Lucid Diagnostics Inc. (NASDAQ:LUCD) Q4 2024 Earnings Call Transcript

Lucid Diagnostics Inc. (NASDAQ:LUCD) Q4 2024 Earnings Call Transcript March 24, 2025

Lucid Diagnostics Inc. misses on earnings expectations. Reported EPS is $-0.18 EPS, expectations were $-0.15.

Operator: Good morning, and welcome to the Lucid Diagnostics Fourth Quarter 2024 Business Update Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Matt Riley, Lucid Diagnostics’ Senior Director of Investor Relations. Please go ahead.

Matt Riley: Thank you, operator, and good morning, everyone. 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 Lucid Diagnostics, along with Dennis McGrath, Chief Financial Officer of Lucid. The press release announcing our business update and financial results is available on Lucid’s website. Please take a moment to read the disclaimers about forward-looking statements in the press release. The business update, press release and the conference call all 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 SEC. For a list and a description of these and other important risks and uncertainties that may affect future operations, see Part 1, Item 1A, entitled Risk Factors in Lucid’s most recent annual report on Forms 10-K filed with the SEC and any subsequent updates filed in quarterly reports on Forms 10-Q and subsequent Forms 8-K. Except as required by law, Lucid 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 the 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 Lucid. Take it away, Lishan.

Lishan Aklog: Thank you, Matt, and good morning, everyone. Thank you all for joining our quarterly update call today. As always, I’d like to thank our long-term shareholders for your ongoing support and commitment. Our team remains singularly focused on driving this Lucid enterprise towards its substantial commercial potential and ultimately to enhance our long-term shareholder value. Lucid finished with a very strong 2024 and we’re off to really an exceptional start in 2025, that’s been marked by significant advancements in EsoGuard sales channels, reimbursement milestones as well as increases in our clinical evidence base. The collective progress, we’ll discuss today, really sets the stage for 2025 to be a really pivotal and productive year in our history.

We’re poised to make our final push towards broader coverage and reimbursement to drive revenue and revenue growth from EsoGuard. Let’s start with some key highlights related to our commercial execution. In the fourth quarter, we generated $1.2 million in revenue. This fourth quarter revenue was in range with our recent quarters and relatively even with our record third quarter. Test volume in the fourth quarter was just over 4,000 tests that represented a record quarterly test volume and substantially greater than our target of 25,000 to 3,000 tests per quarter, which is the amount necessary — the critical mass that’s necessary for us to sustain our traditional revenue cycle management processes as well as our efforts to secure medical policy, while protecting our overall cash burn.

As I’ll talk about in more detail later and as we previewed last time, we’ve restructured our commercial team and our comp model to focus on revenue driving activities. Towards that end, our concierge medicine cash-pay program is off to a great start. We’ve only been at it for a few weeks now and we’ve already signed 20 concierge medicine contracts in total. Again, more on this later. Now, let’s start with our recent strategic accomplishments. As we noted recently, we’re really excited to report that Highmark Blue Cross Blue Shield of New York established positive commercial insurance coverage policy for EsoGuard and this is our first positive insurance coverage policy and we believe it represents an important precedent for future commercial — for future engagements with commercial payers.

We’re also happy to report this week that the NCCN, which is the National Comprehensive Cancer Network, Clinical Practice Guidelines, now include a section on screening for esophageal precancer and that they align with the existing guidelines from the Gastroenterology Association that includes non-endoscopic biomarker testing, such as EsoGuard, as an acceptable alternative to endoscopy. We also believe this is a very important step. The NCCN is widely regarded as a really key indicator of standards of excellence for cancer care and prevention. And we expect this will help us drive positive policy coverage decisions from commercial payers. We continue to expand our clinical evidence base. Most recently, we had two clinical utility studies, the CLUE study and the ENVET-BE studies that were accepted for peer-reviewed publication.

The CLUE study is now published. So that gets us to five peer-reviewed clinical utility studies on top of the clinical utility studies that we’ve previously announced. And not only the number of clinical utility studies, but this establishes a really solid chain of evidence on the clinical utility of EsoGuard. We’ve demonstrated previously that physicians will use the results of the EsoGuard test to inform — appropriately inform their medical decision making and appropriately triage patients to endoscopy. We’ve also reported that patient compliance with the referral for endoscopy is excellent at 85%. And now, with the ENVET study, we’ve demonstrated a substantial increase in the yield of the more invasive endoscopy test, really locking down the role of EsoGuard as a triage tool to triage patients — at-risk patients to the more invasive endoscopy test.

Additional strategic accomplishments include that we strengthened our balance sheet with long-term debt refinancing and registered direct common stock offering and now our runway extends well past our upcoming key reimbursement milestones. We’re really excited at the award of an $8 million NIH grant to investigators at Case Western and University Hospitals. And this grant was to study EsoGuard for an expanded indication to include patients without heartburn. The NIH’s investment of substantial resources in our technology is real testament to the GERD’s groundbreaking nature. And if this study demonstrates what a pilot study seems to show, we believe that this has the potential to substantially increase the total addressable market of EsoGuard to include patients without heartburn.

