Lucid Diagnostics Inc.

Greetings. Welcome to the Lucid Diagnostics fourth quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Adrian Miller, Vice President of Investor Relations at Lucid Diagnostics. You may begin.

Thank you, operator. Good afternoon, everyone. This is Adrian Miller, Vice President of Best Relations at Lucid Diagnostics. Thank you for participating in today's business update. Joining me today on the call are Dr. LaShawn Acklaug, Chairman and Chief Executive Officer of Lucid Diagnostics, and Dennis McGrath, Chief Financial Officer of Lucid Diagnostics. The press release announcing our business update and financial results will be available shortly on Lucid's website. Please take a moment to read the disclaimer about the forward-looking statements in the press release. The business update press release and the conference call both include forward-looking statements, and these forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from the statements made. Okay, factors that cause actual results to differ are described in the disclaimer and our filings with the Securities Exchange Commission. for a list and 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 Form 10-K, filed with the Security and Exchange Commissions, and any subsequent updates filed on quarterly reports on Form 10-Q and any subsequent Form 8-K filings. Except as required by law, Lucid This claims any intention or obligation to publicly update or revise any forward-looking statements to reflect changes in expectations or in events, conditions, or circumstances on which those expectations may be based or that may affect the likelihood of the actual results will differ from those contained in the forward-looking statements. With that said, I would like to turn the call over to Lishan Aklog, Dr. Aklog.

