Lucid Diagnostics Q1 2023 & Business Update Earnings Call Transcript

Quartr
Provided by Quartr
May 16, 2023

There are 7 speakers on the call.

Operator

Welcome to

Speaker 1

the Lucid Diagnostics Business Update and First Quarter 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 conference is being recorded. I would now like to turn the call over to your host, Michael Parks, Vice President, Investor Relations.

Speaker 1

Mr. Parks, you may begin.

Speaker 2

Thank you, Betsy. Good morning, everyone. Thank you for participating in today's Q1 2023 business and financial update call. Joining me today on the call are Doctor. Lishan Aklog, The press release announcing the business update and 1st quarter results is available on the Lucid website.

Speaker 2

Please take a moment to read the disclaimer about forward looking statements in the press release. The Q1 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 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 description of these and other important risk factors and uncertainties that may affect future operations, see Part 1, Item 1A entitled Risk Factors and Lucid's most recent annual report on Form 10 Q filed with the SEC and subsequent updates Filed in quarterly reports on Form 10 Q and any subsequent Form 8 ks filing. 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 those expectations may be based or that may affect the likelihood that actual results will differ from those contained in the forward looking statements.

Speaker 2

I would now like to turn the call over to Doctor. Lishan Aklog, Chairman and CEO of Lucent Diagnostics. Doctor. Aklog?

Operator

Thanks, Mike, and good morning, everyone. It's great to be here. Thank for taking the time. I look forward to giving you an update of our business for the Q1 of this year 2023. Let's just start with some highlights.

Operator

These were highlighted in the press release as well. We performed 1841 and a 2 45 percent annual increase. We've seen substantial increases in the satellite Lucid test center Activities out, they represent about 50% of the samples collected for testing in the Q1. We'll dive into that a little bit further Later, our Check Your Food 2 pre cancer detection events that were launched earlier this year, that program is now in full gear and is expanding across the country. And we had a very we had an excellent DDW or Digestive Diseases Week meeting in Chicago this week, that's the premier gastroenterology meeting.

Operator

2 studies with compelling data were presented for EsoGuard and EsoCheck. I'm going to start with some background for those of you who are new to the story before diving into our results. So Lucid Diagnostics, we're a commercial stage cancer prevention medical diagnostic company and we're focused on early pre cancer detection, Specifically in patients with chronic heartburn or gastroesophageal disease GERD, who are at risk for a highly lethal form of esophageal cancer called esophageal adenoma And our mission is very straightforward, which is to prevent deaths from this awful cancer in at risk patients. Just a couple of facts about esophageal cancer. It is highly lethal, but really bad actor and it's It has become quite prevalent with an increase of over 500% over the last 400 decades for the last 4 decades In contrast to all the other common cancers which have remained flat or gone down.

Operator

This makes it the 2nd most lethal cancer Approximately 80% 5 year mortality rate and accounts for about 16,000 deaths per year. The key statistic is really right there in the middle of the slide there, which is that even Stage 1 disease carries an over 40% Mortality rate, unlike other common cancers, which have, where picking up the cancer at stage 1 gives you an opportunity, Excellent opportunity for a cure. That's not the case with this cancer. It's one of the rare examples of that. And the consequence of that is that early pre cancer detection is necessary to prevent deaths.

Operator

And although screening is recommended in a well defined target population, less than 5% of Our lead products are EsoGuard and EsoCheck and they form collectively the first and only commercially available test That's capable of serving as a widespread screening tool to prevent esophageal cancer deaths through the early detection of esophageal Precancer. Both major gastroenterology societies, the American College of Gastroenterology and the American Gastroenterological Association Recently updated their guidelines and now support non endoscopic biomarker testing such as EsoGuard and EsoCheck as an equivalent Acceptable alternative to endoscopy for early detection of esophageal pre cancer. The market opportunity here is extremely large based on the fact that there is a large population that is recommended for screening. So approximately 30,000,000 patients are with Chronic heartburn are well established by guidelines as being at risk and are recommended for screening. That number is actually somewhat conservative.

Operator

1 of the 2 guidelines actually The target population to include patients who don't have symptomatic heartburn, so that number actually is under those guidelines Medicare has established a nationalized Medicare payment of $1938 As you'll see that has been reflected in our engagements with private payers as well. So that results in a very large Approximately $60,000,000,000 total addressable U. S. Market. The gross margin at volume is over 90%.