As we’ve previously noted, our clinical evidence package was submitted and accepted by the MolDX group for reconsideration of EsoGuard for Medicare coverage under the existing LCD. That submission was announced in late November and we are expecting to hear back from the MolDX group within the first half of this year. Before diving into some of the business details, just a reminder, where we stand as a company. Lucid is a commercial stage cancer prevention company offering a solution that includes two technologies, EsoCheck and EsoGuard, which together offer a comprehensive pre-cancer screening solution. And, our mission is to prevent esophageal cancer deaths in at-risk patients. So, this slide shows the steady growth in both our test volume and our revenue.

We’ve done 30,000 cumulative tests since the launch of EsoGuard, and this represents just the early stages of our efforts to tackle with a very large $60 billion total addressable market. That’s based on the fact that there are 30 million patients who are already recommended for testing by existing guidelines at an average price right around the Medicare price of $1,900. Let’s move on to an update of our business. With our runway now secure, we’re going to focus on two areas of our business: reimbursement as well as how we’re seeking to drive revenue through our expanded sales channel. So, on the reimbursement side, as I mentioned in our highlights, we are very excited to have secured our first commercial policy with Highmark. This really represents a — we believe will be a precedent for other commercial payers now that we have our first one secured under belt.

We remain deeply engaged with payers across the country. And as we’ve talked about before, we are seeking to leverage biomarker legislation to secure coverage and we’ve actually had some success in doing so with the Rhode Island Blue Cross Blue Shield plan, which is now covering our tests as well. As I hinted earlier, the NCCN updated guidelines are extremely important. The NCCN is utilized by commercial payers as a marker of standards of excellence in cancer prevention and cancer care. And we look forward to highlighting these guidelines in our discussions with the commercial payers. On the Medicare side, we continue to view a decision for the MolDX to be a first half event this year and could happen tomorrow, could happen next week. However, we’re confident it will be sometime in the first half of this year and we remain optimistic about the outcome.

So, let’s talk a little bit about some of the updates we’ve had to our sales channel. As we’ve talked about earlier, we made some adjustments to our commercial team, our sales structure and our compensation plans to help drive EsoGuard revenue. So, we see really three separate channels. The first channel is our traditional channel. So, one we’ve been doing since we first commercialized this targeting primary care physicians and specialists and having them submit traditional claims to the payers using our revenue cycle management process. And this process is as we’ve said before is important for us to remain engaged with the payers to seek out to secure positive medical policy as we’ve done, for example, with Highmark. And of course, a part of this process as well is our efforts within the Medicare community.

However, we’ve really decided to push hard on two additional sales channels that are focused on driving revenue. One of those is direct contracting with employers and other self-insured entities and, of course, with fire departments with whom we’ve had a strong engagement now going on for several years. 50% of employers are self-insured and this gives us the opportunity to offer the EsoGuard test, either as a benefit amendment to their existing health and wellness plans or just through contracted events. And our pipeline is actually quite robust with these including small- and medium-sized employers. And we look forward to documenting revenue for that in the coming quarters. And finally, we’re really making great progress with our cash-pay program that focuses on the concierge medicine sector.

Off to a great start. We’ve only been a few weeks into this. We’ve allocated resources appropriately and it’s paying dividends. We’ve signed more than 20 contracts with concierge medicine practices over the past few weeks and we’re in active discussions with the major national aggregators in this sector. So, our expectation really with regard to these last two programs, the direct contracting and particularly the cash-pay program, is that they will start making impact on our revenue starting in the second half of this year. So, to summarize, before handing it over to Dennis, we’re really excited with our recent progress on the reimbursement side and the commercial progress. This new structure on our commercial team that is — that has a substantial portion of our team focused on revenue generating programs such as concierge medicine and contracting.

It’s really working well and we expect that to ramp up in the near future. Our whole program remains very scalable. So, when we receive Medicare coverage and as the revenue efforts also start to scale up, we are in great position to scale up our laboratory operations, our manufacturing operations and otherwise. And we really are setting ourselves up, we believe, for significant growth in our test volume and our revenue growth for the second half. So, with that, let’s pass the call on to Dennis.

Dennis McGrath: Thanks, Lishan, and good morning, everyone. The summary financial results for the fourth quarter and the year were reported in our press release that has been distributed. On the next three slides, I’ll emphasize a few key financial highlights from the fourth quarter. I’d encourage you to consider these remarks in the context of the full disclosures covered in our annual report on Form 10-K. With regard to the balance sheet, cash at year-end December 31, 2024 was $22.4 million. Obviously, this does not include the recent $15 million RDO financing completed on March 5, which when added to the $22.4 million gives us pro forma cash of about $37 million as we enter into the New Year. Importantly, this financing together with the rising stock price, have now lifted the baby shelf restrictions as of the filing of our annual report on Form 10-K.

