Welcome to the PAVmed Business Update and Q1 2023 Financial Results conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. As a reminder, this call is being recorded. I would now like to turn the conference over to your host, Michael Parks, Vice President, Investor Relations. Mr. Parks, you may begin.
Thank you, Betsy, and good morning, everyone. Thank you for participating in today's Q1 2023 business update call. The press release announcing this business update and the Q1 2023 financials is available on the PAVmed website. Please take a moment to read the disclaimer about forward-looking statements in the press release. The business update press release and the conference call both include forward-looking statements. These forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from statements made. Factors that could cause results to differ are described in the disclaimer and in our filings with the U.S. 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 One A, entitled Risk Factors in PAVmed's most recent annual report on Form 10-Q filed with the SEC and subsequent updates filed in the quarterly reports on Form 10-Q in any subsequent Form eight-K filing. Except as required by law, PAVmed disclaims any intentions or obligations 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. I would now like to turn the call over to Dr. Lishan Aklog, Chairman and CEO of PAVmed.
Thanks, Michael Parks, good morning, everyone. Thank you for joining us today for today's business update call. I look forward to a good conversation. I'll start with some recent highlights. As those of you who are long-term investors know that earlier this year we proceeded with a restructuring and strategic refocusing and have been focusing all of our efforts for this half of the year on our two commercial subsidiaries, Veris Health and Lucid. Yesterday we had a dedicated call for Lucid, our content for today will be limited. I would encourage you to go to our website and view the webinar from yesterday for further details about Lucid. Veris Health.
With Veris Health, we've had some recent highlights, including that our remote patient monitoring platform, Veris Cancer Care Platform, is now live. We have an expanding commercial footprint with a robust nationwide pipeline. Subscription payments have begun under the software-as-a-service recurring revenue business model, and we appointed a new President of Veris, Gary Manning, to hone strategy and expand commercial horizons. A few introductory slides here for those of you who might be new to the PAVmed story. PAVmed is a diversified commercial-stage medical technology company. We operate in all three segments of medical technology and devices, diagnostics and digital health. Mentioned our corporate structure is such that PAVmed has two subsidiaries, a digital health subsidiary, Veris Health, which is privately held, and our publicly traded diagnostics company, Lucid Diagnostics. Let me start with Veris.
Veris Health is a commercial-stage digital health company that's focused on enhancing personalized cancer care. There are two products that we have developed. One is the Veris Cancer Care Platform, the other is an implantable monitor that's being developed and looking to commercialize next year. Our mission is to utilize modern remote patient monitoring or RPM tools to improve care through early detection of complications, tracking of longitudinal trends, and generalized risk management. The cancer care platform consists of two parts. There's a patient smartphone app, where patients can report symptoms, quality of life, communicate with providers, and create essentially a permanent link to their provider team.
That's married to a cloud-based electronic health record integrated clinician portal, which allows the cancer care team to track patients, track the physiologic parameters and symptom reporting that are being sent to them from the patient and from connected devices that the patient receives as part of the Veris box. It includes telehealth functionalities as well, as well as integration with the EHR that allows the cancer care specialist to view everything on one screen, as part of their care of the patient. The business model is very attractive, both for us, for Veris Health, as well as for the customers. As I mentioned, it's a software as a service recurring revenue model where we charge a subscription fee that has patients on the platform.
It uses established remote patient monitoring codes, and there are also additional revenue opportunities from enhanced technical support, clinical support, as well as the implantable device that will be launched next year. From the customer's point of view, either cancer care center or cancer or oncology practice, the RPM billing again is well established. They're well established CPT codes that collectively provide for approximately $200 per month per patient revenue opportunity to the practice, and that's approximately $100 per month per patient. It also facilitates participation in value-based payment models by CMS and others, providing additional opportunity for enhancing revenue, Practice revenue, and there are opportunities to decrease the administrative workload as well.
We believe the total addressable market opportunity based on the number of patients diagnosed with cancer every year undergo treatment for that to be approximately $2 billion. As I mentioned, we are excited to have a new president of Veris Health join us, Gary Manning. Gary has three decades of experience in executive leadership roles, commercializing products in global markets. His experience really spans the experiences of PAVmed. He has extensive experience in medical devices and more recently in wearables as well as in digital health.
Gary's been tasked with accelerating the commercialization of the Veris Cancer Care Platform, which launched earlier this year, as well as advancing the Veris implantable monitor to commercial launch, and developing a longer-term commercial strategy, which includes expanded horizons such as supporting pharma, biomedical research, data monetization, and other tools. We're excited about that. The commercial footprint has expanded. We've added accounts, we have patients on the platform, and as of this month, we're starting to receive subscription payments under the model. We're excited but for the future with Gary at the helm. Next slide. Our Veris implantable monitor is designed to extend the power of the platform. It's a monitor that's designed to be implanted at the time of a vascular access port placement.