Thank you, Adrian. Good afternoon, everyone. Thank you for joining us on our Lucid Diagnostics quarterly update call. If you've noticed, we've decided moving forward to hold a separate quarterly call focused entirely on Lucid. Really looking forward to having the time to tell the full Lucid Diagnostics story each quarter. Happy to report that Lucid Diagnostics is firing on all cylinders. Our rapidly growing team is making excellent progress on all fronts and is laying a solid foundation for us to continue driving our long-term growth strategies. Our strong balance sheet provides us with the resources to execute on this strategy. Before proceeding, I'd like to thank our long-term shareholders for your ongoing support and commitment. Every day, each member of our team is singularly focused on growing Lucid while enhancing long-term shareholder value. I'll start by providing an overview of our business, and I'll then pass the baton over to Dennis, who will provide our financial update before opening it up to questions. First, some background on our company and its mission. Lucid Diagnostics is a commercial stage cancer prevention diagnostics company focused on the millions of chronic heartburn patients who are at risk of developing highly lethal esophageal cancer. Unlike other common cancers, esophageal cancer mortality rates are high, even in its early stages. So preventing deaths requires us to detect esophageal precancer, which occurs in approximately 5% to 15% of the at-risk chronic heartburn patients. The good news is that esophageal precancer can be monitored in its early phase and cured with an endoscopic procedure in its late phase, which reliably halts progression to esophageal cancer. Although esophageal precancer screening is already recommended in millions of chronic heartburn patients, fewer than 10% undergo traditional invasive endoscopic screening. The profound tragedy of nearly every esophageal cancer diagnosis is that likely death could have been prevented if the patient had been screened. The missing element for a viable early detection program to prevent these thousands of tragic deaths has been the lack of a widespread screening tool. We believe our ESA-Guard next-generation sequencing methylated DNA test and our ESA-Check cell collection device together constitute the first and only commercially available diagnostic test capable of serving as such a screening tool. We believe ESA-Guard has the potential to become the standard of care to detect esophageal precancer in at-risk patients with a total addressable U.S. market opportunity greater than $25 billion based on an effective Medicare payment of $1,938 at a target U.S. population of at least 13 million patients already recommended for screening by clinical practice guidelines. Let's now review how e-cigarette commercialization has been going. The short answer is that it's going very well. We are very encouraged with the progress we are making as we are starting to see excellent traction with robust growth in e-cigarette testing volume. We processed 303 e-cigar tests in the fourth quarter of 2021. That represents an approximately 50% increase sequentially from the third quarter and a nearly 200% increase annually from the fourth quarter of 2020. This growth has continued nicely into the new year, both in referrals to our lucid test centers and tests performed at gastroenterology and foregrip practices. We're seeing broad growth across all geographic regions. Although our strong focus is on these two commercial channels, we are also making encouraging strides across multiple non-GI specialties, choosing to perform the procedures themselves, including family medicine and primary care practice, and even ear, nose, and throat specials. We've also made steady progress engaging with large practices and health systems. For example, we now, we have new ESAGARD programs underway at several academic medical centers in the Southeast, and will soon launch a program at multiple Florida locations of a major integrated health network. We are also getting traction of community-based hospitals, with multiple such hospitals having launched or in the process of launching ESAGARD programs. We've also gained favorable attention from a couple of large private equity-backed gastroenterology groups, such as GastroHealth, which has multiple locations which have begun ESAGARD testing. Across the board, these sites are embracing the potential for ESAGARD to increase engagement with GERD patients and create downstream revenue opportunities, including consults, confirmatory and surveillance endoscopy, adjunct diagnostics, such as manometry and pH testing, endoscopic interventions and surgical consults. The pillar of our growth strategy remains our expanding network of Lucid test centers. The Lucid test center program has completed its first stage, having advanced from a pilot program in Phoenix, launched in the third quarter of 2021, to a regional program covering, in addition to Phoenix, Denver, Salt Lake City, Las Vegas, Seattle, Portland, and Boise, Idaho. The Lucid test centers operate in leased medical office suites, each staffed by a Lucid-employed, ESO-CHECK-trained nurse practitioner and medical assistant. Chronic heartburn patients in these seven metropolitan areas across the Southwest and Pacific Northwest can now undergo a brief non-invasive office-based test to detect esophageal precancer before it progresses to deadly esophageal cancer. A single nurse practitioner can perform up to 20 ESOCHEC procedures per day. The test centers have very modest fixed costs and attractive margins. Each test center operates almost entirely as a marginal variable cost business, covering its personnel and medical office lease costs with only a couple of reimbursed tests per week. We're now in the process of launching the next stage of our leased test center program, with accelerated expansion into larger states across the nation. We have built a robust compliance program, which allows us to proceed with this expansion, including in states with more complex laboratory regulations. We've also hired a full-time experienced director of clinical services who will oversee this expansion. Our experience with the test centers over the past six months has clearly validated the test center model as a key driver of ESA Guard testing volume. Its greatest impact has been to simplify the engagement of our sales reps with primary care physicians. The reps simply educate the physicians on the relationship between chronic heartburn and esophageal cancer and on the availability of a new non-invasive alternative to screen at-risk patients. The physicians then simply order the test directly through the electronic medical record as possible, and the test is then performed at one of our lucid test centers. We have even encountered gastroenterologists in lucid test center cities, who have opted to send patients to our test centers instead of performing the ESO check procedure themselves. The Lucid Test Center model clearly works. We also continue to pilot our e-cigar telemedicine program, operated in partnership with our independent third-party telemedicine provider, Upscript, which we launched in December of last year. Patients who learn about e-cigar testing can request an online video visit with a telemedicine physician who can send the patient, if appropriate, to a Lucid Test Center for e-cigarette testing. Although patients in any Lucid test center city can access the telemedicine program, we're only actively pursuing a direct-to-consumer advertising program on a limited pilot basis in Phoenix. The program there is operating very smoothly, and a steady flow of self-referring patients have undergone telemedicine evaluation and e-cigarette testing at Phoenix area Lucid test centers. We've also significantly expanded our sales infrastructure and operations during the fourth quarter and recent months. Our very first employed sales rep started just in September of 2021. Our sales team has grown substantially since then. We've been able to attract high caliber personnel to feed this growth despite challenges of COVID-19 and broader economic forces facing all growth companies looking to hire. The team led by our national VP of sales, now consists of three area directors covering the east, central, and west, respectively, six market development managers, 10 sales reps, and several sales operations staff. The market development managers focus on establishing e-surgat testing at gastroenterology for gut surgeons, large primary care and multi-specialty practices, as well as large academic medical centers and integrated health networks. The sales reps, on the other hand, are focused on engaging with primary care physicians, including those within the referral networks of our gastroenterology and forecast surgeon practices. We expect the overall sales team to double in size and the number of sales reps to triple by the end of the year. During the fourth quarter and recent months, we have