What this means is that we now have approximately $70 million of financing optionality under our shelf registration. To put this in perspective, at the beginning of the year, we were limited to just over $6 million, and just prior to the March financing, limited to about $17 million. You will recall that during the fourth quarter, we also refinanced our convertible debt, which is now a five-year note interest only at 12% with a dollar conversion price and is held by long-term shareholders. The fair value of the convertible notes at $18.6 million at year-end is really the only other substantive change from the previous third quarter reported balances. The quarterly burn rate was $10.1 million, which is lower than the average burn rate for the four preceding quarters averaging around $11 million.

The burn in the fourth quarter included $7 million from ongoing operations and $3.1 million from the quarterly MSA payable to PAVmed. Shares outstanding, including unvested RSAs as of last week, are approximately 90.7 million shares. The GAAP outstanding shares as of December 31 of 63.1 million are reflected on the slide as well as on the face of the balance sheet in the 10-K. GAAP shares do not reflect unvested RSA amounts. At present, PAVmed continues to be the single largest shareholder of Lucid Diagnostics with approximately 35% ownership of the common shares outstanding. Although PAVmed no longer has voting control of Lucid, PAVmed with its Board and management still have significant influence over Lucid with more than 32% voting interest.

As you are aware, Lucid’s financing last year included the issuance of a series of voting convertible preferred securities whereby the preferred shareholders are significantly incentivized to delay conversion of the preferred shares into common shares until 2026, namely [indiscernible] second anniversary from closing. If all of the preferred shares outstanding were converted to common shares as of today, there would be an additional 49.6 million common shares outstanding. With regard to the P&L, this slide, as you can see, is this year’s fourth quarter compared to last year’s fourth quarter on certain key items together with full year-over-year comparisons. Trust you will review the information in my comments in light of the cautionary disclosure on the bottom of the slide about supplemental information, particularly the non-GAAP information.

Revenue of approximately $1.2 million for the fourth quarter is about even sequentially, reflects a 15% increase over the prior year fourth quarter. This amount reflects actual cash collections for the quarter. Test volume at over 4,000 tests for the quarter represent almost $10 million in submitted claims at our $2,499 ASP. Given there is a number of new investors joining us for this call, it’s worth repeating what we’ve communicated in past quarters about revenue recognition. Key determinant in how revenue is recognized at this point in our reimbursement journey is the probability of collection. And therefore, due to the fact that we are in the early stages of our reimbursement process means revenue recognition for claims submitted to traditional government or private health insurers will be recognized when the claim is actually collected versus when the patient report is delivered, invoiced and submitted for reimbursement.

As you’ll see in our 10-K, this is called variable consideration or jargon of GAAP’s ASC 606 revenue recognition guidelines and presently there is insufficient predictive data to reflect revenue when the test report is delivered to the referring physician. For billable amounts, however, that are contracted directly with employers and that are fixed and determinable will be recognized as revenue when our contracted service is delivered. Generally that means when the report is delivered to the referring physician. Our non-GAAP loss for the fourth quarter of $10.9 million is slightly higher than the trailing fourth quarter’s average of $10 million even, with most of that increase driven by lab costs associated with the record fourth quarter test volume and one-time financing costs related to the fourth quarter debt financing.

The non-GAAP net loss per share of 0.19 is flat sequentially and is in-line for each of the last four quarters plus or minus $0.01 between each of the last four quarters with an average of $0.20 per share. On a GAAP EPS basis, the fourth quarter non-cash charges accounted for approximately $0.01 per share. With regard to our operating expense, this slide is a graphic illustration of our operating expenses after eliminating the non-cash expenses for the periods reflected. Total non-GAAP OpEx is $12.1 million for the fourth quarter of ’24 and reflects an $800,000 increase sequentially, which includes approximately $500,000 for increased lab costs directly related to the record test volume in the fourth quarter and the remaining increase is largely related to one-time financing costs for the debt refinancing.

Let me close with a few reimbursement highlights for the fourth quarter. In the fourth quarter, we build about 4,000 tests, reflecting just over $10 million in pro forma revenue. During the fourth quarter, we collected approximately $1.2 million from traditional reimbursement claims. Of that amount collected, about 60% was from claims submitted in the fourth quarter, about 23% from claims submitted in the previous quarter and the balance from claims submitted more than six months ago was the longest dated item from 18 months ago. We submitted reimbursement claims for more than 4,000 claims during the fourth quarter, representing just over $10 million in pro forma revenue. About 80% have been adjudicated, 20% are pending. Out of the 80% that have been adjudicated, about 35% resulted in an allowable amount by the insurance company with an average of about $1,600 per test.

Of those denied, about 30% are either, A, deemed not medically necessary, or B, require a prior authorization. Additionally, about 27% were deemed to be non-covered. With that, operator, let’s open it up for questions.