As you can see on the image here, the vascular access port, which is the purple device, is designed to snap together with an implantable cardiac and physiologic monitor. The monitor has continuous cardiac monitoring, measures activity, has a patient-triggered event monitor, measures temperature, respiratory rate, and has Bluetooth connectivity to the patient's smartphone. We recently completed one of several chronic animal studies which showed excellent performance across the key features and the parameters to be measured. We have active discussions with FDA. We've had multiple pre-submission meetings and are looking to submit early in the first half of next year.
The key feature of this is in terms of how it integrates with the remote patient monitoring system or the overall cancer care platform, is that it assures 100% patient compliance with the billing requirements, which are that a patient submit data, physiologic data for 16 days out of a month, and this provides 100% compliance with that. Next slide. A few brief slides on Lucid. Again, I would encourage you to review the webinar from yesterday, which has some further details. Some key highlights here on EsoGuard testing volume. We continue to have good growth in testing volume.
Fifty percent increase over the fourth quarter and 245% increase annually to a total of 1,841 tests performed in the first quarter. Next slide. We've also documented trends with regard to referral sources and operators. The referral source trends have actually stabilized. Approximately two-thirds of patients referred for EsoGuard testing for early detection of esophageal precancer are being referred by primary care physicians, and about a third are being referred by specialists or broadly broader institutions. There has been a substantial shift in the operators.
As you can see here, approximately 60% of the patients undergoing the EsoCheck cell collection procedure are that procedure is being performed by 1 of the Lucid nurse practitioners, either at a physical Lucid test center or LTC or what's a really new burgeoning aspect of this business, which is at the satellite Lucid test centers where a Lucid nurse practitioner has a scheduled day at a physician's office and performs the procedure on patient schedules by the physician at their office. The shift to an increasing proportion, now over half of the total test volume being performed by Lucid nurse practitioners at physicians' offices is a substantial increase from that. Still, about 40% of patients are undergoing the procedure by physicians, by staff at a physician practice.
Next slide. We announced earlier this year our very first, Check Your Food Tube precancer detection event. These are high volume testing events which are scheduled, and all of them to date have been with firefighters. The first one from the pictures there were at the San Antonio Fire Department, where, approximately 400 patients underwent EsoCheck cell collection and testing, over second weekends. We've continued to expand this program and expect it to be an increasing portion of the overall volume. You could see in the red dots there that we've had five that are completed of different sizes. And we have a robust pipeline, including nine events that are already scheduled. With that, I'll hand things over to Dennis for an update on our financials.
Thanks, Lishan. Our summary financial results for the first quarter were reported in our press release that was published last night. The next three slides will emphasize a few key highlights from the quarter. I'd encourage you to consider those remarks in the context of the full disclosures covered in our quarterly report on Form 10-Q that was filed with the SEC Monday afternoon and is available on the PAVmed website. On slide 17, you'll see the cash of $49.3 million at the end of the quarter reflects a $9.5 million sequential increase from the year-end balance of $39.7 million. The vendor payables decreased use of cash $1.5 million sequentially. The convertible note had a net increase of approximately $10.6 million sequentially, reflecting the addition of a convertible debt inside Lucid Diagnostics.
Other long-term liabilities are capitalized leases related to our lab and office spaces. The shares outstanding, including unvested restricted stock awards as of today, is 104.5 million shares. The GAAP outstanding shares of 100.5 million are reflected on the slide as well as on the face of our balance sheet in the 10-Q. In addition to the Lucid convertible debt in the first quarter, the Lucid board authorized a $20 million preferred offering. We completed the initial closing of the Lucid preferred in the amount of $13.6 million. Both structures keep Lucid stock out of the market for long periods of time, likely two years in the case of the preferred, which allows Lucid to complete its work on clinical utility studies and improving reimbursement. Our consolidated runway is elongated into 2024.
When combining these financings with the cash at the beginning of the Q1 , results in pro forma cash of $63.3 million on January 1st. With the ending quarter cash balance of $49.2 million, the pro forma burn rate for the 1st quarter was $14.1 million, which is in line with the expected burn rate for the year, which we previously indicated would be between $53 million and $55 million for the year. This is particularly achievable since it does not reflect the full effect of the cuts we put in place in the middle of the Q1 , nor does it reflect about $1.2 million in one-time costs we incurred for terminating Lucid's relationship with ResearchDx, severance costs, and the R&D wrap-up costs for paused projects.
Furthermore, we have approximately $10 million remaining on the $50 million securities purchase agreement with our convertible debt lender that will serve to elongate our runway further. Slide 18 compares this year's Q1 to last year's Q1 on certain key items. Trust you'll review the information about this P&L and my comments in light of the cautionary disclosure at the bottom of the slide about supplemental information, particularly non-GAAP information. Revenue for the Q1 reflects Lucid actual cash collections for the quarter. The prior year reflects Lucid's fixed monthly fee received from the third-party lab that we used before setting up our own lab at the end of last year's Q1 . The Lucid revenue recognition policy, a key determinant is the probability of collection.