Operator

Just one quick slide on our commercial strategy. We Target are 2 groups separately, the primary care physicians and specialty institutions. And they have very different approaches to these two Stakeholders, the primary care physicians, the goal is just to get them to order at least a direct test as we would as others would ask them to order other tests, reading tests or otherwise. And the actual performance of the shell collection procedure that results in the performance of EsoGuard test In those situations is performed by a Lucid nurse practitioner, either at a Lucid facility, a Lucid test center or in the physician's office in the form of a satellite listed test. As I mentioned, I'll show the data reflect this, the satellite test center model is actually So just to flush that out a little bit, what happens is that we have our nurse practitioner have a scheduled day on a regular basis at the physician's office And they schedule patients for testing in the office by a nurse practitioner.

Operator

They can perform up to 30 days a day. With the specialty excuse me, sorry, I forgot to advance the slide, I apologize. With the specialty and institutions, That's a somewhat different approach where we're looking to work with these specialists or the institutions to build an EsoGuard program and that is The purpose there is to for the specialists or the institutions to garner The downstream opportunities for building such a practice, increased endoscopies, surgeries, other testing within their facility. And In that model, the procedure could be performed either by their own clinician, a nurse practitioner, nurse or physician assistant or Using the satellite listed test center model as well. So on to our commercial results, we had an excellent quarter.

Operator

In the Q1, our Total number of tests, you can see here, continues to increase in a steady fashion. We increased 57% over the prior quarter and 2 Two pie charts here reflecting some of the distribution of this testing volume. The referral source is now about 2 thirds, it's been stable actually in quarters, 2 thirds, primary care physicians and about a third specialists in institutions. And as you could see on the right side there, That 60% of the EsoCheck sub collection procedures are being performed by Lucid personnel, But the number the proportion of the total number that are being performed at a satellite's test center in conjunction with the physicians Office is now over 50% and about 40% of these remain are being performed by the physician practice itself and their own personnel. So last time we announced that we had launched our Check Your Food Tube pre cancer detection events.

Operator

These events are geared towards holding high volume For testing, the first event was with the San Antonio firefighters earlier this year and approximately four Firefighters were tested over 2 weekends. That program, as we As we have announced, it is expanding. We've completed, as you can see here in the orange, five of these events across Few comments about contracts and payment. On the right there, you could see that our the proportion of Patients that are Medicare and Medicaid remains stable at around 10%. And the other aspects are actually relatively stable as well.

Operator

We continue to maintain an average contracted price above the Medicare rate. Excuse me, all the contracts are above the Medicare rate and The average contracted price for the in network contracts that we have is over $2,000 We continue to get out of network payments that respect our charges With an average payment of about $1400 that's based on a typical 50% to 60% out of network benefit. We're working hard to continue to drive future in network commercial payer contracting. And the key drivers of this are generating a claims history and we So we have almost 200 insurers that have one or two whom we've submitted claims so far. And really the critical element of this is Utility is generating clinical utility data that is a critical part of entering into in network commercial payers and I'll talk about that in the next slide.

Operator

We're also transitioning to a new revenue cycle management provider. We're excited that that's going to happen in the next month or so, where we'll have More data and actionable data to facilitate our engagement with private payers. Last time we also announced that we've launched a direct Contracting strategic initiative and the goal of this initiative is to engage, as others have done in the diagnostic space with ASO, self insured employers, unions and other entities directly as opposed to the insurers. We think there's Meaningful revenue opportunity outside of the traditional commercial payer contracts. As I said, others have had some success with this.

Operator

We are hiring a dedicated Person to lead this program. And I'll also note, the MicroFood Tube events are actually part of this and we have an internal person who's going to be who is going to be leading the event planning side of things. As I mentioned, collecting clinical utility data is really a critical part of our efforts to secure predictable reimbursement and Secure in network contracts. Just briefly, a clinical utility data is a very specific type of data. It's basically demonstrating to those entities that our test has an impact on medical decision making.

Operator

More specifically, it means that If a physician orders a test, they actually act upon the result. So a positive test results in a confirmatory endoscopy and a negative test does not. And so that's the specific data that We're documenting here. We know what the result is just based on our experience broadly across thousands of tests that have been performed so far. These are the 4 active studies that we're pursuing to document this retrospective and prospective.

