PAVmed Inc.
Q3 2021 Earnings Call Transcript

Published: 16 Nov 2021

[Operator:]

Hello and welcome to the PAVmed and Lucid Diagnostics Joint Business Update Conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Lisa DeScenza, Vice President of Integrated Communications at LaVoieHealthScience. Please go ahead Lisa.

[Lisa DeScenza:]

Thank you, operator. Good afternoon, everyone. This is Lisa DeScenza, reporting PAVmed and Lucid Investor Relations. Thank you for participating in today's business update call. Joining me today on the call are Dr. Lishan Aklog, Chairman and Chief Executive Officer of PAVmed; and Chairman and Chief Executive Officer of Lucid Diagnostics along with Dennis McGrath, President and Chief Financial Officer of PAVmed and Chief Financial Officer of Lucid Diagnostics. The press release announcing our business updates and financial results is available on PAVmed and Lucid's websites. Please take a moment to read the disclaimer about forward-looking statements in the press release. The business update press release and this conference call, both include forward-looking statements. And these forward-looking statements are subject to known and unknown risks and uncertainties, that may cause actual results to differ materially from the statements made. Factors that could cause actual results to differ are described in the disclaimer and in our filings with the Securities and Exchange Commission. For list and description of these and other important risks and uncertainties that may affect future operations, see Part 1, Item 1A entitled Risk Factors in PAVmed's most recent annual report on Form 10-K filed with the Securities and Exchange Commission and any subsequent updates filed in quarterly reports on Form 10-Q as well as Lucid's S1 registration statement and any subsequent 8-K filing. Except as required by law, PAVmed and Lucid disclaim any intention or obligation to publicly update or revise any forward-looking statements to reflect changes in expectations or in events, conditions or circumstances on which those expectations may be based, or that may affect the likelihood that actual results will differ from those contained in the forward-looking statements. With that said, I would like to turn the call over to Lishan Aklog. Dr. Aklog?

[Lishan Aklog:]

Thank you, Lisa and good afternoon, everyone. Thank you for joining us on this first joint quarterly update call for PAVmed and its major subsidiary Lucid Diagnostics. This call of course comes at a very exciting time for us almost certainly the most important crossroads in PAVmed's corporate history. Just over one month ago, Lucid became a NASDAQ listed public company and netted over $60 million in gross capital, providing it with sufficient runway to execute on its growth strategy and drive commercialization in a $25 billion addressable market. Also, PAVmed and Lucid are no under pre-revenue companies as they both for the first time formally recognized modest revenue consistent with projections in the third quarter. Before diving into updates on the important developments in our business over the past quarter and recent weeks, I'd like to first thank PAVmed long term shareholders for your ongoing support and commitment and I would also like to welcome our new Lucid shareholders to the family. Every day, our rapidly growing team is intensely focused on growing these companies and enhancing your long term shareholder value. I will start by providing some high level comments on certain corporate and strategic matters. I will then hand things over to Dennis who will provide our financial update. After that, I'll proceed with a systematic business update before opening it up to questions. So let me start by talking in a bit of detail about the relationship between PAVmed and Lucid pre-IPO, now immediately post-IPO and in the future. Based on inquiries we and others have received, I think it's important that I clarify some things by recounting the history of Lucid as a company. Lucid was founded as a separate corporate entity and privately held subsidiary of PAVmed in May 2018 to license the groundbreaking technologies underlying Lucid's current products, the EsoGuard esophageal DNA test and the EsoCheck esophageal cell collection device from a major academic medical center. Lucid received the worldwide exclusive rights to commercialize these valuable technologies in exchange for an 18% minority equity interest in the newly created subsidiary. PAVmed not provide any consideration in cash or PAVmed stock despite retaining an 82% stake in Lucid and these licensed technologies. During the 3.5 years since, PAVmed has spent approximately $30 million on Lucid and managed its operations through a management services agreement, advancing what was a research laboratory assay and device prototype into commercial products, securing Medicare payment of nearly $2,000 per test and launching Lucid's own network of test centers. Early this year, as many of you know, we decided that Lucid had progressed efficiently and that it made strategic sense to take Lucid public, so we could raise and spend its own capital to drive a growth strategy focused on one, expanding commercialization, including by expanding Lucid's network of test centers and two, expanding the clinical evidence of Lucid's products efficacy to support Lucid's ongoing regulatory reimbursement and commercialization efforts, as well as recommendation of these products and clinical practice guidelines. We also decided that although Lucid would have its own capital and not depend on PAVmed finding it -- financing its operations, that PAVmed would continue to manage Lucid through a management services agreement for the foreseeable feature. Prior to the effective date of the Lucid IPO perspectives, PAVmed retained an approximately 73% equity stake in Lucid. Lucid issued 5 million shares of common stock in the IPO at $14, a share yielding $70 million in gross proceeds to Lucid. Despite the issuance of these additional shares, PAVmed's equity stake in Lucid actually increased post IPO to approximately 76% as a result of PAVmed converting debt into equity at an attractive price immediately prior to the consummation of the IPO. At a 76% majority shareholder PAVmed will continue to consolidate Lucid's financials into its own and recognize Lucid revenue as its own. The value of PAVmed's stake in Lucid will grow as Lucid's value grows. PAVmed, as I already mentioned, will also continue to manage Lucid through an updated management services agreement. I'll also note that half of Lucid's directors are also patent directors. So with all this remaining unchanged, what has changed for PAVmed following the lease IPO. The only notable change for PAVmed and its shareholders is that PAVmed no longer has to raise and spend capital and diluted shareholders to finance Lucid's operation, hasn’t has for the past 3.5 years and would've had to do at a rate of tens of millions of dollars per year over the coming years of Lucid had remained a private subsidiary. Lucid now has access to $60 million of its own growth capital from the public markets and collectively PAVmed and its subsidiaries now hold approximately $90 million in cash and no debt. The strongest financial position PAVmed has been in since its inception. So that's pretty much it in terms of change, same or higher PAVmed equity stake in Lucid, same management structure, same massive Lucid commercial opportunity, but much more cash available to create value within both PAVmed and Lucid. Based on some of the communications we've received, I thought it would be helpful to clarify what PAVmed did not do by taking Lucid public. PAVmed did not sell some or all of Lucid. The Lucid IPO shares were newly issued primary shares and despite the new issuances PAVmed holds a larger stake in Lucid than it did before the IPO. Similarly PAVmed did not split itself into two companies or spin Lucid off. Lucid Diagnostics Inc. was always a separate corporate entity and majority owned subsidiary of its parent company PAVmed before the IPO and that relationship remains unchanged post IPO. Finally, as I will describe in more detail next, PAVmed is not merely a holding company for Lucid or it's other subsidiaries, but remains the hub of innovation value creation for these subsidiaries and its overall enterprise. On that note, a couple of questions I frequently asked these days are, what is PAVmed now that Lucid is public or, and what is PAVmed's long term strategy? Before answering those questions, let me describe what I believe PAVmed has become over the past few years in many ways, thanks to Lucid because during this period PAVmed has greatly expanded its infrastructure to support Lucid's rapid growth. As a result, I view PAVmed now as a hub, an innovation of value creation engine with scalable capacity across the spectrum of functionalities necessary to advance and commercialize internal innovations or those licensed or acquired from outside parties. This allows PAVmed and its subsidiaries to share these functionalities and services across an expanding portfolio. PAVmed's shareholders benefit from this diversified portfolio with multiple shots on goal with non-binary success, which mitigates long term risk. PAVmed and Lucid shareholders benefit from the obvious economy of scale, which this shared services model provides. So PAVmed's long term strategy can be succinctly stated as create more Lucids. What do I mean by create more Lucids? I mean PAVmed's long term strategy is to use its expanding resources and infrastructure to rapidly and efficiently advance and commercialize innovative technologies to create an enhanced shareholder value as we have done with Lucid over the past two years. We're doing that with our entry into the dynamic digital health space with the acquisition of Oncodisc and the launch of our digital health subsidiary Veris Health earlier this year and we expect to do that with our commercial and near commercial products, CarpX and NetFlo. With Lucid no longer dependent on PAVmed to finance its operations, PAVmed now has plenty of cash to advance these existing technologies. We also expect PAVmed will accelerate its pursuit of new opportunities to expand its portfolio through the licensing and acquisition of new innovative technologies, including for the first time later stage pre-commercial and revenue generating commercial products. To support this growth we are expanding both our human of the first time, our physical infrastructure to meet the needs of this shared services model. PAVmed and Lucid have added dozens of employees over the past couple of quarters and expect to accelerate that growth and headcount in 2022. This quarter we'll launch PAVmed's own dedicated product, research and development facility in Foxborough, Massachusetts adjacent to our long term contract engineering and manufacturing partner, Sage Product Development. Early next quarter, we expect to launch Lucid's own CLIA-certified diagnostic laboratory facility in Irvine, California, a few minutes away from our long-time CLIA laboratory partner Research DX. Finally, sometime mid next year, we expect to launch PAVmed's own dedicated loaded medium volume medical device manufacturing facility in Lake City and we're in the process of securing space for that as we speak. Finally, before handing the reins over to Dennis, I'd like to touch on the ongoing COVID-19 pandemic. Although the late summer surge of the highly transmissible Delta variant did have some impact on our commercial operations, we continue to remain fortunate compared to many other healthcare companies, especially those who operate within hospitals. Our Lucid commercial and clinical activities are almost exclusively in an outpatient setting and we continue to have mostly unfettered access to physicians in our offices. Our concern of course, is that cases have stopped declining and are beginning to rise again, in many parts of the country, raising the spectrum of a major winter surge, similar to the one currently underway here. We are closely monitoring the situation and its potential impact on our commercial and clinical trial activities. With that I'll hand reigns over to Dennis to provide an update on our financials before proceeding with a more comprehensive update of our business.