also made substantial progress in honing the sales process and sales training to assure that our outstanding team is well positioned for success. The sales reps are now armed with a very detailed, highly structured and field tested process to efficiently target primary care physicians to generate interest and convert interest into action, namely ordering e-cigar tech. The process has become entirely data and analytics-driven, utilizing Salesforce and other sophisticated tools. The team has also had good success leveraging peer-to-peer educational events to drive adoption. Our sales program has also become quite robust, combining an intense five-day educational course and extensive field training with established reps. I'd like to now discuss exciting important developments in our laboratory operation. Last month, we were thrilled to announce that LucidDx Labs, a wholly owned subsidiary of Lucid Diagnostics, had acquired certain licenses and other related assets from our longtime CLIA laboratory partner, ResearchDx, which allowed us to operate our own new CLIA certified CAP accredited clinical laboratory. The laboratory operates in a freestanding 20,000 square foot building in Lake Forest, California. And the laboratory has acquired, installed, and qualified all the necessary technology and equipment to perform the e-cigar assay, has completed the necessary assay validations to process clinical samples as a laboratory-developed test, completed a College of American Pathologists or CAP audit, and has begun performing e-cigar testing at the new facility. I'm so proud that the team was able to get the lab up and running and secure CAP accreditation in record time, and that the lab is now performing all e-cigar testing including DNA extraction and bisulfide-converted next-generation sequencing on ESOCHEC samples. I really can't overstate how critical a milestone securing our own CLIA laboratory has been. It markedly streamlines and simplifies numerous important ESAGARD testing processes. More fundamentally, it provides us with a strong, long-term, scalable infrastructure to accommodate accelerating growth and test volume from expanding ESAGARD commercialization activities. Perhaps most importantly in the short term, it simplifies our billing and collection process, eliminating some of the complexities we've had to previously accommodate, as Dennis will describe in more detail later. Speaking of reimbursement now, a brief update on where we stand with it. In conjunction with us taking over the laboratory and fully controlling the e-cigar billing and collection process, we have been able to upgrade all of our processes, including our revenue cycle management providers. With these boxes checked, we are now in a position to start submitting Medicare claims using the effective $1,938 Medicare payment rate. On the coverage side, on the Medicare coverage side, we continue an holding pattern. We're approaching now the two-year anniversary of our submission of the coverage technical file to the Moldex Program of Medicare Administrative Contractor, Palmetto GBA, the same group which issued our effective Medicare payment for ESAGARD in 2021. The processing of molecular diagnostic local coverage determinations really ground to a snail's pace during the peak of the pandemic and has not yet fully recovered. We remain encouraged, however, by the October 2021 Boldex Contractor Advisory Committee, or CAC, meeting on the topic of molecular testing for certain gastrointestinal cancers, including Visigart. The expert gastroenterologist panel voiced strong support for esophageal precancer testing in high-risk chronic heartburn patients. We believe that the CAT meeting was a strong indication that Moldex has actually started a technical review of our file and that a draft LCB should be forthcoming. We just can't say when. Unlike Medicare payment and coverage, which is binary, private payer payment and coverage is a marathon where one negotiates contracts with local, regional, and national private payer programs to steadily increase the number of covered lives for a test. The laboratory has been submitting claims to private payers and we have been encouraged that it has been receiving approximately $1,150 per test, representing approximately 60% out-of-network coverage. This percentage is consistent with the patient's policies and suggests that, at least for now, the payers are basing their out-of-network payments on the full price we are submitting. We're just reaching the critical threshold of submitted and processed claims in certain locales, which will allow us to begin having meaningful conversations with select private payers in these locales and network payment and coverage. We're beefing up our market access team to allow us to fully engage in these negotiations. We're also collecting the critical clinical utility data, demonstrating that e-Cigar positively impacts CARES that the payers are seeking as part of these negotiations. We believe, based on extensive outreach, that our lucid test centers will actually facilitate these discussions, including the potential to participate in more tightly controlled innovation projects which payers are increasingly pursuing in advance of broader coverage. Now let's move on to our clinical studies. As I have said on many occasions, expanding the clinical evidence for e-cigar testing is a pillar of our growth strategy and was a key impetus for us raising growth capital in the fall. We are significantly expanding our clinical trials infrastructure and the number of company and investor-initiated clinical studies. For the sake of time, I'll only be able to provide some highlights. We continue to actively enroll patients in the two international multicenter clinical trials, EsoGard BE1 and BE2, to support eventual FDA PMA approval of EsoGard used with EsoCheck as an in vitro diagnostic or IVD indicated to detect esophageal pre-cancer. The study has 68 sites in the US and Europe. Enrollment has been steady despite the winter Omicron surge, and we are still targeting completion of enrollment by the end of 2022. and PMA submission in 2023. We recently announced that investigators at the Cleveland VA have enrolled their first patient in a Department of Defense-funded ESAGARD study. I'm very excited to see this investigator-initiated study launch, as it'll add important clinical evidence on the impact of ESAGARD in enhancing early detection of esophageal precancer by reserving endoscopy for those with a positive ESAGARD test. The study will enroll up to 100 Cleveland VA patients who fulfill American College of Gastroenterology criteria for esophageal pre-cancer screen. As I mentioned, we've also launched multiple clinical utility studies at busy clinical sites to demonstrate that e-cigar positively impacts the care of at-risk GERD patients. These clinical utility studies and an e-cigar registry that we are launching will provide important data to support our private payer discussions, as well as ongoing improvements and modernization of the e-cigar assets. Finally, we continue to provide support for other investigator-initiated studies, including NIH-funded ones, which are generating positive data to be presented at upcoming meetings, and we believe will expand the peer-reviewed literature supporting e-secure testing. Let me close my portion of these remarks with a few business development updates. PavMed's e-secure device to endoscopically treat esophageal precancer continues to progress well. PavMed completed another successful animal study including head-to-head comparisons with Medtronic's barracks device. Feedback from key opinion leaders who are busy esophageal ablators has been universally positive and very encouraging. Given this progress, Lucid and PadMed decided to enter into a formal intercompany license agreement whereby Lucid will have the exclusive worldwide rights to commercialize eSecure, which is tightly synergistic with the eSoGuard and eSoCheck products. Last year, a PadMed subsidiary acquired Capnostics LLC, which manufactures Esophacam, a non-endoscopic sponge-based esophageal cell collection device, which has been used in pre-commercial clinical research of esophageal pre-cancer markers at major academic medical centers. The company has entered into discussions with these centers and has agreed to continue to support this research. It has closed a clinical trial agreement with Mayo Clinic and is close to doing the same with John Hopkins. Since this technology is firmly within Lucid's business, PadMed and Lucid entered into an agreement for Lucid to acquire the capnostic asset under the same terms that PadMed did in the fall. Finally, we continue to receive a steady inflow of business development opportunities and carefully assess each in terms of synergy with our current portfolio and the potential to be accretive in the near and medium terms. With that, I'll hand the reins over to Dennis to provide an update on our financials before proceeding with questions.