Operator

The firefighter events have had given us a great opportunity for a sub retrospective Analysis of prospectively collected data, that's approximately 3.90 patients. That study is actually The data collection has been completed. The manuscript is written and it's currently being submitted for peer review. We're looking forward to that. We have 2 prospective studies, a LUCID registry and a multicenter Study called the CLUE study, our target enrollment in each of those is approximately 200 each by midyear and those are going well.

Operator

We're at or above our target enrollment in both of those. And the firefighter events have actually been a nice Boost to the registry in particular. And then we have a virtual randomized control study where physicians are given the clinical scenarios And asked to document what their decision making would be. That's a well established modality used for submitting phenoclonal antibody to payers That study is also ongoing and is actually rolling at our targets. So very excited about this.

Operator

We expect that we should have our first A batch of data that can be submitted or the prospective data that can be submitted on top of the retrospective data that's coming from the firefighter events, We expect that to happen by mid year and then that will get submitted for peer review and then subsequently will be available to us for our in network engagements with the commercial payers. Just a couple of highlights from the Digestive Diseases Week meeting. As I mentioned, we had 2 Excellent presentations. This one is by the faculty at the VA In Cleveland, where they performed EsoCheck with follow-up endoscopy, confirmatory endoscopy on 69 veterans, They reported a 99% technical success rate, which is equivalent to the technical success rate that our own NPs have, which was excellent. The overall sensitivity was 100%, which picking up conditions along the spectrum from precancer to cancer That translates into, of course, 100% estimated negative predictive value and a 37% estimated positive predictive value, Which are both, really write down exactly where you'd want it to be for a screening test such as ours.

Operator

There were 7 positive patients detected who had either precancer or cancer. Notably, 4 of the 7 were short segments, so less 3 centimeters of abnormality, that's the most important category, but also the most difficult to pick up because the amount of abnormal Aligning of the esophagus is so short and we're gratified that they were able to pick up all of those. 2 of them had longer segments of this earlier precancer non And we're very excited about the fact that we picked up one patient who had violent cancer and had them enter treatment with chemotherapy and radiation. So very excellent results from the VA. We also reported on an expanded cohort of patients, rollover data using the EsoCheck device for sampling of The DNA quantity or the DNA yields continue to improve.

Operator

The quantity not sufficient rate, which is what portion of patients who enter the cell collection not have enough DNA to run the EsoVet assay. That number was already quite good at 6%, but in the interval between the last report and the current report, That number is down to 2%, which is outstanding. And we're quite proud of the poster presentation at DDW. I forgot to push the slides. The poster presentation at DDW Finally, a summary of our lab operations here.

Operator

You can see the quantity non sufficient rates have plummeted since we took over the laboratory operations in the part of last year is now solidly under 5%. Turnaround times have held also have gone down quite significantly and held At approximately a week of work, I'm going to hand things over to Dennis who can provide us with a financial update.

Speaker 3

Thanks, Nishan. In the Q1, the Board authorized $20,000,000 preferred offering of $11,000,000,000 senior fee vertical That is, you can see on Slide 18. Previously mentioned, we completed the initial closing of the preferred in the amount of $13,600,000 After exploring a variety of alternatives, this preferred structure created a mutual win for the company and investors by matching An attractive dividend with a strong incentive to hold the stock for more than 2 years. Additionally, in the Q1, we issued $11,000,000 in convertible debt with an accredited investor that has provided the same type of structures for PAVmed over the years and currently holds PAVmed's existing debt with similar terms. The note is interest only for 6 months at the $5 voluntary conversion price It has approximately a 7.9% interest rate.

Speaker 3

Amortization does not begin until the 6 month anniversary in October. Both structures keep stock out of the market for long periods of time likely to use in the case of the preferred, which allows the company to complete its work on the clinical utility studies and Our runway is substantially elongated into 2024. When combining these financings with our Cash at the beginning of the quarter results in pro form a cash of $46,100,000 With an ending quarter cash balance of $39,500,000 the pro form a burn rate for the Q1 was 6,600,000 So the next couple of slides, the summary financial results for the Q1 are reported in our press release that was published last night. And on these next three slides, I'll emphasize a few key highlights from the quarter, but 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 last night and is available on our website. So on Slide 19, Balance sheet.