Q&A Session

Operator: Thank you. And ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] And your first question comes from the line of Kyle Mikson with Canaccord Genuity. Please go ahead.

Lishan Aklog: Good morning, Kyle.

Dennis McGrath: Good morning, Kyle.

Kyle Mikson: Hey, guys. Thanks for the questions. Congrats on great end to the year. Just starting with the record volume, it’s great to see. Now just given some of these tailwinds from either reimbursement or I guess the progress on the concierge front and other things, could we — how should we think about the volume metric going forward? Like, should we just — can we assume like a 4,000 times four kind of a level for 2025, or should we expect something like expanded upon that?

Lishan Aklog: Yeah. I think — I’ll let Dennis chime in a little bit further, but I would — on the test volume side, I’d remain a bit conservative where we had a record quarter, we had a couple of really good — some of our pipeline CYFT events kicked in. But our focus as we’ve been transitioning, as we talked about the commercial team, is really on flipping the revenue side of the equation more so than driving test volume. These new the progress we’ve made on the reimbursement side, whether it’s Highmark or Blue Cross Blue Shield of Rhode Island, are certainly are setting a good precedent for us in terms of being able to expand our commercial coverage. But I wouldn’t — and we are and we will, when we get Medicare, seek to allocate resources consistent with where we have coverage to the extent that it’s possible. But I would really focus on the revenue number in the next couple of quarters and we’ll see how the volume follows perhaps a little bit later.

Dennis McGrath: Yeah, Kyle, way to think about this is at a 2,500 to 3,000 tests per quarter, we deliver and drive on the traditional reimbursement process to put additional resources to drive that. Now obviously, that can increase based upon these health fair events. But that drives the mission of being relevant to the Chief Medical Officers insurance companies as we drive this process from out-of-network to in-network. You saw a couple of those examples. The way to think about the concierge medicine, as Lishan indicated, is focusing on the cash-pay side of this to balance out our sales channels between what we collect on a cash basis versus what ultimately will drive the traditional reimbursement process. So, I don’t think it is fair to just take 4,000 test and multiply by four, and that is the equation for the year.

What we’re driving is in the second half of the year with cash-pay, we’re looking at cutting our burn rate. Could that be as much as 50%? That possibility exists. And so, cutting the burn rate while we’re continuing the journey through the reimbursement process is really what we’re focused on. And that dealt with the compensation plans and how we’ve structured the sales teams to focus on this additional initiative now that we are driving critical mass on traditional claims. Hopefully that made sense.

Lishan Aklog: Yeah. And just a reminder that the volume, as it relates to these health fair CYFD events can be very lumpy, right? As I said in the fourth quarter, we have — we happened to hit a few high-volume events that drove that number. One other thing, which is not directly related to your question, but I thought I’d take the opportunity to highlight. We’ve talked theoretically in the past about how our efforts with regard to sort of this low- to mid-throttle effort to make sure, as Dennis mentioned, that we are submitting sufficient claims to drive our engagements with payers. Well, now we actually have concrete examples of that, right, with both Highmark and with Blue Cross Blue Shield of Rhode Island.

Kyle Mikson: Okay. That’s great guys. Thanks so much. Just on the revenue side, looking at like kind of the effective ASP, that’s the lowest market seems like around $300 per test, like since definitely in the last two years. So, maybe would have expected that to have been higher, maybe the highest of the year given deductible kind of dynamics, things like that. So, could you maybe walk through why the ASP, like an effective ASP, was so low? Was that affected by any of these? You sound like the concierge medicine efforts are sort of just taking off now, but maybe that had an impact or something with the larger testing events, anything there that would have dragged down ASP and how we should sort of think about it going forward like in [indiscernible]?

Dennis McGrath: I think the answer is centered in timing of payments rather than a direct reflection on payment. One of the stats I gave on the reimbursement side is the allowable amount has been pretty consistent. Where insurance companies have approved payment, that allowable amount bumps up against the Medicare rate at $1,600 or so. And that’s more of an indicator to us in terms of the stability of that process, the balance of its timing. That’s why I gave us stats in terms of collections during the quarter are still pretty elongated. When you’re still collecting in the current quarter from previous periods that are 18 months out, it’s significant. Another indicator would be the growing backlog of claims that we’re working on that exceeds $15 million.

So, when we’re in this constrained environment of recognizing revenue only upon what collections are recorded in the quarter, not including contracted revenue, but this traditional claims, you’re going to have lumpiness. And calculating an ASP by dividing 1.2 million of collections by 4,000 tests, it doesn’t reveal much. It’s really the underlying data that gives us comfort that the allowable amount is consistent, the collections are still choppy, a lot of it’s still out-of-network, in-network speeds up the payment and makes that more consistent.

