Hello, and welcome to the PAVmed and Lucid Diagnostics Joint Business Update conference call. At this time, all participants are in 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 LaVoie Health Sciences. Please go ahead, Lisa.
Thank you, operator. Good afternoon, everyone. This is Lisa DeScenza, supporting PAVmed and Lucid Diagnostics' 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 Diagnostics' 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 a list and description of these and other important risks and uncertainties that may affect future operations, see Part One, 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 S-1 registration statement and any subsequent 8-K filings.
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'd like to turn the call over to Lishan Aklog. Dr. 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 longer 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's long-term shareholders for your ongoing support and commitment.
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 of 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.
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 did not provide any consideration in cash or PAVmed stock, despite retaining an 82% stake in Lucid and these licensed technologies.
During the three and a half years since, PAVmed has spent approximately $30 million on Lucid and managed its operations through a managed 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 sufficiently 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 product efficacy to support Lucid's ongoing regulatory reimbursement and commercialization efforts, as well as recommendations of these products and clinical practice guidelines.
We also decided that although Lucid would have its own capital and not depend on PAVmed financing its operations, PAVmed would continue to manage Lucid through a managed services agreement for the foreseeable future. Prior to the effective date of the Lucid IPO prospectus, 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. As 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 managed services agreement.
I'll also note that half of Lucid's directors are also PAVmed directors. With all this remaining unchanged, what has changed for PAVmed following the Lucid IPO? The only notable change for PAVmed and its shareholders is that PAVmed no longer has to raise and spend capital and dilute its shareholders to finance Lucid's operation, as it has for the past three and a half years, and would have had to do at a rate of $ tens of millions per year over the coming years if 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. 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 off some or all of Lucid. The Lucid IPO shares were newly issued primary shares, and despite the new issuance, 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 its 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 get asked these days are, "What is PAVmed now that Lucid is public?" or, "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 and 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. Excuse me. PAVmed shareholders benefit from this diversified portfolio with multiple shots on goal and a non-binary success, which mitigates long-term risk. PAVmed and Lucid shareholders benefit from the obvious economies of scale which this shared services model provides. 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 and enhance shareholder value, as we have done with Lucid over the past 2 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.
We expect to do that with our commercial and near commercial products, CarpX and NextFlo. 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 and, for 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 in 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 longtime CLIA laboratory partner, ResearchDx. Finally, sometime mid-next year, we expect to launch PAVmed's own dedicated low- to medium-volume medical device manufacturing facility in Salt 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 their offices.
Of concern, of course, is that cases have stopped declining and are beginning to rise again in many parts of the country, raising the specter of a major winter surge similar to the one currently underway in Europe. We are closely monitoring the situation and its potential impact on our commercial and clinical trial activities. With that, I'll hand the reins over to Dennis to provide an update on our financials before proceeding with a more comprehensive update of our business.
Thanks, Lishan, and good afternoon, everyone. The preliminary and summary financial results for the third quarter ended September 30, 2021 were 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 Diagnostics websites, respectively.
PAVmed has elected the automatic 5-day extension for filing its Form 10-Q for the third quarter. If filed on or before November 22, 2021, the SEC report will be considered timely filed. The Lucid Diagnostics Form 10-Q is 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 occurred directly in the middle of a closing and a reporting period. With regard to tests performed and revenue recognition, as you already know from our previous quarterly corporate update calls, as a general rule, EsoGuard tests performed so far will be recognized as GAAP 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 transition period, we've negotiated a short term, month-to-month fixed payment arrangement with the laboratory, which is processing the EsoGuard 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 agreement became effective on August 1, 2021, and therefore we recognized $200,000 of revenue as part of the EsoGuard commercial agreement with ResearchDx. 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 ResearchDx will be terminated and future revenues will be recognized based upon actual collections until such 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 EsoGuard tests performed and submitted for payment are provided in the press release and will be discussed by Lishan in the 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 EsoGuard telemedicine program.
Presently there are now four banking analysts who have issued coverage on PAVmed and four that have issued coverage on Lucid Diagnostics and others that are doing their diligence. The 2021 and 2022 revenue estimates provided by the analysts 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 for CMS related reimbursement has not yet been published. As Lishan will describe in more detail, we have reason to expect action on 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 PAVmed's consolidated financials are impacted by the recent IPO, which is a question both Lishan and I have frequently received. PAVmed will remain Lucid's controlling shareholder, holding approximately 76% of its voting interest. As Lishan noted, this is slightly greater than PAVmed's voting interest prior to the IPO, which was around 73%. Lucid's operating results will continue to be consolidated into PAVmed's financial results.
The statement of operations will reflect a line item to show the non-controlling interest of profits or losses to non-PAVmed shareholders of its majority-owned 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 PAVmed remains to be the controlling shareholder.
PAVmed revenue. PAVmed 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's operating expenses. In the press release, we added a new table for each of PAVmed and Lucid that details each of the three components of OpEx, namely commercial operations, G&A, and R&D.