[Dennis McGrath:]

Thanks Lishan and good afternoon, everyone. For preliminary and summary financial results for the third quarter ended September 30, 2021, we reported in our press release that was published earlier this afternoon, we plan to file our quarterly reports for each of PAVmed and Lucid Diagnostics on Form 10-Q with the SEC in the coming days. At that time, these reports will be available at sec.gov and on the PAVmed and Lucid websites respectively. PAVmed has elected the automatic five-day extension for filing its form 10-Q for the third quarter. They filed on or before November 22, 2021, the SEC report will be considered timely filed. The Lucid Diagnostics form 10-Q was due 45 days from the effective date of the IPO registration or November 29. We intend to file both 10-Qs concurrently during the PAVmed extension period. The extension for PAVmed was unavoidable given the IPO occur directly in the middle of a closing and a reporting period. So with regard to test performed and revenue recognition, as you already know, from our previous quarterly corporate update calls there a general rule Issa guard test perform so far will be recognized as gap revenue when cash is actually collected by the company. Also, as previously mentioned, this will more than likely be true during this transition period of negotiating third party, private payer reimbursement contracts and related coverage policies as reported to you last quarter for compliance purposes during the reimbursement transit, we've negotiated a short term month to month fixed payment arrangement with the laboratory, which is processing the Issa guard assay and is performing the insurance company, billing and collections function. The fixed payment arrangement can be updated monthly to reflect estimated collections. This commercial green became effective on August 1st, 2021. And therefore we recognized $200,000 of revenue as part of the ISA guard commercial agreement with research DX. Once we acquire our own laboratory lucid will be able to directly invoice CMS and private payers without relying upon a third party to perform those functions. Once this occurs, the short term agreement with research DX will be terminated and future revenues will be recognized based upon actual collections until such times that time that the coverage policies are in place with CMS and payment contracts with the private payers. This obviously can result in timing of revenues recognized versus the timing they are submitted to third party reimbursement until these future conditions are met. The number of visa guard tests perform and submitted for payment are provided in the press release. It'll be discussed by Le on in following obviously we're at the very early stages of our commercial launch, particularly with our test centers, we'll continue to evolve our reporting metrics as various sales and marketing efforts, further influence adoption, particularly with the ramp of our lucid test centers and the upcoming launch of our is guard telemedicine program. Presently, there are now four banking analysts who have issued coverage on paved and four that have issued coverage on lucid diagnostics and others that are doing their diligence. The 2021 and 22 revenue estimates provided by the list are achievable, but quantity and collections are highly dependent upon the evolving reimbursement landscape. As you are likely aware from our last corporate update, the local coverage decision, or LCD or CMS related reimbursement has not yet been published, but as Lishan will describe in more detail, we have reason to expect action this front in the coming months with regard to financial results for the quarter, provide some summary comments on PAVmed and then follow with similar comments on Lucid Diagnostics as a standalone company. First, a couple clarifying comments related to how pads consolidated financials are impacted by the recent IPO, which is a question both Lishan and I have frequently received PED will remain lucid control, controlling shareholder holding approximately 76% of its voting interest. As Lishan noticed, noted is slightly greater than peds voting interest prior to the IPO, which was around lucid operating results will continue to be consolidated into PA's financial results. The statement of operations will reflect a line item to show the non-controlling interest of profits or losses to non-med shareholders of its majority own subsidiaries as well. There will be a corresponding offset in the equity section of the balance sheet for amounts attributable to minority interest equity. This methodology is unchanged as a result of the IPO and will continue to be applicable. As long as paved remains to be the controlling shareholder revenue, a med recognized 200,000 of revenues related to EsoGuard with a margin of 28%. I think everyone understands that this is not reflective of future margin expectations. Given the minimum fixed cost during this early ramp at moderate volumes, we are expecting approximately 90% gross margins, PAVmed operating expenses in the press release. We added a new table for each of the PED, each of PED and lucid that details each of the three components of OPEX, namely commercial operations, G&A, and R&D. And it reflects both gross amounts and net amounts after deducting stock based compensation costs by comparison, the $9.7 million for net operating costs in third quarter is about $2 million higher than previous than the previous quarter in 2Q this increase, this increase is attributable to increases in commercial headcount and activities, as well as the expansion of clinical operations and the various health acquisition of Oncodisc with regard to PAVmed loss per share amounts, a reported a third quarter net loss attributable to common shareholders at $12.3 million or a loss of $0.15 per common share versus a loss of $5.5 million and $0.11 per share for the same period. In 2020, a press release provides substantially more detail related to the non-cash charges occurring in the current prior periods. Also the press release provides a table entitled non-GAAP measures, which highlights these amounts along with interest expense and other non-cash charges, namely depreciation, stock base compensation and financing related cost enable better understanding of the company's financial performance. You'll notice from the table that after adjusting the third quarter gap lost by approximately $4 million for non cash or financing related charges, the company reported a non-GAAP adjusted loss for the third quarter of 2021 of $8.2 million or $0.10 per common share the have had cash of $37.3 million as of September 30 and is debt free. During the third quarter, the company received additional net proceeds of approximately $2.7 million from the issuance of common stock to connection with the exercise warrants and stock options. Lucid revenue lucid recognized $200,000 of revenues related to Issa guard with a margin of 28%, as previously mentioned at moderate volumes we're expecting margins greater than 90%. These lower volume amounts of a minimum level fixed costs associated with just being operational Lucid research development costs for the third quarter, 2021 research and development costs were approximately $2.2 million as compared to $1.2 million for the corresponding period in the prior year with the $1 million increase principle related to the increase in clinical trial costs with regard to Lucid G&A expenses, not including sales and marketing expenses, which are now presented separately as commercial operations were $3.4 million for the third quarter 2021, compared with $0.5 for 2020. The approximate $2.9 million increase principally related to 2.7 stock base compensation for grants, new hires, new directors, and other incentive grants from the, from the board approved equity programs, Lewis its commercial operation. The expense was approximately $1 million for the third quarter compared to $0.3 million for the corresponding prior year period with a $700,000 increase principally related to increase in headcount increase in marketing programs related to the commercial activities with regard to the loss in per share amounts, Lu a diagnostics reported a third quarter net loss attributable to common shareholders of $7 million or a loss of 49 cents per common share versus a loss of $0.14 per common share in the same period. In 2020, the press release also provides a table entitled non gap measures for Lucid as well. You'll notice from the table day after adjusting the GAAP loss by approximately $3.2 million for non cash, an interest cost will in paved convertible debt. The company reported a non-GAAP adjusted loss for the third quarter of 2021, a $3.7 million or $0.26 per common share Lucid that cash of $21,000 as of September 30 and a $22.4 million convertible debt due to the parent comp subsequent to the end of the quarter, converted to debt, to equity in Lucid and on October 14, Lucid completed its IPO and raised $70 million, including $8 million from PAVmed on a pro forma basis. Had the Lucid diagnostics IPO occurred on September 30, 2021 cash would've been approximately $93.7 million after giving effect to underwriting commissions and financial advisory fees. So with that, I'll turn it back to Lishan.