Thanks, Leishon, and good afternoon, everyone. Our preliminary and summary financial results for the fourth quarter and for the full year end at December 31st, 2021. We're reported in our press release that was published just earlier today. We plan to file our annual report for Lucid Diagnostics in Form 10-K with the SEC in the coming days. And at that time, it will be available at sec.gov and on the Lucid website. As you already know from our previous quarterly corporate update calls, that as a rule is E-cigar tests performed are recognized as GAAP revenue when cash is collected by the company. Also, as previously mentioned, this is more than likely to be true during this transition period of negotiating third-party private payer reimbursement contracts and related coverage policies. As reported to you last quarter, for compliance purposes during this reimbursement transition period, we negotiated a short-term, month-to-month fixed payment arrangement with the contract laboratory that was processing the ESAGARD assay and was performing the insurance company billing and collections function. This commercial agreement became effective on August 1st, 2021 and terminated concurrently with the opening of our own laboratory at the end of February, 2022. We recognized $500,000 of revenue as part of the ESAGARD commercial agreement with ResearchDx for the year ended December 31st, 2021. Now that we are operating our own laboratory following the February 2022 agreement where LucidDx Labs purchased certain assets from ResearchDx, Lucid will have the ability to directly invoice CMS and private payers. Future revenues will be recognized based upon actual collections until such time that coverage policies are in place with CMS and payment contracts with the private payers. This obviously can result in the timing of revenues recognized versus the timing they are submitted for third-party reimbursement until these future conditions are all met. Consequently, it is our expectation that we will begin to recognize gap revenue related to our Lucid DX lab in the second quarter of this year and will be adjusted based upon actual collections received for tests submitted for reimbursement by the laboratory. The number of e-cigar tests performed and submitted for payment are provided in the press release and was discussed earlier by Lishan. Obviously, we're in the early stages of our commercial launch, particularly with our test centers. We'll continue to evolve our reporting metrics as various sales and marketing efforts further influence adoption, particularly with the ramp up of our Lucid test centers and our ESA Guard telemedicine program in cooperation with Upscript. Presently, there are now five banking analysts who have issued coverage on Lucid. and others doing their diligence. The 2022 revenue estimates provided by the analysts are achievable. The quantity and collections are highly dependent upon the evolving reimbursement landscape. As you're likely aware from our last corporate update, the local coverage decision, as Lushan mentioned, has still not been published. But we are optimistic that it is being worked on and should be forthcoming. With regard to revenue, Lucid recognized 500,000 revenues related to e-cigar for the year end of December 31, 2021. Despite the negative gross profit for last year, which reflects the initial test centers, startup-related costs at moderate volumes, incremental gross margins can be around 90%, and contribution margins of 60% to 65%. These lower volume amounts have a minimum level fixed cost associated with just being operational. Now a few comments about operating expenses, sales and marketing to start. With the year ended December 2021, sales and marketing expenses were approximately 5.3 million for the year, compared to 1.3 million for the corresponding prior year period, with a $4 million increase principally related to the following items. Approximately 1.7 million was an increase in compensation related costs, largely related to an increase in headcount. Approximately $1.1 million increase for outside professional services related to ESA check, ESA guard, and consulting and other professional service fees, and just under $1 million, $900,000 increase in the management services agreement, the fee allocation from PAVMED related to growth and expansion of Lucid's business and the services incurred through PAVMED. On the G&A front, G&A expenses were $12.8 million for the year ended December 31st, compared with $1.5 million for 2020 with the approximate $11.3 million increase related to a couple items. About $9.1 million of that increase was non-cash stock-based compensation from restricted stock award grants to loose and impavement employees and non-employees. And approximately $2.1 in consulting services related to patents, regulatory compliance, legal processes for contract review, the transition of our public relations and investor relations firms, and public company expenses. On the R&D front, the R&D expenses for the year 2021 were approximately $9.3 million as compared to $5.4 million for the prior year, with the increase of $4 million related to the following items. About $3.2 million were an increase in development costs, about $200,000 in compensation-related costs, and approximately $400,000 in increase in the management services agreement fee allocation from PABMED. There's a table we provide in the press release. It was published earlier that adjusts each of these three components of operating expenses for the embedded non-cash stock-based compensation expense. Without the stock-based compensation expense, total operating expenses for Lucid Standalone were $17.7 million and $8.2 million for the years 2021 and 2020, respectively. with regard to the loss in per share amounts. Lucid Diagnostics reported a fourth quarter, 21, and a full year, 2021, net loss attributable to common stockholders of 11.3 million and 28.1 million, or a loss of 32 cents or $1.51 for common share, respectively, versus the same period in the prior year, the fourth quarter of 20 and the full year, of $2.7 million loss or 19 cents a share. and 8.3 million, or 59 cents a share, in 2020. The press release also provides a table entitled Non-Gap, which highlights these amounts along with interest expense and other non-cash charges, mainly depreciation, stock-based compensation, financing-related costs, so that it enables a better understanding of the company's financial performance. You'll notice from the table that after adjusting the fourth quarter, and the full year gap loss by approximately $3.6 million and $10.3 million for non-cash and interest costs for those two periods. The company reported a non-gap adjusted loss for the fourth quarter and for the full year, $7.7 million and $17.8 million, or $0.22 and $0.96 for the quarter and for the full year per common share. Lucid had cash of $53.6 million as of December 31st, and that compares to about $100,000 in the year in 2020. Today, Lucid entered into a committed equity facility with an affiliate of Cantor Fitzgerald, where Cantor committed to purchase up to $50 million in the company's common stock from time to time at the request of the company. Any future funding from this facility is completely at the discretion of the company. and if utilized, likely would extend the company's runway well into 2024. Unlike PadMed, Lucid is not eligible to put a shelf registration into action until after November 2022, or more than 12 months after the IPO. Like we described about the PadMed shelf, the board considers having available financing options part of their governance duties, even if utilization would finance us well into 2024. So they considered part of their duties to understand what the long-term opportunities to the company are. And this gives us that vehicle short of being able to put a shelf in place. So with that operator, let's open it up to questions.