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 the previous quarter in Q2. This increase is attributable to increases in commercial headcount and activities, as well as the expansion of clinical operations and the Veris Health acquisition of OncoDisc. With regard to PAV med's loss and per share amounts.
PAVmed reported a third quarter net loss attributable to common shareholders of $12.3 million, or a loss of $0.15 per common share, versus a loss of $5.5 million at $0.11 per share for the same period in 2020. The press release provides substantially more detail related to the non-cash charges occurring in the current and prior periods.
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-based compensation, and financing-related costs to enable a better understanding of the company's financial performance. You will notice from the table that after adjusting the third quarter GAAP loss 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.
PAVmed 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 in connection with the exercise of the warrants and stock options. Lucid Revenue. Lucid recognized $200,000 of revenues related to EsoGuard with a margin of 28%, as previously mentioned. At moderate volumes, we're expecting margins greater than 90%.
These lower volume amounts have a minimum level of fixed costs associated with just being operational. Lucid Research and 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 principally related to the increase in clinical trial costs.
With regard to Lucid's 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 half a million for 2020. The approximate $2.9 million increase is principally related to $2.7 million stock-based compensation for grants to new hires, new directors, and other incentive grants from the board-approved equity programs. Lucid's 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 regards to the loss in per share amounts, Lucid Diagnostics reported a third quarter net loss attributable to common shareholders of $7 million or a loss of $0.49 per common share versus a loss of $2 million and $0.14 per common share in the same period in 2020.
The press release also provides a table entitled Non-GAAP Measures for Lucid as well. You'll notice from the table that after adjusting the GAAP loss by approximately $3.2 million for non-cash and interest costs on PAVmed convertible debt, the company reported a non-GAAP adjusted loss for the third quarter of 2021 of $3.7 million or $0.26 per common share. Lucid had cash of $21,000 as of September 30 and a $22.4 million convertible debt due to the parent company.
Subsequent to the end of the quarter, PAVmed converted the 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 have been approximately $93.7 million after giving effect to underwriting commissions and financial advisory fees. With that, I'll turn it back to Lishan. Lishan?
Thanks, Dennis. Let me now run through some key updates from across our business for the past quarter, recent weeks, as well as plans for the upcoming months. As always, let's start with Lucid. Just as a quick intro, Lucid Diagnostics is a commercial stage cancer prevention diagnostics company focused on the millions of chronic heartburn patients who are at risk of 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 5% 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 precancer 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 have been the lack of a widespread screening tool that can detect esophageal precancer.
We believe that Lucid's EsoGuard test performed on samples collected with its EsoCheck device constitute the first and only commercially available diagnostic test capable of serving as such a widespread screening tool to prevent esophageal cancer deaths through the early detection of esophageal precancer in these at-risk chronic heartburn patients.
On the commercial front, Lucid, now flush with the proceeds of its IPO, is in the process of rapidly expanding its commercial sales infrastructure and moving from a hybrid sales model utilizing independent sales reps 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 U.S. Chronic heartburn patients in these cities who are referred by their primary care physician or PCP or who self-refer, can now undergo a rapid non-invasive office-based test to detect esophageal pre-cancer before it progresses to deadly esophageal cancer.
Each test center is staffed by a Lucid employed nurse practitioner and medical assistant who uses EsoCheck to collect surface cells from the esophagus from the patient, which are then sent for EsoGuard testing. Lucid estimates that a single nurse practitioner can perform up to 20 EsoCheck procedures per day, and expects each center to cover its personnel and medical office lease costs with only a couple of tests per week.
The Lucid 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 with modest fixed costs and attractive margins. We also learned that the key to driving primary care physician EsoGuard referrals is to recruit experienced, highly driven sales representatives who exclusively call on these primary care physicians, most commonly 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 UpScript, our independent telemedicine partner. UpScript is finalizing the Lucid branded telemedicine platform, which will accommodate self-referrals for EsoGuard testing from direct to consumer marketing. This EsoGuard telemedicine program with direct to consumer marketing will launch as a pilot program in Phoenix in the coming weeks.
Lucid continues to drive EsoGuard commercialization while growing, training, and fundamentally transforming its sales infrastructure to a direct sales force, 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, sales force 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 critical sales tools.
We also established a very robust and intensive sales training 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 203 tests relative to the prior quarter, but up over 300% on an annual basis.
We continue to see slow but steady 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 well as private payer payment and coverage. We have been engaged with the MolDX program of the Medicare administrative contractor, Palmetto GBA, on Medicare payment and coverage since early 2020.
Although we secured final and effective payment determination, coverage determination has been slowed by a significant pandemic-related backlog of coverage reviews. We do, however, have reason to believe that things are beginning to stir on the coverage front. Last month, the MolDX program held a public contractor advisory committee or CAC meeting on the topic of molecular testing for certain gastrointestinal cancers, which included discussion of EsoGuard testing.