[Lishan Aklog:]

Thanks, Dennis. So let me now run through some key updates from across our business for the past quarter of recent weeks, as well as plans for the upcoming months. So as always, let's start with lucid just as a quick intro, lucid diagnostics is a com commercial stage cancer prevention diagnostics company focused on the millions of chronic heartburn. Patients who are at risk developing highly lethal esophageal cancer, unlike other common cancers, mortality rates are high in this cancer, even at its earliest stages. So preventing deaths requires us to detect esophageal pre-cancer, which occurs in approximately five to 15% of at risk chronic heartburn. Patients esophageal pre-cancer can be monitored in its early phase and cured with an endoscopic procedure in its late phase, which reliably halts progression to esophageal cancer. Although esophageal PR pre-cancer screening is already recommended in millions of chronic heartburn patients fewer than 10% undergo traditional invasive endoscopic screening, the profound tragedy of an esophageal cancer diagnosis is that likely death could have been prevented if the patient had been screened and then undergone monitoring and curative treatment, the missing elements for a viable esophageal cancer prevention program has been the lack of widespread of a widespread screening tool that can detect esophageal pre-cancer. We believe that tests performed on samples with a T check device constitute the first and only commercially available diagnostic test capable of serving a such a widespread screening tool to prevent esophageal cancer death through the early detection of esophageal pre-cancer in these at-risk chronic heart patients on the commercial front Lucid. Now flush with the proceeds of its IPO is an, the process of rapidly expanding its commercial sales infrastructure and moving from a hybrid sales model, utilizing independent sales rep to a full-time dedicated direct sales force, lucid hired 17 sales and clinical support personnel in the recent months and expects to increase its commercial headcount. Several fold in 2022 Lucid is also in the midst of expanding its Lucid test centers in cities, across the Western us chronic heartburn patients in these cities who are referred by their primary care physician for PCP or who self-refer can now undergo a rapid non-invasive office based test to the test esophageal precancer, before it progresses to deadly esophageal cancer. Each test center is staffed by elusive employed nurse practitioner and medical assistant who uses ESO check to collect surface cells from esophagus, from, from the patient, which are then sent for Egar testing. Lucid estimates that estimates that a single nurse practitioner can perform up 20 ESO check procedures per day, and expects each center to cover its personnel and medical office for these costs with only a couple of tests per week, elusive test program has now advanced from a pilot program in Phoenix launched just this past August to a regional program, covering the major cities of the Southwest with the launch of test centers in Denver, Salt Lake City and Las Vegas. Last week, we look forward to the next phase in the program's growth, which will focus on the Pacific Northwest and then steady expansion nationwide thereafter. Our Phoenix experience over the past three months has demonstrated that each test center can again be operated in modest fixed costs and attractive margins. We also learned that the key to driving primary care physic Egar referrals is to recruit experienced highly driven sales representatives who exclusively call on these primary care physicians most from the diagnostics or pharmaceutical sectors and have them in place at the launch of the test centers just as we did in the three new cities we launched last week, Lucid has also been working closely with ups script. Our independent telemedicine partner to ups script is finalizing the Lucid branded telemedicine platform, which will accommodate self-referrals for Egar testing from direct to consumer marketing. So this Egar telemedicine program with direct to consumer marketing will launch as a pilot program in Phoenix in the coming weeks, Lucid continues to drive Egar commercialization while growing training and fundamentally transforming in sales infrastructure to a direct Salesforce increasingly focused on primary care physician referrals to Lucid test centers. The third quarter was somewhat of a transitional quarter as we moved to a direct Salesforce and increasingly focused on these primary care physicians and we dedicated human resources to the expansion of our sales infrastructure, including implementing salesforce.com Showpad and other. We also established a very robust and intensive sales trading process and graduates of the most recent five day program completed last month are now in the field calling on physicians testing volume during this transition during this transitional quarter was flat at 213 -- 203 tests relative to the prior quarter, but up over 300% on an annual basis. We continue to see slow but steady in progress on the reimbursement front EsoGuard has already, as I mentioned previously secured a national Medicare payment rate of $1,938, which became effective last January. Our current efforts are thus focused on securing Medicare coverage as we well as private payer payment and coverage, we have been engaged with the mold DX program of the Medicare administrative contractor, Paul meadow, GBA on Medicare payment and coverage since early 2020, although we secured final and effective payment determination coverage, determination has been slowed by significant pandemic related backlog of coverage reviews. We do however, have reason to believe that things are beginning to stir on the, on the coverage front last month, the multi X program held a public contractor advisor committee or a CAC meeting on the top on the topic of molecular testing for certain gastrointestinal cancers, which included discussion of Egar testing. We were very encouraged that the expert gastroenterologist panel voiced strong support for esophageal precancer screening and high risk chronic heart patients. Our market access and reimbursement team along with our expert reimbursement consultants are now in the process of engaging with multi X to reinforce this message and we are hopeful that we might see draft coverage determination on the coverage in the coming months on the private payer side, the laboratory continues to receive some standard 50% out network payments from private payers averaging over a thousand dollars per test, which is encouraging securing in network. Private payment reach is of course, however, a longer term process that requires negotiating contracts with local regional and increasingly national private payer programs, a prerequisite for initiating such engagements with a critical volume of tests performed and claims submitted to each payer where close to reaching such volumes and certain locals and have initiated some contact with major payers in Arizona in the interim we've had, we have, we have held two successful advisory board meetings, including one this past September with medical directors of major insurers, which indicated good alignment with our strategic approach. The bottom line message from these meetings is that private payers will be focused on clinical utility data demonstrating that Egar positively impacts clinical decision making. Most notably that patients with a negative Egar test. Don't also undergo a constantly endoscopy. We are collecting such data from our busiest clinical sites and will soon have our own clinical registry in place, which will also provide such clinical utility data. Next I'd like to spend some time on the substantial progress we've made in securing Lucid own Clea certified laboratory, which will allow lucid to bill payers directly for the test and eliminate the complexities of the current process involving our partner research DX Lucid and research DX have recently agreed in principle to the terms by which a newly created only owned Lucid subsidiary Lucid DX labs would acquire the clear certificate and related licenses to perform the Egar test. Lucid DX labs would lease a separate building in Irvine and research DX would continue to manage the performance of the Egar test through a management services agreement with Lucid DX labs. We look forward to executing that defend into agreements hopefully before the end of the year and launching the Lucile laboratory. Soon thereafter meeting, much of the effort on Lucid side has been our newly appointed chief scientific officer, highly accomplished molecular biologists sum Verma. Dr. Verma has once been a part of the Luci family and her prior position as VP of genomic services at search DX there, she played a central role in transferring the Egar assay from the case Western research laboratory and