Speaker 3

So cash $17,000,000 sequential net increase in the Q1. Our vendor payables were relatively flat with the sequential quarter. It was offset by the intercompany debt to PAVmed, $2,700,000 increase reflects largely the management services agreement that continues to exist in that intercompany debt And the shares outstanding, including unvested restricted stock awards as of today It's 43,700,000 shares. The GAAP outstanding shares are reflected on the slide as well as on the face of the balance sheet in the 10 Q. On Slide 20, Slide 20 compares this year's Q1 to last year's Q1 on certain key items.

Speaker 3

Russ will review the information in 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 actual cash collections for the quarter. The prior year reflects the fixed monthly C received from the 3rd party lab that we used before setting up our own lab at the end of last year's Q1. Revenue recognition. P determinant is the probability of collection.

Speaker 3

With the vast majority of patient out of network Claim submission means revenue recognition occurs when the claim is actually collected, first when the patient report is invoiced and submitted for reimbursement. As you will see in our 10 Q, this is called variable consideration in the jargon of GAAP's ASC 606 revenue recognition guidelines. And presently, there is insufficient predictive data to reflect revenue when invoiced. Our non GAAP loss for the Q1 of $9,800,000 reflects a 7.5 percent sequential decrease compared to the 4th quarter loss of 10,600,000 On Slide 21. Slide 21 is a graphic illustration of our operating expenses for the periods reflected.

Speaker 3

Total non GAAP operating expense of $10,900,000 for the Q1 2023 was relatively flat sequentially. However, the Q1 includes approximately 1,200,000 Certain one time expenses related to the reduction for severance costs, costs incurred to finalize the acquisition of Research Terminating the earn out payments and canceling the consulting agreement and close out of the secure development and clinical work To arrive at a point to efficiently restart it later when financial resources permit bringing that back online. Absent these costs, the non GAAP Operating expense would have been about $9,700,000 reflecting about a 9% decrease sequentially. Cost of revenue primarily consists of EsoCheck devices, lab supplies and fixed lab facility costs. Consistent with recent SEC filings, this presented in our 10 Q is operating expense consistent with practices of other diagnostic companies.

Speaker 3

Sequential decreases in R and D and marketing expenses were offset by approximately the $1,200,000 one time costs already mentioned, including terminating the relationship with ResearchCX, which will avoid approximately $2,700,000 in future costs. These one time first quarter costs together with the highly variable quarter to quarter convertible debt non cash charges, which are shown below the line, Account for approximately $0.07 of the $0.40 GAAP loss. With that, operator, let's turn it over to questions.

Speaker 1

We will now begin the question and answer session. You will be placed into the queue in the order received. Please be prepared to ask your question Your first question today comes from Kyle Nixon with Canaccord. Please go ahead.

Speaker 3

Good morning, Kyle. Hi, Kyle. Hi.

Speaker 4

This is actually Alex J. Kazimi on for Kyle Mixing. Good morning, everyone.

Operator

Good morning.

Speaker 4

So really a question from me. Just kind of on what you're seeing in terms of the claims process, it seems like you had a really solid quarter in terms of revenue. I Just curious if it seems like the process has kind of been Turning upwards towards that level that you were expecting to reach maybe a few quarters earlier.

Operator

Maybe if

Speaker 4

you want to talk to that. Thanks.

Operator

Yes. I'll have Dennis flush it out, but just at a high level, just a reminder that some timing here that the first Time that Lucid, DxLab, our CLIA laboratory started submitting claims was at the end of Q3 of last year. So we really we've had 2 full quarters of Claim submissions, since that process started. So data is still early, where we have a positive trajectory. And I'll let Dennis Sills flush out any other

Speaker 3

Yes. The claims collection continues to be choppy. So that's why the predictive value In terms of collections, still is uncertain and we have to recognize revenue on a cash basis. We also believe that we can make improvements in the process We've taken steps to do so by changing our revenue cycle management company, which comes on board in the Early part of June, we think that will help us on many dimensions, particularly on the processing of any initial non payment Charges and process them through the denial process, which we believe will have a benefit in the second half of the year to accelerate payments.