We are very encouraged that the expert gastroenterologist panel voiced strong support for esophageal pre-cancer screening in high-risk chronic heartburn patients. Our market access and reimbursement team, along with our expert reimbursement consultants, are now in the process of re-engaging with MolDX to reinforce this message, and we're hopeful that we might see a draft coverage determination on the coverage in the coming months.
On the private payer side, the laboratory continues to receive some standard 50% out-of-network payments from private payers averaging over $1,000 per test, which is encouraging. Securing in-network private payment coverage 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 is a critical volume of tests performed and claims submitted to each payer.
We are close to reaching such volumes in certain locales and have initiated some contacts with major payers in Arizona. In the interim, 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 EsoGuard positively impacts clinical decision-making. Most notably, that patients with a negative EsoGuard test don't also undergo a costly endoscopy.
We are collecting such data from our busiest clinical sites, and we'll 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's own CLIA-certified laboratory, which will allow Lucid to bill payers directly for the test and eliminate the complexities of the current process involving our partner, ResearchDx.
Lucid and ResearchDx have recently agreed in principle to the terms by which a newly created, wholly owned Lucid subsidiary, LucidDx Labs, would acquire the CLIA certificate and related licenses to perform the EsoGuard test. LucidDx Labs would lease a separate building in Irvine, and ResearchDx would continue to manage the performance of the EsoGuard test through a management services agreement with LucidDx Labs.
We look forward to executing the definitive agreements hopefully before the end of the year and launching the Lucid CLIA laboratory soon thereafter. Leading much of the effort on Lucid's side has been our newly appointed Chief Scientific Officer, highly accomplished molecular biologist, Suman Verma. Dr. Verma has long been a part of the Lucid family in her prior position as VP of Genomic Services at ResearchDx.
There, she played a central role in transferring the EsoGuard assay from the Case Western Reserve University, and launching EsoGuard as a commercially available laboratory-developed test. Could not be more excited to have her on board and to launch our own CLIA laboratory in the coming months. Things are also progressing well in the clinical research and development program.
We are actively enrolling patients in two international multi-center clinical trials, EsoGuard BE-1 and BE-2, to support FDA PMA approval of EsoGuard use with EsoCheck as an in vitro diagnostic, indicated to detect early esophageal pre-cancer. The studies have 68 sites in the U.S. and Europe, with 50 U.S. sites and all 9 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 Lucid highlights before moving on to the rest of the portfolio. We are proud to see Lucid's products add to their list of formal accolades and honors, with EsoGuard being awarded Diagnostics Innovation of the Year at the BioTech Breakthrough Annual Award program, recognizing innovation in the global life sciences and biotech industry.
This year's program attracted more than 1,200 nominations from over 12 different countries throughout the world. Also, Lucid recently, last month PAVmed acquired North Carolina-based CapNostics, LLC, which manufactures EsophaCap, a U.S. FDA 510(k) cleared and European CE mark certified non-endoscopic sponge-based esophageal cell collection device, which has been used in pre-commercial clinical research of esophageal precancer biomarkers at major academic medical centers, including Mayo Clinic and Johns 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 minimally invasive device to treat carpal tunnel syndrome. I'm actually cautiously optimistic that we're starting to turn the corner after a frustrating year with repeated challenges building momentum with CarpX.
Our new full-time CarpX national sales manager has been doing an excellent job since he started in June, leveraging his relationships in the orthopedic and hand surgery space to recruit motivated early adopters in what remains a limited commercial launch. In the past quarter and recent weeks, we have trained seven surgeons and have five cadaver training lab scheduled. Surgeons performed 11 CarpX procedures during this period and have an additional eight currently scheduled on the books.
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. Although this is just the first step, I'm encouraged by this progress and remain upbeat about the future of this groundbreaking product, including exciting progress on the next generation CarpX device. Let's now move on to Veris.
I'll try to be brief since many of you participated in our virtual investor event last month, and if you didn't, I'd encourage you to watch the recording. It went really well. Veris is a majority-owned subsidiary of PAVmed and represents PAVmed'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 sensing, with software with symptom reporting and telehealth functions, as well as advanced data analytics. Veris' groundbreaking 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 and Veris' cloud-based digital health platform will seek to deliver actionable real-time data to patients and physicians efficiently and effectively. Veris is targeting FDA 510(k) clearance of the intelligent implantable vascular access port 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 intelligent 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 a definitive services agreement with leading full service Silicon Valley based software development firm, Loka. Loka is now building the Veris remote digital healthcare platform.
The teams are making excellent progress, 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 Veris 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, Philips Healthcare, and Facebook. She has deep expertise in data science, analytics, machine learning, and advanced sensors, all cutting-edge technologies which are central to the Veris device and platform.
We will soon be announcing two key Veris advisory boards, a medical advisory board of key opinion leaders in cancer care, including the major cancer centers across the country, and a technology advisory board of Silicon Valley luminaries. Finally, we have launched a major R&D effort to apply the Veris technology 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 COPD. Now on to NextFlo, including our NextFlo IV Set, which seeks to revolutionize care by eliminating the need for complex, expensive, and error-prone electronic infusion pumps for most of the 1 million infusions performed in this country each day.