launching Egar as a commercially available laboratory developed test could not be more excited to have her on board and to launch her own clear laboratory in the coming months. Things are also progressing well in the clinical research and development program. We are actively enrolling patients two international multicentered clinical trials. B1 and B tube support FDA PMA approval of is guard use with is check has an inviro diagnostic indicated to detect earliest dual precancer. The studies have 68 sites in the us and Europe with 50 us sites and not, and all nine European sites currently active enrollment is steady despite COVID. And we are still targeting completion of enrollment by the end of 2022 and PMA submission to the FDA in 2023, couple of more loose highlights before moving on to the rest of the portfolio. We are proud to see lucid products add to their list of formal accolades and honors with EsoGuard being awarded diagnostics innovation of the year at the biotech breakthroughs annual award program, recognizing innovation of the global life sciences and biotech industry. This year's program attracted more than 1200 nominations from over 12 different countries throughout the world as also Lucid related last month, PAVmed acquired North Carolina based caps, LLC, which manufactures esophagal and us FDA five think a cleared and European C mark certified non endoscopic sponge based esophageal cell collection device, which has been used in pre-commercial clinical research of esophageal pre-cancer biomarkers at major at major academic medical centers, including Mayo clinic and John's Hopkins. The transition to our manufacturing and quality systems is nearly complete and discussions with the academic medical centers and their commercial sponsors have commenced next, a brief update on CarpX our minimal invasive device treat carpal tunnel syndrome. I'm actually constantly optimistic that we're starting to turn the corner after frustrating year with repeated challenges, building momentum with CarpX, Neo full-time car. National sales manager has been doing an excellent job since he started in June, leveraging his relationships in the orthopedic at hand surgery space to recruit motivated early adopters, and what remains a limited commercial launch in the past quarter and recent weeks, we have trained seven surgeons and have five cadaver training SCH lab scheduled surgeons performed 11 Carp procedures during this period and have an additional eight currently scheduled on the bus. We hired a full time territory manager with four years of experience at another carpal tunnel company, and are recruiting a clinical specialist to support training in cases. So, although this is just the first step I'm encouraged by this progress and remain upbeat about the future of this groundbreaking and product, including exciting progress on a next generation car device. Let's now move on, I'll try to be brief since many of you participated in a virtual investor event last month. And if you did, I encourage you to watch the recording. It worked, it went really well. Veris is a majority owned subsidiary of pad and represents pad's entry into the dynamic and rapidly growing digital health sector. Veris acquired Oncodisc, a digital health company with groundbreaking tools to improve personalized cancer care. Veris is now developing a remote cancer care platform that integrates an intelligent implantable vascular access port with physiologic, with software, with symptom reporting and telehealth functions, as well as advanced data analytics virus's groundbreaking VA access port contains biologic sensors capable of generating continuous data on key physiologic parameters known to predict adverse outcomes in cancer patients undergoing treatment wireless communications of the patient's smartphone phone and various cloud-based digital health platform will seek to deliver actionable realtime data to patients and physicians efficiently and effectively. Veris is targeting FDA5, a clearance of the intelligent and implantable vascular access board and launch of the remote digital healthcare platform. In the second half of next year. I'm very proud of the remarkable progress we've made in the six months. Since this acquisition, we are rapidly advancing the development of the intelligence implantable port and successfully completed our first animal lab. Last month on the software side in September Veris was accepted into Microsoft's global partnership program and entered into services agreement with leading full service Silicon Val Silicon valley based software development firm lo LO's now building the various remote digital healthcare platform. The teams are making excellent progress with a now with a clickable user interface of both the smartphone and desktop apps, as well as initial coding of the underlying data structures. A major recent highlight for Garris was the appointment of highly accomplished Silicon Valley technology, executive Sunny Webb as its Chief Technology Officer. She brings to our team nearly two decades of experience successfully leading technology teams and launching dozens of enterprise level software and hardware products, including for industry leaders, such as apple, Phillips, healthcare, and Facebook. She has deep expertise in data science, analytics, machine learning, and advanced sensors hall, cutting edge technologies, which are central to the various device and platform. We will soon be announcing two key, various advisory boards and medical advisory board of key opinion leaders in cancer care, including the major cancers across the country and a technology advisory board of Silicon valley. Illuminaries finally, we have launched a major R and D effort to apply the various technologies to very important and prevalent conditions beyond cancer. This project seeks to enhance the care of patients with heart failure, kidney failure, and most recently, chronic lung disease, or COPT. Now on next level, including our next low IV set, which seeks to revolutionize care by eliminating the need for complex expensive and error prone electronic infusion pumps for most of the Mo 1 million infusions performed in this country each day. Although as a company we've been spared, the brunt of the supply chain issues, plague much of the country, we haven't heard some delay in the receipt of certain of a certain next component from China. We were eventually able to switch to the US supplier, but the delay cost us a couple months in our timeline. We have now received the parts in our starting verification in valley testing but we've pushed our target date for FDA submission, FDA submission to Q2 of 2022. We are however already launching the recruitment of sales leadership personnel in anticipation of the commercial launch next year, as many of our long term shareholders know for several years, we have, we still continue to receive strong interest in next flow next low from leading strategic from the space, the engagements for a pre-commercial product that has not been exposed to the commercial product to the commercial market, excuse me, can be and has in this case been painfully slow. I should note however that that our strategic approach to next low has evolved significantly over the time period. Back then, we were positioning next low for a pre-commercial acquisition to supply pad me with much needed capital. We're obviously in a very, we're obviously a very different company today than we were then pad me is now in a strong cash position, especially following the next low IPO. And although we're open to continuing these engagements and entertaining offers, we will, we know that a commercial Maxwell product is a very valuable asset, which are, which we are happy to commercialize and to create value organically if necessary. Finally, a few brief highlights from a few but for the sake of time, not all of the other products in our portfolio progress on our port IO, implantable iNOS vascular access device and remain frustratingly slow. The long plan human study in Columbia, south America remains delayed due to local IRB backlogs. However, they're promising signs that we'll finally be able to start alone patients with long term implant support IO after the due year in the us, the FDA continues to present us challenges on a us ID east study, and we are strongly considering reverting to the classic MedTech strategy of seeking CE mark and launching in Europe. First, he secure our esophageal ablation devices progressing extremely well, his histopathology and data from our most recent animal study, which included head to head comparisons with the Medtronic bear really looked great. If things continue to go well, we expect to be in a position to submit for five, 10 K clearance in 2022. So thank you all for your attention. And with that operator, we can now open the call to questions and really thank you for your attention.