Speaker 4

Got it. Thank you. I have another question, kind of changing gears here. Looking at your overall commercial strategy, it seems like the satellite testing centers Are taking more and more of a spot in the limelight here. I was just curious if over time if this could become Possibly your one of, if not the key revenue driver for the business going forward.

Operator

Yes. I think that I think the important in answering that question to flesh out some of the details a little bit just to be clear, right. So The key factor is that we've decided to build a team of clinicians and nurse practitioners Who are highly skilled at performing the cell collection procedure, who demonstrated in the published, in the presented results that I mentioned, really outstanding grades A technical success. And the reason we've done that is that, that is the model that's necessary for us to actually have Meaningful engagements and get primary care physicians to order the test because the economics as well as the logistics of individual primary care practices performing the SEG check procedure is just not viable. And so that is the model as you described.

Operator

The locate what that that is the model by design. The evolution that I was highlighting is that we've steadily moved from that being exclusively being done in physical locations, basically just office space That we lease to increasingly happening in the physician's office. And that is a trend and you're correct to note that. The overall share of referrals from primary care physicians that fit more directly within this model versus Specialist institutions that appears to have stabilized and both sides of that are growing at sort of 2 to 1, which is good. But the proportion of patients that are Undergoing their cell collection procedure by 1 of our nurse practitioners has steadily increased and the proportion that are being done in the physician's office as opposed to in one of our Leased office space is also increasing.

Operator

And all of that, we see as a very positive direction and a really important sort of horizon that we're chasing because the satellite model has all sorts of opportunities and efficiencies and expanded reach. So by having us go to the physician's office, we're not anchored as much to a physical location where the patient has to drive Some distance, so the catchment area for the activities of our nurse practitioner extend over a substantially greater geography. That actually can include in areas where we have no physical location, where if a busy practitioner Comes on board, we can actually have the nurse practitioners travel to that location for those for the periodic Lucid testing days at the office. So you're absolutely right. That is the trend.

Operator

I think we'll continue to have institutions and Specialist play a significant role. I think that balance is probably going to remain stable, but the model of having our own clinicians, our own nurse practitioners who are skilled and effective being the primary operator for the cell collection procedure is likely going to continue to go in that direction.

Speaker 4

One last one for me. So just looking at the LucidX Lab operations, So it seems like there's a really strong positive trend in terms of your ability to acquire sufficient DNA As well as just average turnaround time. I was just curious in terms of average turnaround time, do you believe that at this point you've kind of reached,

Operator

I guess, I wouldn't say

Speaker 4

the impacts, but like more or less kind of Kind of towards the peak of what we're really looking at there. And then in terms of just improving the DNA quality of the samples, Do you expect it's been a pretty strong upward trend? Has this also kind of plateaued or do you think that

Operator

Yes, those are both great questions. Let me answer the DNA question first because one thing I didn't mention in my The comments was that that didn't happen by accident. That happened because our team, once we took over the laboratory, made substantial improvements to the DNA extraction process. So that number, that 3% for the last quarter is a reflection of improvements in the laboratory, but also a reflection of that really high 98% technical success rate. Nurse practitioners, if you don't do the procedure correctly, you're not going to get a sufficient number of cells to have a sufficient amount of DNA.

Operator

So the combination of essentially 3% or so of patients who don't have enough DNA to perform the test and 2% who are unable to perform So the actual complete the actual procedure, those are sort of summarily high numbers for the type of for a diagnostic that requires a test. So yes, there's always it's never going to be 100% between those 2, but if you add those 2 up, it's around 95% of patients who are referred We'll not only have a technically successful cell collection procedure, but also have sufficient DNA to run the assay. That's a very, very high number. And so sure, I mean, could we extract another percent or 2, but that is absolutely sort of at our goal and our target and For a test of this type is really outstanding. The turnaround time is a turnaround time of approximately a week It's actually probably where it needs to be.

Operator

There is a limit in terms of how what getting the turnaround time much shorter than that. There is The assay, the EsoGuard assay has a variety of steps in it, some of which require hours and multiple and over multiple days. So getting it down to 5 or 6 days may be possible, but 7 is just fine. And the reason it's fine is that this is an elective test. This is not An urgent test that requires some that where some immediate action is awaiting the result of that test like other tests would be.