Although as a company, we've been spared the brunt of the supply chain issues plaguing much of the country, we have incurred some delay in the receipt of a certain NextFlo component from China. We were eventually able to switch to a U.S. supplier, but the delay cost us a couple of months in our timeline. We have now received the parts and are starting verification and validation testing, but we've pushed our target date for 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, and we still continue, to receive strong interest in NextFlo from leading strategics in the space. The engagements for a pre-commercial product that has not been exposed to the commercial market, excuse me, can be, and has in this case, been painfully slow. I should note, however, that our strategic approach to NextFlo has evolved significantly over this time period.
Back then, we were positioning NextFlo for a pre-commercial acquisition to supply PAVmed with much needed capital. We're obviously a very different company today than we were then. PAVmed is now in a strong cash position, especially following the NextFlo IPO. Although we're open to continuing these engagements and entertaining offers, which we will, we know that a commercial NextFlo product is a very valuable asset, which we are happy to commercialize and to create value organically if necessary.
Finally, a few brief high-level highlights, but for the sake of time, not all of the other products in our portfolio. Progress on our PortIO implantable intraosseous vascular access device has remained frustratingly slow. The long-planned human study in Colombia, South America remains delayed due to local IRB backlogs. However, there are promising signs that we'll finally be able to start enrolling patients with long-term implants of PortIO after the new year.
In the U.S., the FDA continues to present us challenges on a U.S. IDE study, and we are strongly considering reverting to the classic med tech strategy of seeking CE mark and launching in Europe first. EsoCure, our esophageal ablation device is progressing extremely well. Histopathology and data from our most recent animal study, which included head-to-head comparisons with the Medtronic Barrx device, really looked great.
If things continue to go well, we expect to be in a position to submit for 510(k) clearance in 2022. Thank you all for your attention. With that, operator, we can now open the call to questions. We really thank you for your attention.
Thank you. We're now conducting a question and answer session. If you'd like to be placed in the question queue, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing star one. One moment please, while we poll for questions. Our first question today is coming from Kyle Mikson from Canaccord Genuity. Your line is now live.
Thanks. Hi, Lishan and Dennis.
Hey, Kyle.
Hi, guys. Hey, congrats on the IPO in the quarter. I just wanted to start, Lishan, I heard you on reimbursement, really helpful. I guess next couple of months, you think, the draft LCD could, you know, 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? I'm just kind of curious if you expect any additional data is gonna be necessary to achieve the draft LCD. Thanks.
I think that the short answer is no. I mean, we obviously will know when we know, but we don't expect that. There was nothing in our extensive discussions with the MolDX group as we were preparing the coverage dossier back in the first half of May that suggested that they were focused on additional data. You know, the CAC meeting transcript, if you read it's a bit rambling, and there's a lot of, you know, you have to sort of pay attention.
You know, there was fairly strong support, as I mentioned, from the gastroenterology expert panelists, including two from Mayo Clinic. One from Johns 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. Every hint we've gotten and every communication we've had would seem to suggest that.
You know, we feel that there's a fairly straightforward decision to be made here. If one follows the risk factor profile that's been well-established in 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, you know, it's still an unknown.
We're encouraged that they've dusted off our dossier and are looking at it in conjunction with other tests in the GI area and in the esophageal area. Again, as I said, we're hoping that that'll translate in the draft in the coming months. You know, what happens from there is really impossible to predict, right? It depends on what they say. You know, certainly if we get something that's approximates what I just described and what we think we have made a strong argument for, you know, we would hope that the process from a draft LCD to an effective one would not be very long. That's obviously to be determined.
Okay. Appreciate that, Lishan. That makes sense. I was also wondering where I guess most EsoCheck procedures occurred during the third quarter, and I guess where they're kind of, you know, being performed currently and what's the expectations for, like, early 2022? Obviously you had the Lucid test centers kind of launched, I guess in the middle of the quarter. I know, you know, they're not really up and running yet, but I'm just trying to understand if the volume that we saw in the third quarter could increase sequentially or just what the trends could look like going forward.
Yeah. I think I have a, you know, one clear answer is that the bulk of nearly all of the tests performed in the third quarter were through our traditional target, which were the GI physicians. I mean, we didn't launch the Phoenix test centers until August. By the time we had our local sales reps in place, we were well into September. That number reflects almost entirely the same target that we had prior in prior quarters. And as I said, it reflects some sort of shifting of resources to get the test centers up and running and to train and expand our sales force.
You know, I think you know I would expect over time you know 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 know for sure.
That's certainly where we're heading over the long term and that we fundamentally believe over the long term, whether it happens in the next couple of quarters or not, we'll see. Over the long term, the path to wide adoption of EsoGuard testing is through the primary care physicians because that's where the patients are. Very few patients ever see a gastroenterologist.