[Operator:]

Our first question today is coming from Kyle Mikson from Canaccord. Your line is now live.

[Kyle Mikson:]

Hey congrats on the IPO in the quarter. So I just wanted to start wish Sean heard you on reimbursement really helpful, I guess next few months, next couple of months you think the draft talk could, you know, could be published, but just, could you just walk through the steps a little with a little bit more clarity or detail and just kind of the expected timelines and perhaps the scenarios. And I'm just kind of curious if you expect any additional data is going to be necessary to achieve the draft TD.

[Lishan Aklog:]

Thanks. I think that the short answer is no. I mean, we obviously will know, and we know, but we don't expect that there was nothing in our extensive discussions with the Moldex group. As we were preparing the coverage dossing back in the first half of May, that that suggested that they were focused on additional data and the CAC meeting transcript, if you read it, it's a bit rambling and there's a lot of you have to sort of pay attention, that there was fairly strong support. As I mentioned from the gastroenterology expert panelists, including two from Mayo clinic and one from John's Hopkins on the fact that there's sufficient data right now to support high risk screening with these non-endoscopic tests basically leveraging the existing guidelines for endoscopic screening to non endoscopic screening. So every hint we've gotten in every communication we've had would seem to suggest that you know, we feel that that there's a fairly straightforward decision to be made here. If one follows the, if the risk factor profile that has been, that's been well established and, and endoscopic screening recommendations Medicare patients are over 65. So we would hope and expect that the same risk profile, basically a patient a Medicare patient with two other risk factors would be covered for screening that said, of course it's still an unknown we're encouraged that they've dust. They period of dusted off our dossier and are looking at it in conjunction with other tests in the GI area and in the esophageal area. And again, as I said, we're hoping that that'll translate in the in the draft in the coming months what happens from there is very, really impossible to predict, right? It depends on what, on what they say. If we certainly if we get a something that's approximates, what I just, what we, what we think we have made a strong argument for. We would hope that the process from a draft LCD to a effective one would not be very long, but that's obviously to be determined.

[Kyle Mikson:]

And also was wondering with, I guess, where most Isho check procedures occurred during the third quarter and I guess where they're kind of being performed currently and what, what's the expectations for like early 22, and obviously you had the Lucid test centers kind of launched, I guess, in the middle of the quarter. I know, they're not really up and running yet, but I'm just trying to under understand if the volume that we saw in the third quarter could increase sequentially or just what the trends could look like going forward.

[Lishan Aklog:]

Yeah. So I think, I think I have a, you know, one clear answer is that the, the bulk of the nearly all of the tests performed in the third quarter, where through traditional our traditional target, which were the GI with, which were the GI physicians. I mean, we didn't launch the Phoenix test centers until, until August, by the time we had our local sales reps in place we were well into well into September. So that number reflects almost entirely the same target that we had prior in prior quarters. And as I said, it were reflect some sort of shifting of resources to get the test centers up and running and to train and expand our sales force. So, I think, I would expect over time, including this coming quarter and beyond that the proportion of tests performed from primary care referrals at our test centers, relative to those being performed at GI centers will likely shift, but it's really hard to, it's really hard to know for sure. But that's certainly where we're heading over the long term and that we fundamentally believe over the long term, whether happens in the next couple of quarters or not, we'll see over the long term, the path to wide adoption of ISS our testing is through the primary care physicians, because that's where the patients are. Very few patients ever see a gastroenterologist.

[Kyle Mikson:]

All right, great. I'll leave it there. I appreciate you taking the questions though, and I'll let other others jump in.

[Operator:]

Next question today is coming from Charles Duncan from Cantor Fitzgerald?

[Charles Duncan:]

Good Le thanks for taking the questions. Congratulations on the recent progress. You've, you've got a lot going on. My questions are primarily along the lines of lucid. I wondered if you could provide any feedback from physicians who have prescribed ISO Gar, so check and kind of in market experience, anything newly glean from that.

[Lishan Aklog:]

Oh, absolutely. Yeah. We train and we prepare our reps to do what we call objection handling, right. For both flavors of physicians for gastroenterologists and for primary care physicians. And we've had a lot of experience on that talk tracks related to gastroenterologists and have worked through that. And generally the, those talk tracks have been well honed and have gone well over the you know, over the prior quarters, what we have learned. And we're very happy with, with to have experienced is that the talk tracks that we developed on the primary care side is really quite straightforward and the reason for that is that what we made the, as you know, we made the strategic decision to, to have a very simple ask of the primary care physicians, which is to say, let us sort of update you or educate you on the relationship between chronic heartburn and esophageal cancer. The availability of this test, and all we're asking is that you, that you understand that, and you offer this test to your to the appropriate patients within your practice and order the test and we'll provide you with the a location for that test to be performed. So without, because the burden on them is quite low, we're not asking them to utilize their own resources to do the test. We have a quick anecdote one of our Vice Chairman Stanley was in Phoenix touring our test center and engaging with some of our folks. And he actually did a sales call, which is, you know, quite, quite impressive with one of our local PCP focus reps. And he really came back and stands a pretty, pretty grizzly veteran. And he came back with very positive reviews of the, of how the story was told and how the entire folks in this in was in office in Mesa you know, physicians, nurse practitioners, PAs, etcetera, just got it from, from the very beginning and didn't require a lot. Now, now there is, there is obviously an arch of this to sales and that's mostly around sort of repeated context. So messaging has been fine, but to get people to actually, to remember to think about it and to have it be front and center, that's just classic sales 101 and requires, you know, sort of multiple points of content. And the team has really gotten that down to almost a mathematical exercise right now, in terms of how to, how to do that. So as I really said, could not be happier with how the interactions are going with the primary care physicians, which is sort of what's new in the, in the last quarter.

[Charles Duncan:]

Very good. And as, I guess, as a key investor with your time and money in this business, and these initiatives marketing initiatives over the course of say, even the next quarter, what will you be looking to gauge success?

[Lishan Aklog:]

Sure. I think a quarter may be short, but, we'll obviously, you know, hope, hope that we'll that we'll start seeing quarter, quarter. We clearly, yeah. We clearly are looking, our metric right now is just test volume. Right. And, as I said, we took some to time to kind of, it took some not just time, but sort of allocation of resources to, do this transition to direct Salesforce. The training program is now a five day sort of intensive five day, all day program that we expose 16 new, new sales people to just last month. And so now that that's all in place and a lot of the infrastructure with Salesforce and stuff is in place. We really expect them they're out of the field. Now they're on the field banging on doors making their case. And so we would you know, certainly expect to see some you know, nice increase in the, in testing volume over the couple, over the coming quarters.