Dennis McGrath: Yeah. Just to emphasize one thing, the ASP, it’s not a bad finger-in-the-wind number. I think we should view it as sort of stable when — given that we’ve been in this kind of traditional claims environment. But our great hope is in the coming quarters as we start seeing the fruits of the cash-pay side of things, and we start seeing patients coming through these contracts — through these concierge medicine contracts that we’ll start seeing some significant increase in that ASP because it’s going to be driven by higher guaranteed — contracts and guaranteed payments and actually a lower threshold from an accounting point of view for us to be able to recognize those upon delivery of the reports.

Kyle Mikson: Great. That makes sense. And then, final one, on this $8 million NIH grant to study EsoGuard and the extended indication patients without GERD, could you maybe just size that opportunity for you guys and also talk about, number one, if there’s been testing kind of off-label testing, I suppose, in that indication to date and how it’s progressed, and if that’s like a…

Lishan Aklog: Could you repeat the first part of your question? Sorry, Kyle.

Dennis McGrath: The addressable market.

Lishan Aklog: Oh, the addressable market. Yeah. No, it’s actually quite significant. So about — it’s estimated that about 40% of patients who are at risk for esophageal precancer and cancer fall out of guidelines based on the — fall out of the ACG more strict guidelines based on lack of GERD symptoms. And so that would be a substantial increase as many as an additional 20 million patients who would be ultimately recommended for screening. I’ll note that the American — there’s a good opportunity to remind you that of the two major guidelines, the ACG and the AGA. The AGA already recommends testing for patients without symptomatic GERD. GERD is just simply a risk factor, amongst seven. So, you have to have three out of seven.

So that’s already in place. And that actually goes to your next question, which is that, yes, I wouldn’t call it off-label because this is not really sort of an FDA paradigm that we’re operating within in terms of on label and off-label. But in our registry and in other clinical utility real-world evidence data, there are a significant number of patients who are referred based on AGA guidelines on the — more liberal guidelines than an ACG guidelines. Some of those have GERD. I don’t mean to imply that a large percentage don’t have GERD, but we do think it’ll be an opportunity for us to grow the overall market opportunity. I hinted at a pilot study, so there is data, unpublished data so far. It’ll be presented hopefully at the upcoming [the GI] (ph) meeting in May, which suggests, and this is what drove the grant that the prevalence in this non-GERD population is pretty significant.

It’s only a couple of ticks below what it is in the symptomatic patient population at around 7% to 8% versus 9% to 10%. So, I think the data is real. I think this is — this has some very long-term implications for the size of the market.

Kyle Mikson: Yeah. And one thing I wanted to kind of follow-up with that was that, in terms of Medicare, so there’s a pilot study. Would the roadmap basically be like you conduct this pilot study and then you send that data to Medicare and they just add on this indication, or do you have to do another like maybe larger study at some point over the…

Lishan Aklog: Well, the pilot is — yeah, so the big study is the one that the grant will fund. Look, we’re not going to be greedy here. We’re perfectly comfortable with the more — the stricter ACG guidelines, which is what the Medicare LCD as well as the NCCN guidelines align with, right? So, we’re perfectly happy tackling the 30 million patients who are covered by that for the time being. I think the timing will be good as we’re starting to really start to penetrate that market that when the data from the NIH — the full blown NIH study, which is it tends to roll 800 patients, will come out just in — the timing of that will be good to give us that expanded opportunity. But for the coming years, we have plenty of opportunity within the more the ACG guidelines, which is what the Medicare LCD guidelines [indiscernible].

Kyle Mikson: Got it. Okay. Super helpful. Thanks, guys. Appreciate it.

Lishan Aklog: Yeah. Thanks, Kyle.

Operator: Your next question comes from Mark Massaro of BTIG. Please go ahead.

Lishan Aklog: Hi, Mark.

Dennis McGrath: Mark, good morning.

Mark Massaro: Hey, guys. Congrats on the strong quarter and thanks for taking my question. I guess, the first one for me, you guys have been doing the low- to mid-throttle strategy for some time now. And I wanted to start and say, if you get the Medicare coverage flipped by Palmetto, I’m trying to figure out how quickly that low- to mid-throttle strategy might switch into the next gear.

Lishan Aklog: So, yeah, sticking with that metaphor, the car metaphor, yeah, the expect — the plan and expectation is upon Medicare approval that we will put our foot to the metal and, at least with regard to that subset of the population. So, let me give you an example of that. So — sorry, before I give you an example of what that might look like, a reminder that as I mentioned in my prepared comments that we can scale. We have plenty of capacity within our laboratory, we have plenty of capacity on the manufacturing side. And so, our ability to scale that up is not limited in any way except for just simply adding sales and marketing resources to that. We also have the ability to do more targeting of patients in the Medicare population.

Right now, the proportion of patients that are Medicare has been flat to actually down a little bit because some of these firefighter events and other CYFT events tend to have a younger patient population. Many of them are working firefighters. So, we have the opportunity to target geographies and communities that have a higher Medicare population. We’ve said this before, haven’t reiterated in a while, but based on our understanding of the epidemiology of esophageal precancer and cancer, the expectation is that somewhere between 40%, 45%, even as high as 50% of the target population won’t be of Medicare age. We just haven’t — our current approach to the market just hasn’t tapped into that. So, how quickly can we do that? Well, it’s not going to happen overnight, but we will benefit from a backlog of Medicare claims.