All right, great. You know, I'll leave it there. I appreciate you taking the questions, though, and I'll let others jump in. Thanks again.
Okay. Thanks a lot, Kyle.
Thank you. Next question today is coming from Charles Duncan from Cantor Fitzgerald. Your line is now live.
Hi, Charles. How are you?
Yes, good, Lishan. Thanks for taking the questions. Congratulations on the recent progress. 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 EsoGuard, EsoCheck, and kind of the, you know, in-market experience thus far. Anything newly gleaned from that?
Oh, absolutely. Yeah. You know, 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. We've had a lot of experience on that, on the talk tracks related to gastroenterologists and have worked through that. Generally, those talk tracks have been well honed and have gone well over the prior quarters. What we have learned, and we're very happy to have experienced, is that the talk track that we developed on the primary care side is really quite straightforward, you know.
The reason for that is that what we made the as you know, we made the strategic decision 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, availability of this test. All we're asking is that you understand that and you offer this test to your appropriate patients within your practice, and order the test.
We'll provide you with a location for that test to be performed." Because the burden on them is quite low, we're not asking them to utilize their own resources to do the test. You know, I have a quick anecdote. You know, one of our Vice Chairman, Stanley Lapidus, 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 impressive, with one of our local PCP-focused reps.
He really came back and Stan's a pretty grizzly veteran, and he came back with very positive reviews of how the story was told and how the entire folks in this, in what was an office in Mesa, you know, physicians, nurse practitioners, PAs, et cetera, you know, just got it from the very beginning and it didn't require a lot. Now there is obviously an art to this, to sales, and that's mostly around sort of repeated contacts.
Messaging has been fine, but to get people to actually, you know, to remember to think about it and to have it be front and center, that's just classic sales one-on-one and requires, you know, sort of multiple points of contact. The team has really gotten that down to almost a mathematical exercise right now in terms of how to do that. As I really said, I could not be happier with how the interactions are going with the primary care physicians, which is sort of what's new in the last quarter.
Very good. 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?
Sure. You know, I think a quarter may be short, but, you know, we'll obviously, you know, hope that we'll start seeing.
2 quarter.
Yeah, we clearly are looking. Our metric right now is just test volume, right? And
Yeah.
You know, as I said, it took some time, not just time, but sort of allocation of resources to, you know, do this transition to direct Salesforce. The, you know, the training program is now a five-day, sort of intensive five-day all day program that we exposed 16 new salespeople to just last month. 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 in the field now. They're out in the field banging on doors, making their case. We would, you know, certainly expect to see some, you know, nice increase in testing volume over the coming quarters.
Okay. Last question on this and then one on tech.
Yeah, one other thing that I should know, 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 UpScript in Phoenix. We'll have a lot of information by the time we have our next call as to how effective that direct-to-consumer marketing is, how effective we are at capturing the interest of patients with chronic heartburn and driving them into our telemedicine program. That obviously, you know, could very well have a big impact in the coming quarters as well.
Okay, that should be helpful. Last question on the marketing initiatives, and then just one quick strategy question on CapNostics. 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, or are you having to adjust that at least with these three new geographies?
Yeah, no, the math's the thing. I mean, you know, obviously at some point we'll get to New York and, you know, Chicago and other, and then potentially some other higher real estate areas where the medical office leases will be somewhat higher. Honestly, even then the math is still pretty insanely, you know, attractive in that it still ends up being a marginal cost business. No, nothing has changed in the cities that we just launched in and the ones we expect to launch in the Pacific Northwest, and we really don't expect that to change meaningfully even in higher cost. That's on the operations side.
Obviously, the marketing side and the, you know, 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 cost media markets.
Got it. Last question, strategy. Thanks for taking all my questions. Regarding EsophaCap and the CapNostics acquisition, I guess I'm wondering if you could give us a little bit of information on what you would like to do with that and really what drove you to consider that acquisition by PAVmed. Thanks.
Let me answer the second question first. I'm probably not really gonna be able to say much on the first question, so let's start with the second question. The reason we acquired EsophaCap from CapNostics is really fundamentally that Lucid intends to be the esophageal disease company. We have obviously EsoGuard and EsoCheck for esophageal pre-cancer, Barrett's esophagus screening.
We have, we've entered into option or license agreements and we continue to seek more out with regard to progression markers that can detect the difference between non-dysplastic and dysplastic. We have an ablation technology that's currently housed in PAVmed, in EsoCure, that we expect, when and if it's successful, will move into Lucid.
We wanna 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 food-mediated allergy, condition of the esophagus. With that as a baseline, you know, we wanna make sure that we have all of the tools available to us to pursue all of the things that I just mentioned.
Although we firmly believe that EsoCheck 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 access to the other technology out there, which was a sponge-based technology, which could be beneficial for, let's say, esophageal eosinophilic esophagitis or potentially for progression markers or other areas that we're pursuing. We were frankly somewhat surprised that CapNostics was available, and when it became clear that it was available, we acquired it.