[Charles Duncan:]

Okay. And then last question done this…

[Lishan Aklog:]

One other thing that, but we'll certainly know by the next quarter, which is that, as I mentioned, we're very close no more than a couple of weeks away from launching the pilot DTC program with ups script in Phoenix. And we'll have a lot of information by the time we have our next call as to how effective that direct to consumer marketing. It is how effective we are at capturing the interest of patients with chronic heartburn and, and, and driving them into our telemedicine program. So that obviously, you know, could very well have a big impact in the coming quarters as well.

[Charles Duncan:]

Okay. That should be helpful. Last question on the marketing initiatives, and then just one quick strategy question on tics I guess relative to the testing center model, which you've used in Arizona, you mentioned perhaps expanding that to Denver, Las Vegas and salt lake city. Does the math still work? Are you having to adjust that at least with these three new geographies?

[Lishan Aklog:]

Yeah, no, and that's the same, obviously at some point we'll get to, we'll get to New York and Chicago and other, and then potentially some other higher real estate areas where the medical office leases will be somewhat higher, but honest, but even then the math is still pretty insanely at attractive in that it still ends up being a marginal cost business. So no nothing has changed in the cities that we're, we just launched in and the ones we expect to launch in the Pacific Northwest. And we really don't expect that to, to change meaningfully even in higher cost. That's on the operation side, obviously the marketing side and the media cost side will increase dramatically. And that's why we're testing the media model in lower cost cities before we would even contemplate doing it in larger higher, higher cost media markets.

[Charles Duncan:]

Got it. Last question strategy. Thanks for taking all my questions regarding ISSO ESO cap and the S acquisition, I guess I'm wondering if you could give us a little bit of information you would like to do with that, and really what drove you to consider that acquisition by Kevin?

[Lishan Aklog:]

Thanks. So let me answer the second question first. I'm probably not really going to be able to say question the first question. So let's start with the second question. So the reason we acquired ESO cap from tics is really fundamentally that lucid intends to be the esophageal disease company. So we have obviously Egar check for, for esophageal precancer, Barrett, esophagus screening. We have we've entered into option or license agreements, and we're continue to seek more out with regard to progression markers that can detect the difference between non dysplastic and dysplastic, how we have an ablation technology that's currently housed in PAVmed that we expect when, and if it's successful, we'll move into mental Lucid. So we want to do we want to be the company for all things esophageal, all esophageal disease. I forgot to mention we're also launched a medical advisory board and have started some clinical trial work on its use in eosinophilic esophagitis, which is an inflammatory very common inflammatory food mediated allergy condition of esophagus. So with that as a baseline, you know, we want to make sure that we have all of the tools available to us to pursue all of the things that I just mentioned. And although we firmly believe that there, that ISO check for the screening application that we're using today is and will continue to be the best choice because of the way it does anatomic targeting and protected sampling. We just wanted to make sure that we had, we had access to the other technology out there, which was a sponge based technology, which could be beneficial for, let's say, esophageal eosinophillic esophagitis, or potentially for progression markers or other areas that we're pursuing. We were frankly so much surprised that tics was available and when it became clear that it was available, we, we acquired now in terms of the strategy, I'm going to have to get back to you on, you know, obviously there's you know, we, we, as I mentioned in my prepared remarks, we have initiated conversations with Mayo clinic and Johns Hopkins who have been doing clinical research using the on their own biomarkers using their using the ESO cap device and with frankly with commercial partners that they work with. So commercial sponsors and partners they work with. So stay tune on that. And, we'll let you know once we have a little bit more fill bit on that, but we just wanted to get into our portfolio to make sure we had all the tools available so that we could pursue our broader aspirations in this space. Next question today is coming from Frank Takkinen from Lake Street Capital Markets. You line is now live.

[Frank Takkinen:]

Good afternoon. Thanks for my questions. I think this was slightly or partly answered in Kyle's line of questions, but I just wanted to come back to it. Can you talk to the sequentially flat quarter over quarter from a volumes perspective? What were some of the moving pieces that happened in the quarter? I guess I was expecting a little bit of growth, but I understand a lot of moving pieces. So maybe

[Lishan Aklog:]

I think the best way, sorry -- for the best way I describe it is that is that as I said, a transition quarter. So in the second quarter, everything was sort of full steam calling on gastroenterologists. We did not have we had not sort of expanded our team. It was mostly our business model with sales management utilizing independent sales reps. And we really kind tack pretty rapidly in the third quarter in anticipation of the Lucid of IPO and the access to significantly more growth capital to a direct sales model. So most of that is most of that is a result of us shifting some personnel to getting the test centers up and running, to getting the primary care folks trained to getting some of the infrastructure, as I mentioned, the online and other infrastructure in place. So we can be set up, we could be set up to start really dealing things up with regard to expanding the direct Salesforce. So it it's really that, I mean, was there a little bit of COVID you know, obviously COVID went through the roof in August maybe at the GI level, but I would attribute it mostly to this kind of transition from direct sales, sorry, from independent reps in a hybrid model of calling primarily on GIS to sort of laying the groundwork for the future model of direct of direct sales.

[Frank Takkinen:]

Got it. That's helpful. Crystal clear second piece I wanted to touch on was just of the revenue recognizing the quarter. Can you break out the contribution from Medicare, if any, versus whether or not it was commercial at the 50% level you referenced?

[Lishan Aklog:]

Yeah, let me answer that. So Dennis, why don't you go and answer that? Let me just make one comment which is, can solve. So the, the revenue we recognize is not reflective of the hacking and remember the way it's just set up and Dennis will answer, this is not one and the same with the billings received from, by the, by the laboratory. But I will answer a part of your question then I'll let, let Dennis answer it from a more of a financial perspective.

[Dennis McGrath:]

So all of the -- all of the claims that have been paid have been with have been from private payers, the claims that have been paid to the laboratory have been private payers. We have not either gotten a denial or for Medicare today. Some of that was related to the fact that it took a little while to get this sort of thing called the DEX code, which facilitates processing of Medicare claims and that's now in place, but we don't have really a picture either one way or the other with regard to either the denials or claims paid for Medicare.

[Frank Takkinen:]

So all of the claims that been paid to date have been outta network payments by private payers at typically that sort of 50% rate. But Dennis, do you want to maybe add a little bit of to that as it relates to sort of the actual recognized revenue and where that came from?

[Lishan Aklog:]

Yeah. The recognized revenue is actually agnostic in terms of the, the treatments, whether or not they're Medicare or private payer side. So you have both of these things going on as Lishan explained the, the laboratory who is the billing arm and collecting has all been private payer that they've collected on our arrangement with them is a fixed price contract. They pay us a hundred thousand dollars a month presently their 30 day contract, so they can renew each month, depending upon what we view as the likelihood of their collections. It can't be tied directly to that, but there's an, there's an enough discussion understanding in terms of where the billing cycle is occurring on the laboratory side, that orients our arrangement in the contract for the go forward months, but presently it's a 100,000 month, regardless of what they collect. We have visibility into what they're doing, what they're billing, how they're collecting of network payments. And at least on said so far, none of them have been Medicare collections. None of them have been Medicare denials on the private payer side. Their collections have been predominantly out of network. And traditionally out of network is paid at 50% of list price, which we view that as incurred. And it continues to be that that approach at roughly half of what you know, our 1938 payment rate is with CMS. So all of that is good. And for the foreseeable future until such time that we we have our own laboratory own our own laboratory we'll continue with that arrangement with research DX and that will go up as their volume, their collections go up and it'll go up perspectively in terms of that financial arrangement. But once we own it, then we will take over that same position. We will bill directly to the private payers. We will bill directly to CMS. And we will deal with those rates that we you know, the, the payment rate has been determined at until such time that there are contracts in place with the private payer community going forward. So hopefully that was the I'll just add, emphasize one thing, which is that we really, I mean, not the, the eyes are not dotted. The teas are not crossed yet, but we're, we really see this transit we're highly motivated to complete this transition, to loosen owning the, the, the clean laboratory and transitioning to its own billing. And we really expect that to be a near term event, going to borrow some major unexpected problem. Perfect. So this temporary, temporary is really temporary. We really expect to be temporary. Got it. Perfect. Thanks.