At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question is from Kyle Mixon with Canaccord Genuity. Please proceed with your question.

Hey, thanks. Kyle? Hey, guys. Congrats on the quarter. And thanks for the questions. So great updates, obviously. I hate to be kind of myopic here, but I just wanted to talk about the COVID impact in early first quarter. Clearly, there were headwinds that affected the diagnostics industry during January and February due to Omicron. Just was wondering what the impact on Lucid was kind of early in the first quarter. And could there be any systemic impact that lasted throughout the quarter rather than just kind of the transient impact early on? Thanks.

Yeah, you know, as I said before, our team has done a good job of insulating ourselves or inoculating ourselves a bit, no pun intended, from some of these COVID-related effects. And that's primarily because our engagement with physicians is entirely outpatient-based. And our test centers are entirely under our control, and we control how we handle precautions at our test centers. So generally, we have not seen with this or even with the previous, the summer surge, for example, the Delta surge, any meaningful impact compared, certainly compared to companies that call on hospitals where elective procedures and other things can be canceled. We do get a bit here and there of centers at the absolute peak, which slow down the ability of our reps to get into offices. But that's been relatively modest. As I've said before, the main issue, frankly, was around travel, cancellation of flights and so forth. And that was a very, very sort of narrow window during this last Omicron spike. So, bottom line is that it hasn't had a major impact that we, so far, and that we expect moving forward.

All right, great. And maybe just one on the CLIO lab. So, when do the benefits from that in-house lab, kind of internally owned lab, really fully take shape? Or maybe have they already? And I guess, you know, why did it make sense to acquire that capability kind of relatively early into the launch before Medicare reimbursement was secured?

So the benefits are occurring immediately. So the key, you know, we had planned, and if you recall during the S-1, we talked quite a bit about the need to have this infrastructure in place moving forward. But the thing that really dominated our thinking to move more quickly, as we described previously, has been the complexities around using a third-party laboratory for billing and collection and invoicing of procedures of tests submitted to payers when you marry that to our test centers. So there are a lot of hurdles that come with that that relate to federal and other regulations. And it was getting quite sort of onerous and complex to do so. So by having our own laboratory, it provides us with with the ability, as Dennis mentioned, to invoice payers directly to really enter into direct negotiations with private payers and so forth. And they really are somewhat linked. There's a bit of a chicken and egg process throughout the secure private payer payment and coverage. The impact beyond the initial price to get these licenses in place on the sort of marginal aspects, and Dennis can elaborate on this, are really not significant since we did continue We do continue to use ResearchDx to help us run the assay through a management services agreement. So the big difference has been that it's allowed us to be the official laboratory of record, not have to go through various convoluted mechanisms to allow us to do so under a third-party arrangement. Dennis, would you like to add anything more to that?

yeah if we were to uh eventually we would have our own lab anyway to to in the thrust of your question the timing of it certainly made sense if we were to start our own lab from scratch the delay could be upwards of a year to get the appropriate licensing by by buying certain certain assets and funding that we get it in place now we said we would do it in the registration agreement and As we're in this process of putting and negotiating payer contracts, it made sense to have those contracts in the name of our own laboratory rather than have them in ResearchDx and then have to go through the administrative process of transferring over. Given this year is a transition year, given it was part of the funding and use of proceeds, the opportunity presented itself. It shortened the game to get it in place It's in advance of the negotiations we're having with private payer side and where the coverage policy will put in place. For all those factors, it made sense to pull the trigger now.