Operator

So because it's an elective test where the action is going to be starting a surveillance, it's sort of getting an endoscopy to confirm this and then Putting them in a surveillance regimen and all that, there's actually plenty of time. So a week is absolutely fine from a clinical adoption and acceptance point of view. And sure, there might be an opportunity to shave a day off of that or more, but we're really at sort of at our target. Our goal is really to maintain it as the goal is to maintain it at 7% with the escalating volume, particularly Not just the overall volume, but the spikes in volume that happen when we do these high volume testing events where the lab can get sort of 200 samples in a day, which it had not been You do. And the lab has done a great job of absorbing not just a general increase in volume, but also the speaks.

Speaker 4

Really good color. Thank you very much.

Operator

Yes. Thanks a lot. Great questions.

Speaker 1

The next Question comes from Mike Mastin with Needham. Please go ahead.

Operator

Good morning, Mike. Hi, Mike. Yes. Thanks. Good morning.

Operator

So I want to ask about the So the test volume obviously very strong in the quarter. Can you just tell us how much of that was from the Check your food tube event with firefighters in the quarter? Yes. So we had just the Q1 reflected just that one That we had previously announced, the San Antonio event, which was just under the I guess under 400 tests, right? So we saw growth both in our organic numbers as well as our Obviously, the testing events, the CYFT events.

Operator

And I just maybe I'll use this as an opportunity to comment on this. We see Yes. These testing events as well as the other direct contracting efforts are just part of our sort of an all of the above strategy. So I just want to keep think I did this last time as well that we're not sort of tacking or swapping one strategy for another. We're just adding new horizons where we can identify Ways to get patients who are out there into the channel and ultimately test it.

Operator

So we have been very careful in how we manage Our sales team to make sure that the organic growth by directly engaging with primary care physicians, specialists and otherwise continues to move forward strongly. But we obviously expect to see a meaningful volume from the testing events as well and We'll be contributing to what we believe will be ongoing solid growth. Okay. And then just following up on that. So At those events, I mean, what's the expectation for getting paid for those tests?

Operator

Is it More likelihood of getting paid versus your other distribution channels or is it kind of similar or? It's a little bit early to it's quite early to predict, right? We just had our first one, I think it was less than 2 months ago. Purely speculating and purely on a theoretical basis, you might we would expect that it might be Easier to engage in network conversations with these entities. They tend to be Self insured entities, unions and otherwise, and having an audience with them in the conjunction with These events has the potential, although we don't know for sure, we don't have any direct evidence of this yet, To enter more quickly into discussions as opposed to the standard model with a traditional payer where You really have to wait until you get a sufficient number of claims just from the kind of the random in the wild activity that goes on.

Operator

So there is an opportunity there. We're quite cognizant of it. We're focused on it. We are tailoring the way we engage with The entities that are sponsoring these events in a way to effectuate what you're suggesting, but way too early to say whether that will actually That materialized in terms of how it translates into payments and into payment as well as into network contracting. Okay.

Operator

And then as far as the test that you've done to date, I know Trying to go through insurance companies and collect payment, but when do you sort of Give up on trying to get paid for a test and has any portion of that the volume done to date, have Given up on any of those, written them off or you just continuing to try to collect payments? I'll let Dennis flush out some details, but the answer I've taken your question to mean on an individual claim, right? And the process by which an individual claim gets adjudicated is actually quite long. You get submitted, there's all these back and forth about all the I's being dotted and T's crossed. And then Often in the absence of a there's 2 possible ways that can proceed.

Operator

One is that if you don't have an in network contract, you can So get paid out of network and there are some payers that pay out of network at a reasonable clip and others that don't. And that just depends On the individual insurer, those that are not paid out of debt, where there is no out network payment or out of network benefit payment, Those will typically get denied and then there's an appeals process and there's multiple levels of appeal. And so we don't give up until we actually Exhaust that entire appeals process, which can take many, many months. So the number Dennis, correct me if I'm wrong, but the number of the thousands of claims that we've submitted where we've actually Reached the end of an appeals process is low. And honestly, even those are not look, we'd love to get paid on every test, but we know from just historical precedent and others We've done this before that this entire process going through the claim submission process, getting on the radar of insurers, Getting denied, getting going through an appeals process and all that is how you that actually all is sort of a positive experience that gets you Traction, that whole history, is important to get traction to actually engage in to secure a network contract.