Now in terms of the strategy, I'm gonna have to get back to you on that because, you know, obviously there's, you know, 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 their own biomarkers using the EsophaCap device and with, you know, with frankly, with the commercial partners that they work with.
Commercial sponsors and partners they work with. Stay tuned on that and, you know, we'll let you know once we have a little bit more to fill in that. But we just wanted to get it into our portfolio to make sure we had all the tools available so that we could pursue our broader aspirations in this space.
Thank you. Our next question today is coming from Frank Takkinen from Lake Street Capital Markets. Your line is now live.
Hey, Frank. Good afternoon.
Hey, Lishan. Dennis.
Good afternoon.
Good afternoon. Thanks for taking 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 just.
Yeah.
Flesh that out for us.
I think the best way to describe it is that, you know, as I said, a transitional quarter. In the second quarter, everything was sort of full steam, calling on gastroenterologists. We had not sort of expanded our team. It was mostly our business model with sales management, utilizing independent sales reps. We really kind of pivoted pretty rapidly in the third quarter in anticipation of the Lucid IPO and the access to significantly more growth capital to a direct sales model.
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 could be set up to start really dialing things up with regard to expanding the direct sales force.
It's really that. I mean, you know, 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 NGIs to sort of laying the groundwork for the future model of direct sales.
Got it. That's helpful. Crystal clear. Second piece I wanted to touch on was just of the revenue recognized in 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?
Yeah, let me answer that. Oh, well, Dennis, why don't you go and answer that? Let me just make one comment, which is-
Sure.
Dennis can follow up. The revenue we recognize is not reflective of the backlog. You know, remember, the way it's set up, and Dennis will answer this, is not one and the same with the billings received from the laboratory. I will answer a part of your question, then I'll let Dennis answer it from a more financial perspective. All of the claims that have been paid have been from private payers. The claims that have been paid to the laboratory have been from private payers. We have not either gotten a denial or payment from Medicare to date.
Some of that was related to the fact that it took a little while to get this sort of thing called a Dex code, which facilitates processing of Medicare claims, and that's now in place. We don't have really a picture either one way or the other with regard to either the denials or claims paid for Medicare. All of the claims that have been paid to date have been out-of-network payments by private payers at typically that sort of 50% rate. Dennis, do you wanna maybe add a little bit of color to that as it relates to sort of the actual recognized revenue and where that came from?
Yeah. The recognized revenue is actually agnostic in terms of the treatments, whether or not they're Medicare or private payer side. You have both of these things going on. As Lishan explained, the laboratory, who is the billing arm and collecting, has all been private payer components they've collected on. Our arrangement with them is a fixed price contract. They pay us $100,000 a month presently.
They're a 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 enough discussion understanding in terms of where the billing cycle is occurring on the laboratory side that orients our arrangement and the contract for the go forward months.
Presently, it's 100,000 a month regardless of what they collect. We have visibility into what they're doing, what they're billing, how they're collecting out-of-network payments. As Lishan 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 encouraging, and it continues to be that approach at roughly half of what you know, our nineteen thirty-eight payment rate is with CMS. All of that is good.
For the foreseeable future, until such time that we have our own laboratory, we'll continue with that arrangement with ResearchDx. That will go up as their volume, their collections go up. It'll go up prospectively in terms of that financial arrangement. Once we own it, we will take over that same position. We will bill directly to the private payers. We will bill directly to CMS, and we will bill at those rates that we, you know, the payment rate has been determined at, until such time that there are contracts in place with the private payer community going forward. Hopefully that was clear.
I'll just add, emphasize one thing, which is that we really, I mean, the i's are not dotted, the t's are not crossed yet, but we really see this transition. We're highly motivated to complete this transition to Lucid owning the CLIA laboratory and transitioning to its own billing. We really expect that to be a near-term event barring some major unexpected problem.
Perfect.
This temporary setup is really temporary. We really expect it to be temporary.
Got it. Perfect. Thanks.
Thank you. Next question is coming from Mike Matson from Needham & Company. Your line is now live.
Hey, Mike, good afternoon.
Mike, how are you?
Good. How are you guys? I guess first on this transition to the direct sales force, I mean, I know you guys kind of talked about that in the past, so it's not surprising, but just, is it now completely done or is it still underway? When do you expect it to be done? The second part of the question would be, is the direct sales force really purely focused on PCPs? Have you sort of given up on the GIs or are they calling on GIs as well?
Yeah, that's worth. The transition in terms of the structure is complete. We're no longer depending on independent sales reps. That all of the sales activity right now is being done with Lucid employees. But we're absolutely not giving up on the GIs. Let me just make it clear. Although the expansion has been, and what's new has been aggressively adding PCP-focused reps, the reason for that is we need them to support the Lucid test center. 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 we learned in Phoenix is that it doesn't really matter whether you have a test center up and running if you don't have reps, PCP-focused reps in the area that are actually banging on doors and driving referrals there. 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 way to understand the GIs is as follows. We have in the trenches primary care sales reps.