If I could just add one thing, Kyle, in terms of immediate benefits, we actually are able to secure our own revenue cycle manager. And that's been challenged because prior to this, we've been sort of at the mercy of the one that the laboratory used. So we kind of hold all the cards now. with regard to sort of really efficient submission of claims, proper submission of claims, efficient processes for appeals and processing claims across the board. So it's super critical, and we're really happy we have this sort of all teed up and ready to go for our future expansion.

Yeah, that was great. The benefits are clear. I just was kind of wondering about the timing, but I think that all was great color. It all makes a lot of sense now. And just moving to, I guess, denial of cash collections, Could you help us think about the denial rate during the quarter and where that kind of stands today? You know, I heard the number, I think it was $1,150 from private payers. That's great. Obviously, a large portion of the, you know, target patient population is Medicare patients, and so it's obviously really not getting reimbursed right now. So could you help us think about maybe denial rate right now as well as, you know, is the full-level patients, you know, the 300 or so tests during the quarter, I mean, is that mostly private payer patients or Medicare as well?

So the balance between, let me answer your last question first, that the payer mix is a bit more skewed towards private payers than we would expect from the overall sort of epidemiology of this, which should be about 60% Medicare. But that's just various factors related to geography and local health and so forth. So that's that. In terms of, you know, the cycle between submissions and claims is so long. It can be, you know, three months or longer. We don't really have good numbers with regard to denial rates because the vast majority of claims are still being, just being adjudicated. We haven't, we've submitted them and we haven't gotten a response. We haven't gotten a payment or a denial. So we have had some denials and those are actually fairly important. to get denial so that you can go through the appeals process and engage with the payers on that front. But I don't – I'm not yet able – we're not yet able to give you sort of a percentage with regard to – with regard to denials that we're getting. Some out-of-network payments are coming through, but the vast majority of the claims are still sort of in the hopper waiting to get processed.

All right, great. That makes sense. It's fair. And for a final question, I just want to kind of lump two thought processes come together here, and it's kind of around basically the announcements that you made towards the end of the call regarding esocure and esophicap. Those are very positive, obviously. I guess first on esocure, I believe that PadMed previously planned to conduct additional development work in animal testing of esocure to support like a planned 510 submission in early 2022. Just wondering if that still stands. And then on Asafoetcap, I mean, what does that mean for your competitive positioning, for Lucid's competitive positioning? Does the company basically think that it could essentially control certain players from entering the market that use that Asafoetcap as a cell collection device? Thanks.

So the answer to the first one is no. That early 22 is not quite the completion of these studies. Completion of the verification and validation testing will get us further into this year. So we don't expect that to happen early. But the progress has been really solid and great, and we look forward to getting to design freeze and getting the verification of validation testing to allow us to submit to the FDA. And we think we have a very good regulatory strategy to do so and to get it cleared and to be able to offer that commercially. So the time just seemed right right now to formalize the engagement with Lucid as it relates to licensing of the technology when it's ready for commercialization. With regard to esophagus, I'll just be kind of, you know, somewhat brief about that response. There is, there are two 510 cleared sponge-based devices in the U.S., three non-invasive collection devices that we include, ESOCHEC, the other sponge-based device is, the Medtronic cytosponge device, which has been off the market for a couple of years. And so the answer, the indirect answer to your question is right now, we do control the only 510K cleared sponge device for use in screening GERD patients with biomarkers. So I'll just leave it at that.

Okay, perfect. Thanks again, guys. Appreciate it. It's been awesome to talk to you. Thank you.

Our next question is from Mike Mattson with Needham & Co. Please proceed with your question.

Hey, Mike. Good afternoon.

Hey, good afternoon.

So for the 300 roughly tests that were performed in the fourth quarter, can you just remind us how many test centers those were kind of going through? I can't remember where you were at as of the end of the year. And then, you know, were they pretty evenly spread out or were they concentrated in one versus another?

So, yeah, I'll give you some color on that without, you know, the numbers are too small to really give you a lot of kind of granular numerical data on that. But if you remember, the first test center was launched and really didn't get rolling until September. So for most of the fourth quarter, we had just the Phoenix test centers, so three, but just in the Phoenix area. And we didn't launch the Salt Lake, Vegas, and Denver centers until the mid-portion of that year. So the actual, the majority of those cases were actually not test center cases because the test centers were just getting up and running and were actually cases performed by physician practices. And as I said, the geography is really spreading out nicely across the country. The largest, the busiest geography has actually been in the east, which is not, which doesn't actually have any test centers. So we expect, as we continue to grow, that an increasing portion of the volume will be cases that pass through our test centers. But to be honest, we've been quite encouraged by the, as I mentioned in my prepared remarks, in the expansion of non-lucid test center activity at community hospitals, at integrated health networks, at academic medical centers, and GI centers. practices including very large private equity-backed GI gastroenterology networks. So we expect that volume to continue to grow, but I would say over time, particularly as we get into this next stage and enter into larger states across the country, that an increasing portion of the volume will be represented by at least the cancer cases that get referred by primary care physicians or eventually self-referrals.