Operator

So Hopefully that answered your question, Dennis. Yes.

Speaker 3

During the early phase that we're in now, claims history and the denial process Have real value for us in terms of getting to full reimbursement and always consider full reimbursements ultimately when you get north of 80%. To your question, when you get to that point of nearly 80%, you probably give up in your term after a year process.

Operator

Yes.

Speaker 3

But right now that is all part of gaining value, gaining attention and getting Towards contracts. So we're not giving up on any claim just

Operator

yet. Yes, exactly.

Speaker 3

But later down the road that probably makes more sense. A good estimate would be

Operator

greater than a year. Okay. And the legwork on all this stuff, I mean that's basically being handled by the revenue the RCM revenue cycle management firm that you're working with or?

Speaker 3

Correct.

Operator

Well, in conjunction with our team, but yes.

Speaker 3

That is that they're We outsource.

Operator

We outsource that and they're obviously geared Again, we're looking to upgrade and get some more aggressive activity in this regard as well as just better Data better sort of visibility as to what's happening with individual payers. And that's the reason we're looking to upgrade in this much more

Speaker 1

The next question comes from Mark Massaro with BTIG. Please go ahead.

Operator

Good morning, Mark. Hi, Mark.

Speaker 5

Hey, guys. This is actually Vivien on for Mark. Hi,

Operator

Vivien. Hi, Vivien. Hi, Vivien.

Speaker 5

Hi. Yes, so wanted to grab your thoughts On volume pacing for 2023, it's probably safe to say sequential volume growth for the remainder of the year, but just wondering your thoughts around ASP traction as well? Thanks.

Speaker 3

Yes. I'll let Dennis handle it. We think it will continue to grow quarter to quarter. Last quarter, we did give a preview of the Q1 because we were within 17 days of the end of the quarter. This quarter is still unfolding.

Speaker 3

We're optimistic about that and optimistic about the balance of the year and what that represents in terms of total claim submission and total tests delivered. We think it will be pretty strong, but we haven't provided any guidance for the second, third or fourth quarter so far. But We're thinking that it continues to grow sequentially.

Speaker 5

Okay, perfect. Understood. I'm going to apologize if you covered this maybe earlier in the call, but could you just remind us where you stand in the technical assessment process and just your updated thoughts around the timing around securing Medicare coverage under the umbrella LCD.

Operator

Sure. Yes. Nothing really new to report on that. As you hinted at, we both MolDX The Palmetto MAC as well as an Iridium MAC, which will be which is the MAC that covers our laboratory in California published final and effective local coverage determinations. These are foundational local coverage Terminations that cover the category of tests, which EsoGuard falls within.

Operator

And so that was that happened That's 34, my end of March. I think it does. So nothing to report on that front. There's no ongoing Activity there, what we're the process moving forward is one where we get sufficient clinical utility data, whereby we believe we Steve, the criteria that they've outlined, as we mentioned when we talked about this when it first came out, the improvements to the Final LCD relative to the draft LCD a year ago were entirely consistent with what we and others had requested to make it truly operational. So the criteria are solid.

Operator

They're very much focused on the newly published guidelines. And we believe that the clinical So the data is what we need in order to try to convert this to coverage Medicare coverage for But as is the case with as has been the case now for 3 or 4 years that we've been working on this, The activity with Medicare and with MolDX and with LCD is very kind of We hear we got a bunch of news as a part of activity and then there's sort of a waiting period while you're collecting data or awaiting response. Don't expect to have any news in the near term. I will put out my usual reminder that we continue, Although some of the large payers do like to see a Medicare, LCD for your test, We continue to believe we'll get that we will continue to get traction with the private payer side and the private payers represent 90% of our total line. So that activity is day to day.

Operator

Medicare is basically awaiting the completion of our clinical utility, the publication thereof and then That's a good step through there.

Speaker 5

Okay, awesome. Thank you. And if I can just squeeze in one more.

Operator

I

Speaker 5

guess on the commercial Can you just remind us on the number of commercial pay contracts, number of coverage live at Q1? And then could you also remind us, maybe one for Dennis, the number of tests that you were paid on in Q1? Thanks.