These are, as I mentioned, 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 are primarily right now expanding at the PCP level, but still providing ongoing support and engagement with the gastroenterologists.
Our messaging to the gastroenterologist has changed a little bit, which is that the way we see the gastroenterologists are, they're just another test center. They're sort of GI test centers, just like we have Lucid test centers, and we're not really out there putting Lucid test centers up to compete with gastroenterologists.
When we have a gastroenterology group in an area that's busy and is active and wants to have basically on-site Lucid EsoGuard testing, that's fine, and we support that, and we provide clinical specialists who come in and support the cases they try. They try to be there pretty much in every case. Nothing has changed in that part, and we continue to seek out and grow through the higher level market development managers gastroenterology practices that want to embrace this and basically become a test center.
Once they've established themselves as a test center, then what's interesting is that the primary care reps are calling on both 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 will also be the entity or the rep that calls on the primary care physician that refers to that GI. I think as you remember, we've said this many times in the past, our message to the gastroenterologist is that, you know, yeah, there are gonna be some patients in your practice.
There are gonna be some patients undergoing colonoscopy, and there is some low-hanging fruit that you already see. Our goal is to go out and find you more patients, find you those 19 out of 20 patients that are not currently getting screened. To do that, we have to go to your primary care network.
By having a network of primary care physicians, primary care sales reps, we actually are in a better position now to actually support the GI. It's a bit, maybe it's a bit complicated, and hopefully that makes sense, but it's all intertwined in this transition. The transition that I described is from a hybrid model with independent reps to a direct sales model. It is not a transition away from GIs towards primary care.
Okay, great. That's very clear and very helpful. Thanks. You know, I wanted to ask about the direct to consumer component. You know, what's your plan for sort of initial DTC advertising? Is it gonna be in these areas, all the areas now where you have the test centers? Are you gonna start in Phoenix to see how it goes?
Yeah. We're gonna start in Phoenix. Just like we did with the actual physical locations, we're gonna start in Phoenix. We have the Phoenix test centers. We actually have the media buys. Everything's ready. We've just been waiting for the UpScript Lucid telemedicine platform to be up and running. It looks great. It looks pretty slick. That'll be ready very, very soon. It's really just a matter of turning on the switch with regard to the media buys in the Phoenix area across all the various modalities. You know, we're gonna do that in a deliberate way.
We're gonna 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 responds to our advertising before we branch out and start doing it in the other test center cities. For the other test center cities, that's gonna be strictly primary care physician-driven referrals until we sort of fine-tune and hone the upcoming DTC program in Phoenix.
Okay. Got it. Thanks for the help.
All right. Thanks, Mike.
Thank you. Next question is coming from Mark Massaro from BTIG. Your line is now live.
Hello.
Hey, guys. Hey, Lishan. Thanks for taking the questions. You know, 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, you know, a large health plan?
Yeah. I think the quick answer to your question is that we'll have that data by the time 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 you have sufficient claims within their, you know, 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 results on patients who underwent EsoGuard testing.
So these are very straightforward, you know, this is not a complex clinical trial. It's actually getting clinical utility data. It's fairly straightforward. You know, the patient got a test, were they positive or negative? If they were, and did they get an endoscopy? You know, what did that endoscopy show, right? Yeah, we're collecting that data now, and as I mentioned, we're just about ready to launch our own registry.
The goal of our registry is to try, it's not always easy, but to try to get just about every patient who undergoes EsoCheck EsoGuard testing to consent to us collecting their follow-up data with their endoscopy if indicated. We'll have a sort of a continuous stream of that data. It's not complex data to collect and the collection of that data is not gonna be the rate limiting factor in our initiating conversations with private payers.
Okay, maybe just a two-parter. Is there currently a preference between digital or TV or billboards on the DTC? 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. You know, 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, you know, between 10 and 15 in terms of rolling out clinics across the country or at least the Pacific Northwest.
Yeah. Let's answer the first question first. I'll defer to Dennis on that mostly 'cause he has a lot more experience in DTC, but I think the answer is that we're not going in 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 digital. We're using Phoenix as a laboratory to understand that. Dennis, do you wanna talk a little bit more about that?
Yeah. Obviously, Mark, this changes over time, so it's more important to have the feedback loop. As Lishan said, we're gonna launch with some initial bias, all of those media tools. 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 an appointment with telemedicine or calling their PCP and getting a script to get tested. That will change over time.
More dollars will pour into those that are having a higher, you know, MER or media expense ratio that, you know, revenue dollars compared to the cost of the specific media. You can parse all of those media even further. For instance, if you're gonna do TV, and which is part of our plans, on a very limited scale initially, you gotta 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.
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 is gonna yield dollars of revenue. It'll take time to figure out, digital TV versus billboard and other means of approach. You know, radio has been very successful in the past, for
You know, physician-based kind of models. COVID changes that, especially when drive times aren't as regular as they have been. We expect that to come back at some point, and that could be a very, you know, profitable approach for us. You know, measuring that and spending where it works is gonna be important, and that's what we intend to do.