Okay. And I was just wondering if you could give us an update on the DTC campaign. I know you made some comments on it, but I think I have to say it was really still limited only to the Phoenix area. Is that right?

Yeah. I mean, our philosophy, I think I've articulated this before with the direct-to-consumer aspect of this, is we're really doing it in a very sort of controlled fashion. We don't think it makes sense to really blow it out until two things happen. One, we have a clear understanding of which modalities work and what the yield on each advertising dollars will be, but also until we get more traction with regard to reimbursement. So we're taking a careful approach with regard to deploying dollars into advertising and have limited it to the Phoenix area where we do have billboards and TV and radio advertising, and we're continuing to do that. We don't really have enough data to understand. We were definitely getting responses, and as I said, we are having patients who are passing through the telemedicine program and have gotten tested and have completed the process, and that appears to be growing, and we believe we're getting good traction with that. Typically, with direct-to-consumer work, you really need kind of three to six months of data to really understand which modalities are giving you the best bang for your buck. And so we'll continue to collect that data. And we'll likely continue the DTC work to keep it limited to Phoenix or perhaps one or two other states for the foreseeable future. Dennis, do you have anything you want to add to that?

No, I think that summarizes well. The two gating factors are optimization and reimbursement. And as both of those start to evolve, we'll have more of the DTC expansion and investment so that, you know, every dollar spent has a direct relationship to the yield of adoption and revenue.

Okay. Got it. And then just as far as mold DX goes, I mean, if you're confident that this is going to happen, it's just a matter of time, and it's just sort of a backlog at CMS.

Yeah, it's a little bit. I wish I could have more details. I mean, you know, the fact that they held a CAT meeting which covered our test along with others, you know, is a strong indication that they're working on it as opposed to prior to that where we had no real evidence that they had actually, you know, dusted off our file. So we clearly feel they're working on it. We do have, you know, our team does engage with them. We have discussions with them. We check in regularly. And so all of that together, you know, these LCDs, I think we've talked about this, Mike, have increasingly common batches sort of centered around certain disease processes or other organizing factors. And so, you know, we just suspect that that's in fact what's going on, that there's a group of tests that fall under similar umbrella that are all being evaluated and that we would expect to get a batch of LCDs. draft LCDs, you know, sometime soon, you know. Okay, got it. Thank you. Thanks, Mike.

Our next question is from Ross Osborne with Cantor Fitzgerald. Please proceed with your question.

Hey, Ross.

Good afternoon.

Hi, everyone. Congrats on the progress. Thanks for taking my question. So, I guess maybe starting off with test centers, could you walk through the timeline on the next set of locations? And then I guess just as a follow-up, has the company developed any solutions in addressing states with the stricter regulations you've furiously discussed?

Yeah. So the timelines are – we're definitely accelerating things. So, you know, the first group we did one city, Phoenix, then we did three and three, and now we're moving towards doing them in larger batches and in larger cities. So we've identified nine states where we're going to target, including most of the large states across the country, and we're going to – we're identifying – our first target location in each of those, and we're looking to do a bigger launch across multiple states as opposed to doing them in smaller bite sizes as we've done to date. In terms of the solutions we actually have, yeah, we're all set with regard to the compliance infrastructure around replicating the test centers in states that have more complex laboratory regulations. There are a variety of factors there. really that falls into two buckets. One bucket is on nurse practitioner practice regulations and the need for supervising physicians. We've been able to establish a straightforward mechanism for dealing with that. There's some states where we have to deal with corporate practice of medicine statutes, which we've been able to establish a program on how to deal with that as well. And then there's some where kind of the relationship between the laboratory and the test centers are important. Yeah, we're good to go. We've got really outstanding compliance counsel and all of those ducks are in their own, right? Just about ready to go.

Okay, great to hear. And then maybe just in terms of education, I think we've previously discussed some pushback with nurses just given a new offering, which is kind of the basic workflow. Have you guys made any progress in maybe some more efficient education programs Or is it really just kind of knocking on doors? I'm just curious to hear all that.

