PAVmed shares plunged 12.4% in Monday’s extended trading session after the medical devices company announced the spin-off of its majority-owned subsidiary, Lucid Diagnostics, into a separate public company.
PAVmed’s (PAVM) plan is to either spin-off Lucid Diagnostics through an initial public offering (IPO) or through a combination with a healthcare special purpose acquisition corporation (SPAC). The medical devices company will remain Lucid’s largest shareholder following the spin-off.
Additionally, PAVM said that Lucid will launch a new commercial initiative for EsoGuard, the company’s esophageal DNA test product, and target multiple sales and marketing channels.
The company also released preliminary 4Q and FY20 results. PAVmed forecasted a non-GAAP adjusted loss of $0.12 per share for the fourth quarter, in line with analysts expectations. As of Dec. 31, 2020, PAVM had cash and cash equivalents of $17.3 million.
PAVmed’s CEO Lishan Aklog said, “Following a strong fourth quarter of 2020 and start of 2021, including raising over $30 million from institutional investors, we find ourselves in the strongest financial position in our history and with the confidence and determination necessary to rapidly and effectively advance and expand our mission. In addition to providing an update on all areas of our business, we are making two important announcements regarding Lucid and EsoGuard consistent with that sentiment.”
Separately, PAVmed announced a public offering of its common stock for an undisclosed sum and expects to grant the underwriter of the offering a 30-day option to purchase up to an additional 15% of the shares offered. The company intends to use the proceeds from share sale to repay its outstanding debt including all outstanding convertible notes while the remaining proceeds will be used for working capital needs.
PAVM raised $30.4 million in gross proceeds from three common stock offerings with institutional investors in December and January, including a $13.4 million priced-at-the-market offering. (See PAVmed stock analysis on TipRanks)
Following the spin-off announcement, Lake Street analyst Frank Takkinen raised the price target from $5 to $9 (62% upside potential) and reiterated a Buy rating on the stock. Takkinen views the Lucid spin-off announcement as a positive and added that he sees “significant value” in the rest of the business, too.
According to the TipRanks Smart Score system, PAVM scores an 8 out of 10, indicating that the stock has a high likelihood of outperforming the market.