Operator

Yes. I'll let Dennis answer those. Thanks.

Speaker 3

So, we have just under, I think it's 15 in network contracts, Secondary PPOs, the largest of which is multi plan that recently entered into a contract with us. You'll recall that they have 60,000,000 consumers as part of their overall umbrella. And We the revenue collected in the quarter was $446,000 And the average claim as indicated in the slide deck was $14.40 and I was looking for my notes to do the division, but I couldn't

Operator

find it quick enough, but

Speaker 3

I'm sure you can do that yourself.

Speaker 5

Okay, perfect. Thanks for taking the question.

Operator

Thanks, Vivien.

Speaker 1

The next question comes from Edward Lou with Ascendiant Capital. Please go ahead.

Speaker 3

Good morning, Ed.

Operator

Hi, guys. Good morning.

Speaker 6

Yes. Congratulations on the quarter. My question is on the check your food tube detection events. They Very high value and relatively low cost events for you to get patient outreach. Have you considered making that your primary marketing event?

Operator

And is

Speaker 6

there how hard or difficult would it be to expand these events exponentially across the country?

Operator

Yes. I'll answer that by sort of reiterating what I said earlier. Like we have we're going to put in you're correct in your assessment, they are Quite efficient ways to get a targeted population. In response to Mike's question, we have some hopes that they'll also be an efficient way To get to accelerate the reimbursement process, that's TBD. And so we are fully committed to them and you can see just over a very short period We've gone from 1 to having completed half a dozen or so and having quite a robust profile.

Operator

And now as you can see from that math that we've had Multiple, multiple conversations, some with smaller entities, some with larger entities, and those conversations have really been consistently quite positive. There's a lot of receptivity. Obviously, we're starting with firefighters, but we have plans to expand into other areas. So our commitment, our motivation, Our determination to use this as a way to garner access to the E Cigar test to as many people as possible It's solid and we'll continue to push that as hard as we can. But I won't go as far as your question, which is to say that we want to Sort of make it our primary mode, we're not that's not the way we're thinking about this at all.

Operator

We're looking at all of the modalities, all of the ways, all of the methodologies And at the end of the day, we're going to continue sort of an all of above strategy that includes the bread and butter Traditional reps going to primary physicians and garnering physician adoption. You have to garner physician adoption for long term for the long term traction here, if you think about it, one of these events typically has a limited number of physicians, which is great. It makes it highly efficient. You only have to Work with 1 physician or 2 physicians and you can end up with hundreds of tests. But that doesn't take away from the importance of establishing this Test as the standard of care for patients who fulfill criteria and who are recommended for testing.

Operator

And that will continue to involve us Driving adoption within the broader physician community.

Speaker 3

And maybe just one additional comment To further amplify Lishan's analysis there, ultimately, a good portion of the patients who are our target population are self medicating. And as reimbursement unfolds, our test centers will continue to have a prominent Position as we do direct to patient advertise that educational marketing to go after those patients will come through telemedicine. So all of these components are important. At this point in time, one may have a higher driver component to the number of tests, but there's still big patient pools in each of the categories that our Go to market strategy is approaching. So it will change over time and there is a big patient pool that we're going after in all of those

Operator

Yes. Just to close on that, I mean that the broader patient pool is large. We've talked about that repeatedly. It's at least 30,000,000 patients and We're not sort of segmenting that to some of our group that we're looking to get. I mean, at the end of the day, the market opportunity here is across the board.

Operator

If you think about it, the number of the we don't know for sure, but the proportion of those $30,000,000 who would fall under an entity like a union or an employer that would be A lot of them would under one of these high volume testing events. It's not going to represent the vast majority of those patients. That's majority of those patients are either self medicated to Senostatinib and could be contacted directly or through their primary care physician or specialist.

Speaker 6

Great. Well, thanks for answering my questions and I wish you

Operator

guys good luck. Thank you. Thanks a lot. I appreciate Operator, we're we can close out now. So I'd like to thank you all for taking the time this morning.

Operator

We found it informative. We encourage you To follow us on our websites and social media, but also feel free to contact Michael Parks for any questions. We're always open for business in that So his e mail address is meppavmed.compavmed.com

Speaker 1

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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Earnings Conference Call
Lucid Diagnostics Q1 2023 & Business Update
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