For the vast majority of Lucid's patient out-of-network claim submission means revenue recognition occurs when the claim is actually collected versus when the patient report is invoiced and submitted for reimbursement. As you'll see in our 10-Q, this is called variable consideration, the jargon of GAAP's ASC 606 revenue recognition guidelines. Presently, there is insufficient predictive data to recognize revenue when invoiced. As for Veris revenue, we just started billing our first customer in March. We have not recognized this revenue for March activities as this first customer site, as they are helping us customize the system to optimize client and company ROI, which will benefit us as we are onboarding additional clients. We expect that once we are through this initial phase, unlike Lucid's revenue, we expect the recognized revenue on an as invoiced basis, subject to normal GAAP rules.
A couple comments on GAAP and non-GAAP OpEx and net loss. Our first quarter GAAP OpEx and GAAP loss is lower sequentially by $3.8 million and $2.5 million, respectively. Our first quarter non-GAAP OpEx and non-GAAP loss are also lower sequentially by $2.5 million and $4.1 million, respectively. Our first quarter non-GAAP loss per share is $0.10, a decrease from $0.15 from the fourth quarter. Slide 19 is a graphic illustration of our operating expenses as presented in detail in our press release. First quarter non-GAAP OpEx decreased significantly by $2.5 million sequentially. The sequential decrease was led approximately by $2.2 million decrease in R&D and a $1.2 million decrease in sales and marketing.
These decreases were offset by an increase in G&A, driven approximately by $900,000 to terminate Lucid's past relationship with ResearchDx, which will save us approximately $2.7 million in future expenses. The cost of revenue primarily consists of lab supplies and fixed lab facility costs. Consistent with recent SEC filings, it is presented in our 10-Q as operating expense, also consistent with practices of other diagnostic companies. With that, operator, let's open it up for questions.
We will now begin the question and answer session. If you would like to ask a question, please press star then one on your telephone keypad now. You'll be placed into the queue in the order received. Please be prepared to ask your question when prompted. Once again, if you would like to ask a question, please press star then one on your phone now. The first question comes from Ross Osborn with Cantor Fitzgerald. Please go ahead.
Morning, Ross.
Morning. Hi, good morning. Congrats on the progress. Maybe I'll focus on Veris. Can you discuss the types of new accounts you have added during the quarter and how many patients, if any, have been onboarded to date?
Yeah. We have right now a total of three accounts and a couple that are close, in fact one that's closing today. Right now they're sort of medium-sized practices, often with multiple locations. We had the first practice has three different locations. We do have a process with larger strategic accounts and bigger cancer care centers. Those are, as you might expect, longer lead times in terms of securing those accounts, but we're getting traction in those conversations as well. In terms of the number of patients, we're really not quite ready to start reporting on patient numbers. We certainly will in the first in the coming quarters.
Yeah, we have dozens of patients on that are onboarded, and we've had sort of second waves of patients in our earlier accounts. Generally, when we open an account, there's as you might expect, they'll delineate their practice and identify higher risk patients who they think will benefit. As Dennis mentioned, you know, this is an important clinical tool, but it's also an important practice tool. Figuring out how to properly integrate it into their IT system, figuring out the ROI models, figuring out their billing and tracking of time and so forth is a collaborative process between our team and theirs. So far it's going really well.
Okay, great. Then maybe could you just explain again how the revenue recognition process works? I realize it's a SaaS model, but maybe just from the time a patient is onboarded until PAVmed should recognize revenue.
For Veris, when a patient is on the platform, we will bill the client the appropriate fee on the contracted amount. Roughly, we measure that around $80 per patient, and we bill that each month that patient's on the platform. The client in turn will bill the patient's insurance company, which there are existing codes. We don't have to fight the reimbursement battle here. The client will turn around and pay us, and they'll collect from the insurance company. Because the collection has a high predictive value of collection, we're able to recognize revenue as the patient or the client is invoiced.
It's on an as invoiced basis for Veris, unlike Lucid, where we're presently in this reimbursement evolution where we have to recognize revenue on a cash collection basis.
Okay, great. Thank you for taking my questions.
Thanks, Ross.
The next question comes from Anthony Vendetti with Maxim Group. Please go ahead.
Anthony, good morning.
Hi, Anthony.
Good morning, Dennis. Good morning, Lishan. How are you?
Great. Doing great.
Excellent. So just following up on Veris, can you talk about what the pipeline looks like at this point? Any color on that? Then on Lucid, it looks like significantly more tests are being performed outside of the Lucid test centers. Can you comment on that? Would that cause you to pause, you know, setting up new centers and focusing more on just driving patients to wherever the physician can perform the procedure? Thanks.