[Operator:]

Your next question is coming from Mike Mattson from Needham and company. Your live is now live.

[Mike Matson:]

So I guess first on this transition to the direct Salesforce, I mean, I, I know you guys kind of talked about that in the past, so it's not, not surprising, but just, is it now come completely done or is it still underway when do you expect it to be done? And then the second part of the question would be is the direct salesforce really purely focused on PCPs? Have you sort of given up on the GIS, are they calling on GIS as well?

[Lishan Aklog:]

Yeah, that's worth the, so the transition in terms of the structure is complete. So we're not, we're no longer depending on independent sales reps that, that all of the sales activity right now is being done with loose, loose employees, but we're absolutely not giving up on the GIS. Let me just make it clear. So although the expansion has been, and the, and what's new has been adding aggressively adding PCP focused reps. The reason for that is we need them to support the Lucid test center. So, as I mentioned in my prepared remarks, I mean, they're kind of joined at the hip and we've actually learned that one of the things that, that we learned in Phoenix is that doesn't really matter whether you have a test center up and running, if you don't have, if you don't have reps at PCP focus in the area that are actually banging on, on doors and, and, and driving referrals there. So we're now moving. We're now doing them simultaneously like we did in the three cities last week. And we'll do that the same in the Northwest. The, the, the way to understand the, the, the GIS is, is as follows. We have in the trenches primary care sales, these are, as I mentioned, pharma, typically pharma diagnostic reps, who've spent their careers selling diagnostics or pharmaceuticals to primary care physicians. They know how to go door to door and do that above them. We have market development managers who are looking at the overall market in a particular region and working with their reps as well as that, that are primarily right now expanding at the, at the PCP level, but still providing ongoing support and engagement with the gastroenterologist. Our, our messaging to the gastroenterologist has changed a little bit, which is that the way we see the gastroenterologist are, they're just another test center. They're GI test centers, just like we have Luci test centers, and we're not really out there putting Luci test centers up to compete with gastroenterologists when, and when we have a gastroenterology group in an area that that's busy and is active and wants to have basically onsite lucid Egar testing, that's fine. And, and, and we support that. And we provide clinic clinical specialists who come in and support their, the cases they're tried. They try to be there pretty much on every case. And so nothing just like can state that more, more, more, more, more strongly, that nothing has changed in that part of we continue to seek out and grow at, through the higher level market development managers and gastroenterology practices that want to embrace this and basically become a test center. Once they've established themselves at the test center, then what's interesting is that the primary care reps are calling on both on primary care physicians that are kind of de Novo that are not particularly attached with a particular GI that's working within our network or they'll, they will also be the, the entity or the, the rep that calls on the primary care physician that refers to that GI. So I think, as you remember, we've said this many times in the past our message to the, to the gastroenterologist is that, yeah, there are going to be some patients in your practice. There are going to be some patients undergoing colonoscopy, and there are some, there is some low hanging fruit that you already see, but our goal is to go out and find you more patients find you those 19 outta 20 patients that are not currently getting screened. And to do that, we have to go to your primary care network. And so by having a, a network of primary care physician through primary care sales reps, we actually are in a better position now to actually support the GI. So it's a bit, maybe it's a bit complicated and hopefully that makes sense, but it's all intertwined. And this transition, the transition that I described is from hybrid model with independent reps to a direct form, the sales model. It is not a transition away from GIS to towards primary care.

[Mike Matson:]

Okay, great. That's very clear and very helpful. Thanks. and then you know, I wanted to ask about the direct the consumer component. What's your plan for sort of initial DTC advertising? Is it going to be in these, the areas, all, all the areas now where you have the test centers are going to start in Phoenix to see how it goes.

[Lishan Aklog:]

Yeah. And we're going to start in Phoenix. Yeah. So just like we did with the actual physical locations, we're going to start in Phoenix. So the, we have the Phoenix test centers, we actually have the media buys everything's ready. We've just been waiting for the, the up script lucid telemedicine platform to be up and running. It looks great. It looks pretty slick. And that'll be ready very, very soon. And it's really just a matter of turning on the switch with regard to the media buys in the Phoenix area across all of all the various modalities and, we're going to do that in a deliberate way. We're going to look and see, you know, what the return on investment are, you know, with billboards versus local TV versus digital versus print versus other, and start titrating that until we really kind of have a pretty good sense as to how generally the population response to our advertising before we branch out and start doing it in the other test center cities. So for the other test center cities, that's going to be strictly primary care physician driven referrals until we sort of fine tune and hone the upcoming DTC program in Phoenix.

[Mike Matson:]

Okay. Got it. Thanks for help. Thanks Mike.

[Operator:]

Thank your next question is coming from Mark Massaro from BTIG. Your line is now live.

[Mark Massaro:]

Hey guys. Lishan, thanks for taking the questions. Congratulations on the IPO. I guess my first question is on the commercial payer contracting side. I know this can take a long time. I think you talked about clinical utility data being important. Where are you in that process? And how long do you think it would take for you to complete building the evidence such that you could submit this to a large health plan?

[Lishan Aklog:]

Yeah, I think the quick answer to your question is that we'll have that data by the time. I don't, I don't believe that data actually right now is a rate limiting factor. The rate limiting factor is that they won't talk to you until, until you have submissions claims within their, within their coverage population. Right, so we are collecting that data. We have obviously high volume users where we are going to them and getting them to get the endoscopy, the endoscopy results on patients who undergo under one Egar testing. So these are very straightforward. This is about a complex clinical trial. It's actually getting clinical utility there. It's fairly straightforward. The patient got a test, were they positive or negative if they were, and did they get an endoscopy and what does that endoscopy show? Right. so yeah, we're collecting that data now. And as I mentioned, we're just about ready to launch our own registry. And the goal of our registry is to try, it's not always easy, but to try to get just about every patient who undergoes eject is Egar testing to consent to us collecting their follow up data with their, with endoscopy, if indicated. So we'll have sort of a continuous stream of that data, but so it's not complex data to collect. And the collection of the data is not going to be the great limiting factor in our initiating conversations with Frank payers.

[Mark Massaro:]

Okay. And then maybe just a two part is there currently a preference between digital or TV or billboards on the DTC? And then the second part is, you know, as I think about my model for next year obviously the test clinic is probably the biggest driver to adoption, for what it's worth, I'm modeling 14 clinics launched you know, that's a cumulative number. Just curious if you can just give me a sense for your comfort around a number, between 10 and 15 in terms of rolling out clinics across the country, or at least the Pacific Northwest.