Just as a reminder, Dennis is — can elaborate on this if you’d like, that we have, the ability upon a final and effective Medicare LCD covering our test that we have the ability to submit up to a one year backlog of claims. And — but we’ll — at least with regard to the Medicare population, it’ll be pedal to the metal. The other aspect of our kind of low- to mid-throttle here has to do with to the extent to which we’re able to see traction in terms of generating revenue on the contracted revenue that the new sales channels around contracting and concierge medicine. Because if we start seeing some good traction on that, which we expect to in the coming quarters, actually independent of Medicare, we expect to a second pathway to put our foot on the gas, so to speak.

Mark Massaro: Yeah, that all makes sense. Great. And so, I think you had some positive comments about the MolDX process. And I think you said that you expect to hear back from them in the first half of this year and that you’re optimistic about the outcome. I’m just trying to make sure I understand. Do you expect a positive coverage in the first half of this year, or do you expect just to kind of hear back a response? And then, is it your view that the response back could be in draft form or do you think it could be in final form?

Lishan Aklog: Yeah, great. Thanks for that opportunity. I’d probably provide a little bit clarification on that because it’s — there are some nuances to that. But the overall answer is that it’s sort of is consistent with the positive sentiment. So, just a reminder, to sort of take the opportunity for your question to remind folks, we have — there is a final and effective local coverage determination that aligns with the American College of Gastroenterology guidelines that says that Medicare will cover, this test in patients who fulfill the ACG criteria. But at the time it was published, there was no test that had sufficient CV, CU and AV data to be covered. So, it’s a non-coverage LCD, but written as a coverage LCD. What we did is we submitted in late — in mid-November after multiple in-person meetings with the leadership at MolDX, we submitted our now robust clinical evidence package in support of a request for reconsideration of the LCD.

And the only thing we requested was simply to flip the non-coverage to coverage based on our data. So, the — just to get it really into the weeds, the draft edited version of the LCD that we submitted as part of that reconsideration is essentially identical to the current LCD except it switches non coverage to coverage and it includes a summary of our data that we submitted as part of that package. So, to your specific question of what do we expect within the first half of this year, is a draft, a draft LCD that accepts our request for reconsideration that incorporates our data in the body and flips it from a non-coverage to a coverage LCD. That’s really the milestone, right? Our expectation — yes, there is some bureaucratic sort of hoops you have to jump through after that before we can actually start submitting under that.

There’s a public comment period that remains mandatory, and some other steps along the way before you get to a final coverage. But we view those latter steps as a formality that we expect to move forward with expeditiously. For us, the milestone is that they complete what they’re doing right now, which is reviewing our data and comes to conclusion that our data, meets the criteria that they had already outlined in the previously published LCD and the draft flips it from a non-coverage to coverage based on our data.

Mark Massaro: Okay, perfect. One more for me. Congratulations on the NCCN catalyst. I think in my experience, we’ve largely seen NCCN be perhaps more of a catalyst for companies that are treating cancer or cancer patients as opposed to screening even the at risk. So, I guess, I’m trying to understand how you think the NCCN catalyst can help you going forward. I think in your press release, you talked about commercial payers might recognize this as a stamp of approval. Maybe can you just help us think about how practically the being included in NCCN guidelines will help you in the coming years?

Lishan Aklog: Yeah. I mean, you’re right. If you read one of these NCCN guidelines, but like the one for esophageal cancer, it’s dominated by therapeutic treatment and other aspects as you highlighted. But it has been our experience in our conversations with commercial payers that the NCCN does matter in this regard. It is actually quite helpful, and we get asked that. In our early conversations, let’s say, we have a payer that we’ve submitted some hundreds of claims to and we’re starting to get into a dialogue with them about securing a positive policy, it comes up. They ask us, do you have — what does the NCCN say about this? So, we believe quite firmly that the for the first time, the NCCN, including even any statement with regard to the value of esophageal precancer screening and then reiterating the guidelines from both the AGA and the ACG and including in that reiteration the fact that the guidelines recommend non-endoscopic testing of which we’re the only — non-endoscopic biomarker testing, of which we’re the only that are available as an equivalent acceptable alternative to endoscopy with equivalent level of evidence, That is a powerful tool for us.

So that’s been our experience to date.

Mark Massaro: Great. Thanks for the time.

Lishan Aklog: Yeah, thanks, Mark.

Operator: Your next question comes from Mike Matson of Needham & Company. Please go ahead.

Lishan Aklog: Good morning, Mike.

Dennis McGrath: Hi, Mike.

Mike Matson: Hey, guys. So, just a couple on the Highmark news. So, it’s for Blue Cross Blue Shield. So, can you just talk about how many covered lives those cover? And then, what’s your sales coverage in kind of the regions where there covered lives are?