Yeah. So I think so what you're referring to, of course, are not the primary care targets, right, where there is no workflow issue. It's just purely engaging them on the, educating them on the disease and risk factors for cancer and the availability of the test, right? So that doesn't require any change of workflow. That's just sort of standard engagement with primary care physicians. On the gastroenterology front, as well as larger primary practices, it's actually gone pretty well. We're not really getting that pushback. We're getting centers that, you know, what's changed over the past couple of quarters is that we've been able to really have these centers, whether they be large practices, community hospitals, academic medical centers or integrated healthcare networks or these large PE-backed gastroenterology practices to really see this as a program, as I mentioned in my prepared remarks, as a comprehensive program, either part of a broader program for gastroesophageal reflux disease in a chronic heartburn clinic or just specifically around screening for esophageal precancer. And there is now a better understanding, and I think perhaps we've learned how to articulate the downstream benefits to these larger entities around referrals, consults, endoscopies, surgical referrals, ablations, and so forth. And so really going quite well. I mean, as I kind of gave, I tried to give, you know, a variety of diverse examples of the types of venues where we're getting, we're starting to get traction. And now it's simply about, you know, expanding the team and getting them out there and having these conversations. The time it takes to convert Let's say a small GI practice compared to a large academic medical center, as you might imagine, is quite different. You have a large center. There's technology committees and other hurdles that you have to go through, and the time to get traction there can be many, many months, six months or longer at times. But the payoff, obviously, is greater once you're in and you have access to the entire facility and program.

Understood. Thanks for taking my question. All right. Thanks, Ross.

Our next question is from Mark Massaro with BTIG. Please proceed with your question.

Hey, Mark. Good afternoon.

Hey, guys.

Hey, Mark.

This is Vivian. I'm for Mark. Hey. So on the initiation of the Cleveland VA study, could you maybe give a sense of timing for the initial readouts? Just any major milestones to look out for there that could potentially help drive a draft LCD or guideline inclusion in the future.

Thanks. So we don't have – it's a little too early to know yet what the enrollment pace is going to be, but we expect it to be pretty quick. I mean, just even since our announcement, the investigators have enrolled several patients, so we don't expect this to – we expect it to be – for it to – to complete enrollment fairly quickly. There are lots of these patients out there. And as you might imagine, the VA has a lot of these patients that are pretty fertile ground for the typical good patients who need screening. So yeah, so not too long. I can't give you sort of precise timelines yet, but I think I would say certainly this year, we would hope to have it completed. And unlike other studies, there's really no follow-up, right? These are immediate reads upon enrolling the patient. They get their Easter check procedure. They get their Easter guard test. They get their endoscopy. So there's a long follow-up period to get the readout. So I'm pretty confident we can get it done this year.

Okay, perfect. Thanks. And maybe just one quick follow-up. Could you speak to your mix of prescribing physicians between PCPs and GI specialists? You did mention an uptick in non-GI specialties. So just how you view that trending, looking at 22 here. Thanks.

Yeah, I mean, the non-GI specialties are mixed amongst large primary care centers who have decided to do their own testing, non-internal medicine family practice groups, as well as, of course, primary care physicians who are referring to our test centers. I don't have a hard breakdown of that, and that's rapidly changing, so the fourth quarter numbers don't necessarily reflect where we are today. If I was to give you a sort of a rough guess right now, I would say that if you take referrals to primary care referrals to our orders to our lucid test centers, along with primary care practitioners, like our busiest practitioner is a nurse practitioner, family medicine nurse practitioner who does a large number of procedures herself in her practice. So if you take all of those together, are we sort of 50-50 GI versus primary care? Maybe not quite, but probably heading towards that.

Okay, perfect. Thanks for taking the questions.

Thank you.

Thanks, Ed.

Our next question is from Ed Wu with Ascendant Capital. Please proceed with your questions. Congratulations on the rollout.

It looks like you guys have been adding about one city a month. And am I correct that you guys are going to be at a much faster pace over the next 12 months?

Yeah, I think so. And it's going to be less sort of steady than we're going to do in larger chunks, right? So instead of doing, you know, three at a time, which we did the last couple, we're going to tackle nine cities and nine states all at once and try to get those wrapped up. as soon as we can. You know, I think we've said this before, Ed. The rate-limiting factor is not the process of finding a site and identifying the best city within a state to start with and getting the physical location up and running or even hiring the nurse practitioner and medical assistant. It's actually getting the sales infrastructure, the sales reps in place to be able to drive cases to the test centers. Although in many of the states that we're talking about now, we already actually have a presence with market development managers and even sales reps who are already working with non-Lucid test center channels. And so we will be able to place some of these test centers in places where we already have a commercial presence.

Great. Well, thanks for answering my question. Good luck. Thank you.

All right. Thanks, Ed.

We have reached the end of the question and answer session, and I will now turn the call over to Dr. LaShawn Acklog for closing remarks.

So, again, thank you all for joining us today and, as always, for the great questions. As always, we look forward to keeping you abreast with our progress via news releases and periodic calls such as this one. Again, I'm really excited that we've been moving forward. We're going to be able to provide dedicated calls for Lucid, and this has been, I think, a great first crack at that. The best way to keep up with Lucid News updates and events is for you to sign up for our email alerts on the Lucid Investor Relations website and to follow us on social media, Twitter, LinkedIn, YouTube, and our website. Or you can contact us directly through Adrian, our VP of Investor Relations, at akm.padmed.com. So, again, everybody, thanks a lot, and have a great day.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.