[Lishan Aklog:]

Yeah. So let's answer the first question first. I'll, I'll, I'll differ to Dennis of that mostly, cuz he has a lot more experience than DTC, but, but I think the answer is, is that we're not going in with any, with any preconceived biases as to what works or what doesn't you just never know. Right? I mean, some of these are elderly patients where digital may not be, you may not get to them through the digital. So we're using Phoenix as a laboratory to understand that. But Dennis, do you want to talk a little bit more about that?

[Dennis McGrath:]

Yeah, obviously mark, this changes over time, so it's more important to have the feedback loop and as leash on said, we're going to launch with some initial bias both all of, or all of those media tools. And the key is to make sure that we have the feedback loop to understand which ones are working, meaning the call to action is getting folks to schedule a an appointment with telemedicine or calling their, their PCP and getting a script to get tested and that will change over time. More dollars will pour into those that are having higher media expense ratio that, you know, revenue dollars compared to the cost of the specific media in you can parse all of those media even further, for instance, if you're going to do TV which is part of our plans on a very limited scale, initially you got to figure out what times of the day, what channels what message is it, 15 seconds? Is it a longer commercial from a training standpoint? All of those things will take some time to optimize. But once it's completely figured out and that's why we're using the lower media cost markets to have that figured out so that when it does launch on a national basis, we have great data to give us confidence that dollar spent it's going to yield dollars of revenue. So it'll take time to figure out digital TV versus billboard and other means of approach. Radio has been very successful in the past for physician based kind of models. COVID changes that especially when drive times aren't as regular, they, they have been. But we expect that to come back at some point and, and that could be a very, you know, profitable pro for us, but you know, measuring that and spending where it works is going to be important and that's what we intend to do.

[Lishan Aklog:]

Great. And then on the tech center side. Yeah. So let's talk about that a little bit. Let me see if I can give you some details. I provide some color without directly projecting. So, so in Phoenix, for example, we have three test centers, right? And the reason we started right off the bat with three in Phoenix is because we knew, we knew we were going to launch the DTC program in Phoenix first, and we wanted to make sure we had full geographic coverage across the Phoenix metropolitan area so that we could because you can't always know where people are when they, when they receive the advertisement. So of green Phoenix, right? And the three cities we announced last week, we were starting with one in each because we don't anticipate doing direct to consumer there until we, you know, as I mentioned until we sort of get a sense of, of the model in, in Phoenix. And so those locations were basically those places were located basic, using the geography of hospitals and clinician practices and population demographics and so forth. We certainly expect to add one, add at least one additional one in Denver and, and salt lake after we've had some time to, to gear up there. And potentially maybe even a third in Denver the next we've, as I said, pretty clearly, we're going to the Southwest of the Northwest, that's three cities. You can probably guess what they are and that model will remain, will be similar to starting with one in each and then, and then expanding to up to two to three, depending on, on the population of the geography at the, that point and that that's not too far into next year, that's fairly early next year. We will be in a position where we're laying the groundwork now to expand to cities and sorry to states where the you know, we selected these Western states, I think as because they have a low red burden for nurse practitioners to operate independently. And so that's where we started, but we are now with our council from Greenard working through the processes of what we need to do to have physician oversight in states that require physician supervision. And so that process will be, you know, will be well will be done by the time we have the Northwest centers up and running. And then it's really just a matter of aligning, you know, geographies and states with where we have where we seem to be getting traction or where we have reps. I'll also just point out one really important point, which I probably should have started with, which is that I know you're focused on the rate of growth of test centers, but I just want to emphasize one thing that I said earlier, which is that test centers and the growth of the primary care targeted sales reps are in integrated linked they're sort of one and the same. And so the rate lending factor for adding test centers is actually adding reps. We could, getting test centers up and running, it doesn't take any effort at all. You just sign a leasing, you hire nurse practitioner, but there's no point in doing that until you've identified. We, again, we're doing, we're starting with at least two in each, in each city you know, high caliber experienced, highly motivated, highly driven reps that are going to do a good job of driving patients to those test centers. So, what you're really asking is what is our, what is our timeline and sort of we're growing our, our sales team. And you know, I think as I said, maybe I'll just leave it at that we expect, you know, our current team to, to expand several fold in 2022. And I would expect by the end of 22, 22, you know, we have a significant number of test centers with sales rep primary care sales rep support in multiple other cities outside of the Western states that have already outlined, including the upcoming ones in the Northwest.

[Mark Massaro:]

That's really helpful. Thanks so much.

[Operator:]

Next question is coming from Ed Woo from Ascendiant Capital. Your line is now live.

[Ed Woo:]

Yeah. Congratulations on the IP. my question is, has there been a significant shift in your product acquisition strategy? Should we expect fewer but much bigger acquisitions going forward?

[Lishan Aklog:]

So I did hint that I think I threw a few lines, my preparing remarks on that, but again, all always thanks for giving me the opportunity to expand on something. So the answer is, is yes, I'm not saying I'm not necessarily fewer, but somewhat, maybe, maybe a different spectrum or a broader spectrum of potential targets, right? So you know, historically as I was sort of describing with related to Nextel and so forth, we had limitations with regard to capital in terms of what we could, what we could go out and pursue. And we were mostly pursuing extremely early stage age products that we could essentially get for no cash or stock consideration like we did with lucid and bar and invest in them and build value with them or organically over time. Right. now that Lucid now that was well financed prior to lucid IPO, but now that it's free from having to fund lucid operations, which is which accounted for the substantial portion of its of its cash burn. We have significantly, more capacity to do you know, to do later stage deals, including those that are truly pre-commercial or companies of products that are already in the commercial realm and already revenue generating. So I think you've picked up on an important point, which is, so the answer to that is yes, whether the number will them will just depend on what we see in as I think as and our long term and shareholders know we get a lot of deal flow. We're constantly being contacted by companies by academic centers by physician innovators. You know, the word is sort of out people, people reach out to us seeking to partner with us, which is a really fantastic position to be. And that includes, look the kind of company you're talking companies that are further along that have commercial products. We have active discussions in that room too.

[Ed Woo:]

Great. Well, congratulations. Thanks. Good luck in the future.

[Operator:]

Thank you. We've reached the end of the question-and-answer session. I'd like to turn the floor back over to management for further closing comment.

[Lishan Aklog:]

So, Hey, thank you all for joining us today. This is obviously a lot with the two companies, and so thank you for your patience of going through all the information and for again, another really great round of questions. So as always, we look forward to keeping abreast of our pro progress with news releases and pure out calls like this one the we best way to keep up with PED and Lu news updates and events is to sign up for our email alerts on the PED and lucid investor relations websites, and to follow us on social media, Twitter, LinkedIn, and YouTube, and the rest of our websites. You can also contact [e-mail] or info Luci, dx.com or directly to Lisa at PAVmed@ Health Science, lavoiehealthscience.com. And I would really encourage folks who really, you know, don't feel limited to contact us by email contact us by phone. And some of the alert is not always the easiest thing. Our corporate offices are still basic way remote. And so the timeline to get back to folks is more, it can be more challenging. So quickest way to get in touch with us is info or info is TX. And we're always happy to hear from you. So thank you very much for your time. I appreciate it. And everybody have a good evening.

[Operator:]

Thank you. That does conclude today's teleconference and webcast. Let me just connect your line at this time and have a wonderful evening. We thank you for your participation today.