Lishan Aklog: Yeah. I just emphasize something here. So, this is the Highmark of New York. Highmark has — also has policies that we’re pursuing and follow-up to this in Pennsylvania and elsewhere. And I would really focus this milestone as more of a precedent center as opposed to sort of the volume that is going to — the number of covered lives relative to the total potentially 30 million target population. It’s a modest-sized regional plan, but it is extreme. So, its value is not so much in the number of patients and sort of the impact it’s going to have in the coming weeks and months, but its value is much, much more important as setting a precedent. And that’s not just a theoretical thing. When we go and talk to payers and you have a positive conversation with the medical director and we show them the data and it’s positive, it is not uncommon for them to say who else is covering this.

And to be able to highlight a specific regional plan will be helpful for us in the coming quarters. The Rhode Island, I’ll just take the opportunity to emphasis something that we just are mentioning today, which is on the Blue Cross Blue Shield of Rhode Island. That’s actually a different dynamic there. We’ve talked about this before. There are about 20 states in the country that have passed biomarker legislation that mandate coverage for biomarker tests that fulfill certain criteria, which we believe we fulfill. But that’s a bit of a challenge. It’s not as straightforward as just getting the traditional positive policy like with Highmark. So it’s a little bit a little bit of a slog, but it’s worked in this particular case with Blue Cross Blue Shield of Rhode Island.

And again, it gives us the opportunity to continue to tackle or attack those other 20 states with regard to their legislation. At the end of the day, Blue Cross Blue Shield, Rhode Island agreed to pay us for EsoGuard consistent with the biomarker legislation as long as prior authorization is secured. And we already have experience with that. We submitted dozens of prior authorization claims for test performed in Rhode Island that would be covered under this and received the positive authorization in nearly all of those patients. So that bodes well for us. And again, this is more a precedent setting milestone than one that’s going to necessarily drive volume and revenue in the near term.

Mike Matson: Okay. Thanks. That’s helpful. And then, just with regard to MolDX, let’s say you got — they respond tomorrow and you get the coverage, what does that mean in terms of your sales team, sales effort? Are you going to have to expand that? Are you going to have to use your cash burns, that go up in the shorter term? And then, I guess, as a follow-up, at least with regard to Medicare, would you — at what point would your revenue recognition change from actually cash collection to being able to record it when you provide that report to the doctor?

Lishan Aklog: Yeah. I’ll let Dennis answer the latter, but this — just to go back to one of the previous questions, if we get an announcement tomorrow, let’s say, that announcement will be that we have — will be the draft, the update — the positive update to — the draft that reflects a positive update to our request for reconsideration. So that actually gives us a bit of time. It gives us a couple of months to gear up with regard to the — between that and the and a final LCD during which we can — through which we can submit claims. So, yes, I mean, all of the things that you mentioned are things that we would bring into play. We would start allocating our existing resources in a direction towards communities and target markets that we expect that we have a higher — that would have a higher penetration of Medicare patients.

We already have started some of that exploratory work with some programs that are looking to help us use publicly available data to do that. And so, the answer is yes. We would proceed fairly aggressively. Again, as I mentioned earlier, it’s not going to happen overnight, but fairly aggressively to take advantage of the Medicare coverage. I’ll let Dennis answer questions around the revenue recognition and how it might relate to our burn.

Dennis McGrath: Yeah, Mike, with a positive policy, we would then shift that element of the test volume to recognizing that when the report is issued rather than just waiting for collections. Because with that policy, all of the Medicare patients will, in fact, get paid and get paid fairly quickly. As far as the burn rate, the way to think about that even though people and programs will increase targeting that patient pool with a 90% margin and a $2,000 price point, the speed of collection added to that really shouldn’t change the burn rate significantly just based upon the Medicare approval.

Mike Matson: Okay, got it. Thank you.

Lishan Aklog: Okay. Thanks.

Operator: Your next question comes from Anthony Vendetti of Maxim Group. Please go ahead.

Lishan Aklog: Hey, Anthony.

Dennis McGrath: Good morning.

Anthony Vendetti: Hey, Lishan. Hey, Dennis. How are you?

Lishan Aklog: Great.

Dennis McGrath: Good morning, Anthony.

Anthony Vendetti: Good morning. Just a general maybe question to characterize kind of the pipeline for both the cash-pay concierge and other private health insurers. Maybe just talk generally how that pipeline looks — how it looked at the end of 4Q and kind of how it looks now? How would you characterize it?

Lishan Aklog: Yeah. So, let’s start with — let’s just start with the commercial payer side first before we get into the new business. So, on the commercial side, we have dozens of conversations with payers. We’ve submitted claims to 400 payers. We have a robust process by which we go through those and figure out who to target. And so, we’ve had, again, many, many dozens of conversations with payers. Those conversations are somewhat modulated because we want to be careful. The smaller and regional plans, we believe we can engage with them prior to Medicare and we can have wins, as we’ve shown with Highmark across Rhode Island. The larger plans, those are more — many of those operate through laboratory benefit managers such as [EviCore] (ph) and others.