Yep. Thanks, Anthony. Let's start with Veris. The pipeline is robust. You know, as with any commercial pipeline, some are like, you know, in the midst of contractual negotiations, some are at early stages. The typical process we're bringing on a client, you know, a medium to small practice is one of engagement, of demos, of contractual negotiations on the subscription fee, and then ultimately of planning and executing on the integration process for getting the platform onto their IT system. But there are, you know, without concrete numbers, but it's in the dozens range in terms of the total number of targets. We expect to start seeing a nice escalating number of those.
but as I said, there's a wide range of practice sizes. There are small practices with a couple of oncologists and, you know, all the way up to obviously the large, the major large cancer centers across the country. We're targeting all of them, and the process for securing those accounts is going to be different and the timelines are gonna be different. Let me move on to the Lucid Test Center question 'cause that's a really important one. just again, I said this before, but I'll repeat it for emphasis, that our approach with regard to how we're expanding access to the test, patient access to the test is a multipronged one. It's an all of the above.
The testing events, the high volume testing events are supplementing. So far we're excited about the opportunity to bring in patients in large chunks through these testing events. We're continuing full steam and not tacking or shifting in any way from the traditional model of our reps calling on primary care physicians and specialists to garner physician adoption. You specifically asked about the physical test centers versus the physician practice orientation. That is shifting, to, as I showed on the slide, to an increasing number of our, of the tests that our nurse practitioners are performing, the cell collection procedures are being performed at these, what we're referring as satellite, test centers in the physician's offices.
As I've said before, that's a very attractive aspect of this in that, it unmoors them from the physical location and increases the geographic span and the efficiency of us being able to perform the tests. It also improves our ability to keep the test front in mind with the primary care physicians. We've had really good success with adoption, and so a large focus of our effort is reminding the physicians to think about the test as they're seeing patients. Having the nurse practitioner from Lucid you know, be coming next Thursday is a good impetus for that. We will continue to have to maintain the test centers.
In a sense, the economics of the test centers, which we've described before in some detail, are actually somewhat even more efficient right now because the cost associated with the nurse practitioner that calls that physical location their sort of their home, their Lucid home, is now much greater because they can go beyond the physical location. I would encourage you and others to think about the expansion, not as we have in the past in terms of, you know, how many test centers, how many cities, and so forth. We've kept that fixed for this year, consistent with the number of sales reps as part of the plan that we adopted earlier this year. We...
As you can see, we continue to grow test volume because of some of the creative angles that we've taken with the satellite test centers and the high volume testing events.
Okay, great. Thanks. That's very helpful. I'll hop back in the queue.
Thanks, Andrew.
As a reminder, if you would like to ask a question, please press star then one to enter the question queue. The next question comes from Ed Woo with Ascendiant Capital . Please go ahead.
Morning, Ed.
Yeah, thank you for taking my question. My question is on once you get an account signed up for Veris, how quickly can you get from signing the contract to getting everything up and running? I know it's still pretty early, but, you know.
Yeah.
When things, are progressing, how quickly do you think it could be?
Yeah. It's, as you said, it's early, we're progressing, and we're learning jointly with the practices. Of course, it depends a bit on the complexity of the practice and the size of the practice. One thing that we've learned in this early experience with, for several clients is that we can actually get them up and running where the patients are on the system and generating data even as we're working on the integration with their electronic health record, which as you might imagine, has some additional complexities to do so. That time is shortening.
You know, I would think over time with more experience that we could have that down, you know, from contract to first patient on the system down to a few weeks. Yeah, that's still a learning process for us as this is still relatively early in our launch.
Great. My last question is on the pipeline that you have or the contracts that you already have signed. Is there a geographic area or region of the country that you guys are focusing on first?
Yeah. We're not, we're not like in the Lucid case where we did consciously focus on areas in the West. Here, we're not. We're, we have our commercial team targeting the entire country. It has turned out that several of the first accounts happen to be in the Northeast, in New Jersey and Pennsylvania. We have active, we're active in Florida, in the Southeast, as well as in the West. We're not targeting any particular geography right now. We're looking at any opportunity across the country.
Great. Well, thanks for answering my question. I wish you guys good luck. Thank you.
Yeah, thanks a lot.
Thanks, Ed.
Thanks a lot, Ed. Have a great day.
This concludes our question and answer session. I would like to turn the conference back over to Dr. Aklog for any closing remarks.
Thank you, operator. Hey, thank you all for taking the time this morning to for joining us on this call. I would encourage you to for further information, to go to our website, follow us on social media, and of course, feel free to contact Mike Parks with any questions. His email address is mep@pavmed.com, mep@pavmed.com. Thanks again, and have a great day.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.