This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk02: Welcome to 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 Park, Vice President, Investor Relations. Mr. Park, you may begin.
spk04: Thank you, Betsy. Good morning, everyone. Thank you for participating in today's first quarter 2023 business and financial update call. Joining me today on the call are Dr. LeSean Acklog, Chairman and Chief Executive Officer of Lucid Diagnostics, along with Dennis McGrath, Chief Financial Officer of Lucid Diagnostics. The press release announcing the business update and first quarter results is available on the Lucid website. Please take a moment to read the disclaimer about forward-looking statements in the press release. The first quarter 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 in 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-K 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 The actual results will differ from those contained in the forward-looking statements. I would now like to turn the call over to Dr. Leshawn Affleck, Chairman and CEO of Lucid Diagnostics.
spk09: Dr. Affleck. Thanks, Mike, and good morning, everyone. It's great to be here. Thank you for taking the time. I look forward to giving you an update of our business for the first quarter of this year, 2023.
spk03: Let's just start with some highlights. These were highlighted in the press release as well. tests in the first quarter. That's a 57% increase on a quarterly basis. over the fourth quarter of 2022. And a 245% annual increase. We've seen substantial growth Financial increases in the satellite LUSA test center activity. Now, they represent about 50% of the samples collected for testing in the first quarter. We'll dive into that. further later.
spk09: Our check your food to 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. Two studies with compelling data were presented for ESA guard and ESA check. 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 adenocarcinoma. 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, it's a really bad actor, and it has become quite prevalent with an increase of over 500% over the last four decades, in contrast to all the other common cancers which have remained flat or gone down. This makes it the second most lethal cancer, approximately 80% five-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 one gives you an 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. And although screening is recommended in a well-defined target population, less than 5% of those patients
spk03: So, I recommend, of course, cleaning with a musket. Yeah, they're going off. Our lead products are ESA's Arctic. Check in the form of a collection. Collectively the first and only commercially available test. that's capable of serving as a widespread tool, screening tool to prevent subject cancer deaths through the early detection of pre-cancer. Both the American College of Gastroenterology, and the American Gastroenterological Association. Recently,
spk09: updated their guidelines and now support non-endoscopic biomarker testing, such as ESA check, 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's a large population that is recommended for screening. So approximately 30 million patients with chronic heartburn are well established by guidelines as being at risk and are recommended for screening. That number is actually somewhat conservative. One of the two guidelines actually expanded the target population to include patients who don't have symptomatic heartburn. So that number actually is under those guidelines is actually moderately higher. Medicare has established a national line Medicare payment of $1938. And 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 billion total addressable U.S. market. The gross margin at volume is over 90%. Just one quick slide on a commercial strategy. target two 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 an e-cigarette test as others would ask them to order other tests, screening tests or otherwise. And the actual performance of the cell collection procedure that results in the performance of the e-cigarette 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 lucid test center. As I mentioned, and I'll show the data to reflect this, the satellite test center model is actually rapidly expanding. So just to flesh that out a little bit, what happens is that we have our nurse practitioner
spk03: have a scheduled day on a regular basis at the physician's office, and they schedule patients for testing that in the office practitioner. They can perform up to 30 views a day. With the specialty... Excuse me, sorry. I forgot about the advances. Apologize. the specialty and institutions, that's a somewhat different approach where we're looking to work with these specialists or the institutions to build needs to go to program. And that is the purpose there is to
spk09: for the specialist institutions to the downstream opportunities for building sexual 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, a nurse or a physician assistant, or using a satellite listed test center model as well.
spk01: So on to our commercial results. We had an excellent quarter.
spk09: The first quarter, our total number of tests you can see here continues to increase in a steady fashion. We increased 57% over the prior quarter and 245% compared to a year ago.
spk01: Two pie charts here reflecting some of the distribution of this testing volume.
spk09: The referral source is now about two-thirds. It's been stable, actually, in recent quarters. Two-thirds primary care physicians and about a third specialists and institutions. And as you can see on the right slide there, about 60% of the ESA check subcollection procedures are being performed by elusive personnel. But the number, the proportion of the total number that are being performed at a satellite's test center in conjunction with a physician's office is now over 50%.
spk01: And about 40% of these are being performed by the physician practice itself and their own personnel.