Great. On the test center side.
Yeah. Let's talk about that a little bit. Let me see if I can give you some details that provide some color without without sort of, you know, directly projecting. In Phoenix, for example, we have three test centers, right? The reason we started right off the bat with three in Phoenix is because we knew we were gonna 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, you know, 'cause you can't always know where people are when they receive the advertising. We have three in Phoenix, right?
The three cities we announced last week, we're 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 the model in Phoenix. Those locations were basically those kind of places located basically using the geography of hospitals and clinician practices and population demographics and so forth.
We certainly expect to add at least one additional one in Denver and Salt Lake after we've had some time to gear up there, and potentially maybe even a third in Denver. As I said, pretty clearly we're going to the southwest, to the northwest. That's three cities. You can probably guess what they are. That model will be similar to starting with one in each and then expanding to up to two to three, depending on the population and the geography.
At that point, that's, you know, 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 states where you know we selected these western states, I think, as you know, because they have a low regulatory burden for nurse practitioners to operate independently. That's where we started. We are now, with our counsel from Greenberg Traurig, working through the processes of what we need to do to have physician oversight in states that require physician supervision.
That process will be done by the time we have the Northwest centers up and running. Then it's really just a matter of aligning you know geographies and states with where we seem to be getting traction and 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 wanna emphasize one thing that I said earlier, which is that test centers and the growth of the primary care targeted sales reps are intricately linked. They're sort of one and the same.
The rate limiting factor for adding test centers is actually adding reps. We could. I mean, getting test centers up and running, it doesn't take any effort at all. You just sign a lease and you hire a nurse practitioner. But there's no point in doing that until you've identified. Again, we're starting with at least two in each city, you know, high caliber, experienced, highly motivated, highly driven reps that are gonna do a good job of driving patients to those test centers. So what you're really asking is what is our timeline and sort of for growing our sales team.
You know, I think as I said, maybe I'll just leave it at that we expect, you know, our current team to expand several fold in 2022. I would expect by the end of 2022, 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 I've already outlined, including the upcoming ones in the Northwest.
That's really helpful. Thanks so much.
Great. Thanks, Mark.
Thank you. Our next question is coming from Edward Woo from Ascendiant Capital. Your line is now live.
Yeah, congratulations on the IPO. My question is, has there been a significant shift in your product acquisition strategy? Should we expect fewer but much bigger acquisitions, going forward?
I did hint at that. I think I threw a few lines in my prepared remarks on that. Again, as always, Ed, thanks for giving me the opportunity to expand on something. The answer is yes. I'm not saying I'm not necessarily fewer, but somewhat maybe a different spectrum or a broader spectrum of potential targets, right? You know, historically, as I was sort of describing with regard to NextFlo and so forth, you know, we had limitations with regard to capital in terms of what we could go out and pursue.
We were mostly pursuing extremely early-stage products that we could essentially get for no cash or a stock consideration like we did with Lucid and Veris and invest in them and build value with them or organically over time, right? Now that Lucid now that you know PAVmed has you know PAVmed was well-financed prior to the Lucid IPO, but now that it's free from having to fund Lucid's operations,
which accounted for you know the substantial portion of its cash burn, we have significantly you know more capacity to do you know to do later stage deals, including those that are truly pre-commercial or companies or products that are already in the commercial realm and already revenue generating. I think you picked up on an important point, which is, so the answer to that is yes. Whether you know the number will just depend on what we see. As I think, as you know, and our long-term 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 reach out to us, seeking to partner with us, which is a really fantastic position to be in. That includes, you know, the kind of company you're talking about, companies that are further along that have commercial products. We have active discussions in that realm too.
Great. Well, congratulations and good luck in the future. Thank you.
Thanks. Thanks, Ed.
Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over to management for any further closing comments.
Hey, thank you all for joining us today. This is obviously a lot with the two companies, and thank you for your patience of going through all the information and for, again, another really great round of questions. As always, we look forward to keeping you abreast of our progress with news releases and periodic calls like this one. The best way to keep up with PAVmed and Lucid news updates and events is to sign up for our email alerts on the PAVmed and Lucid investor relations websites, and to follow us on social media, on Twitter, LinkedIn, and YouTube, and the rest of our websites.
You can also contact us at info@pavmed.com or info@luciddx.com, or directly to Lisa at pavmed@lavoiehealthscience.com. I would really encourage folks and really, you know, don't feel limited to contact us by email.
Contact us by phone, as some of you are aware, is not always the easiest thing. Our corporate offices are still basically remote, and so the timeline to get back to folks is more challenging. Quickest way to get in touch with us is info@pavmed.com or info@luciddx.com, and we're always happy to hear from you. Thank you very much for your time. I appreciate it, and everybody have a good evening.
Thank you. That does conclude today's teleconference and webcast. Let me disconnect your line at this time, and have a wonderful evening. We thank you for your participation today.