We have active conversations with them and we believe that those conversations will be catalyzed more directly by a positive Medicare approval. On the concierge and contracting side, we just got started on this. So, there really isn’t no — there really isn’t a 2024 halfway. This is all in the last few weeks. And I got to say on the concierge side, extremely — it’s been extremely positive and has moved much more quickly than I might have realized. The team, the adjustments to the comp plan and the processes with the team have borne fruit quite rapidly. We have team members across the country that are calling on concierge medicine and getting these contracts signed at a fairly rapid clip. Now, we’re still early in the process. We’ll see how that translates into revenue, but this is contracted payment.

So, we expect those physician practices to be incentivized to order the test for their patients and for us to get paid on those. On the contracted side, whether it’s with converting our firefighter healthcare event, the CYFT event volume into paying volume through contracts or with the self-insured employers. That’s going extremely well as well. We’re starting to move up a bit up the food chain to target larger employers than we had in the past, but those — the lead times on those are a little bit longer than what — how it’s turning out with regard to the concierge medicine side. The one other thing I’ll add on the concierge medicine side is that there are these sort of larger aggregators, you can call them franchisors, they all have somewhat different models, the MDVIPs and MD2 of the world.

And we have active conversations with them as well as with health systems that have big concierge practices. So, you have a larger health system, and those conversations are active and we look to start flipping — to start executing contracts with them. But the — just the more traditional concierge medicine practices in cities across the country that cater to higher — wealthier individuals who pay subscriptions and so forth, that sales cycle has been substantially shorter than I had ever expected, Dennis.

Dennis McGrath: Anthony, another way to look at this is on the financial side and kind of highlighting or illuminating the importance of this. The longstanding traditional efforts we have clearly have given a standing with the concierge medicine groups, whether they’re individual practices or large hospital organizations. And with $37 million of cash entering the year and the historical burn of around $10 million a quarter, I made the comment, it wouldn’t be unreasonable to think about the burn rate being cut in half as we get towards the end of the year. Concierge medicine certainly can contribute a significant portion of that. Obviously, Medicare will also help in that regard. And I think from a financial stability standpoint, the balance between traditional claims and this reimbursement journey and concierge medicine and contracted revenue where we’re getting paid upfront is a good blend to again enhance our financial stability.

So that’s how we think about as we continue to make progress here. We are pleased that we have 20 contracts so far and the response from the market and our salespeople gives us great reason to be optimistic about how this moves forward.

Anthony Vendetti: Okay, excellent. That’s great color. Thanks guys. Appreciate it. I’ll hop back in the queue.

Lishan Aklog: Thanks. Appreciate it, Anthony.

Operator: Your next question comes from Ed Woo of Ascendiant Capital. Please go ahead.

Ed Woo: Yes, congratulations on the quarter. If Medicare does kick in and your testing volume increases significantly, how much of potential operating leverage can there be to increase your already high gross margins?

Dennis McGrath: Well, the price point has already been established. It’s just under $2,000 in 1938. That gives us next patient [indiscernible] margin of 90%. And operating at that high margin gives you plenty of flexibility to drive programs. So that will also contribute as I just indicated about our burn rate. When you think about the 30 million patients, the symptomatic portion of the patient pool, as Lishan said, it could be in that 30% to 50% range. I think about it generally in the 40% range. You’re talking about a pretty big patient pool with reliable steady price point of reimbursement can change the dynamic pretty quickly. It will focus where our sales teams go hunting. It will help us with cash flow in terms of how quickly we’ll get paid and get paid at a handsome price point can change the dynamics of our financial stability pretty quickly.

Ed Woo: Great. Well, thanks for answering my questions, and I wish you guys good luck. Thank you.

Dennis McGrath: Thanks, Ed.

Lishan Aklog: Thanks a lot, Ed.

Operator: There are no further questions at this time. Please continue, Dennis McGrath.

Lishan Aklog: Great. Hey, so with that, let me just thank you all for your time and attention this morning. Clearly, there’s a lot of progress on multiple fronts to close that 2024 and really what is shaping up to be a exciting and pivotal 2025. We really do believe that broad coverage for EsoGuard is coming. And we also believe that this effort to build these new sales channels to drive contractually guaranteed revenue, particularly the early success we’ve had in securing cash-pay concierge medicine contracts is really going to start paying dividends soon. So, we really believe we’re overall very well positioned to start accelerating EsoGuard revenue growth on the second half of this year and capitalize on EsoGuard’s massive clinical and market opportunity.

So, with that, I just encourage you again to make sure you keep abreast of our progress via our news releases, periodic calls and by signing up for email alerts on the Lucid IR website and following us on Twitter and LinkedIn. So, with that, thank you and have a great day.

Operator: Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.