spk09: So last time we announced that we had launched our Check Your Food Tube pre-cancer detection events. These events are geared towards towards holding high-volume testing events where our nurse practitioners arrive at a location with a group that has been scheduled for testing. The first event was with the San Antonio firefighters earlier this year, and approximately 400 firefighters were tested over two weekends.
spk03: That program, as we announced, is expanding. We've completed see here in the orange size of these events across the country. And we have a robust pipeline of the remaining of the others. Blue are already scheduled for 10 weeks. A few comments about contractual payment. On the right there, you can see that our proportion of patients that are Medicare and Medicaid remains stable at around 10% and the other aspects are are actually relatively stable as well.
spk09: We continue to maintain an average contracted price above the Medicare rate. All the contracts are above the Medicaid rate. 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 $1,400 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 continue to do so. We have almost 200 insurers to whom we've submitted claims so far, and really the critical element of this is clinical utility. It's 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. 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 significantly 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 self-insured employers, unions, and other entities directly, as opposed to the insurers. We think it's a meaningful revenue opportunity outside of traditional commercial payer contracts. As I said, others have had some success with this. We are hiring a dedicated person to lead this program, and I'll also note the The food tube events are actually part of this, and we have an internal person 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, clinical utility data is a very specific type of data.
spk03: basically demonstrating to those entities that our tests have an impact on medical decision-making. More specifically, it means that the physician orders the test. upon the result. So a positive test results in a confirmatory endoscopy. And a negative test does not. And so That's the data that we're documenting. Here we know what the results are. This is based on our experience broadly across thousands of tests that have been performed so far. These are the four active studies that we're pursuing to document this, retrospective and prospective.
spk09: The firefighter events have given us a great opportunity for some retrospective analysis of prospectively collected data. That's approximately 390 patients. That study is actually, the data collection has been completed The manuscript is written, and it's currently being submitted for peer review. So we're looking forward to that. We have two prospective studies, a lucid registry and a multi-center study called the CLU study. Our target enrollment in each of those is approximately 200 each by mid-year, and those are going well. 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 clinical scenarios and asked to document what their decision-making would be. That's a well-established modality used for submitting clinical utility data to payers. And that study is also ongoing and is actively enrolling at our target. So we're very excited about this. We expect that we should have our first batch of data that can be submitted, 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 it will be available to us for our in-network engagements with the commercial payers.
spk01: Just a couple of highlights from the Digestive Diseases Week meeting.
spk09: As I mentioned, we had two excellent presentations. This one is by the faculty at the VA in Cleveland, where they performed ESA check with follow-up endoscopy, confirmatory endoscopy, on 69 veterans.
spk03: supported a 99% technical success rate, which is equivalent to the technical success rate that our own NPP established. The overall sensitivity was 100%. I would recommend that you look at patients who are taking up conditions along the spectrum from pre-cancer to cancer. that translates into, of course, 100% estimated negative predictive value and a 37% estimated positive predictive value. the value, which are both really write down exactly where you'd want it to be for a screening test. patients detected who had pre-cancer cancer. Notably, four of the seven were short-term segments. so less than three centimeters of abnormality.
spk09: That's the most important category, but also the most difficult to pick up because the amount of abnormal lining of the esophagus is so short, and we're gratified that they were able to pick up all of it. Two of them had longer segments of this earlier pre-cancer non-dysplastic VE. And we're very excited about the fact that we picked up one patient who had silent stage 3 esophageal cancer and had them enter treatment with chemo and chemotherapy and radiation. So really excellent results from the VA. We also reported on a on an expanded cohort of patients, real-world data, using the ESA check device for sampling of the soft yield cells. This was approximately just under 1,500 patients. And the technical success rate that we had previously reported at the American Association of Cancer Research at 98% held. And the average procedure time of less than three minutes also held. The DNA quantity, or the DNA yields, continued to improve. The quantity not sufficient rate, which is what portion of patients will undergo cell collection, do not have enough DNA to run the E-Cigarette 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. Excuse me, I forgot to push the slides. The poster presentation at DDW was in the top 10 percent.
spk01: Excellent distinction. Finally, a summary of our lab operations here.
spk09: You can see the quantity of non-sufficient rates have plummeted since we took over the laboratory operations in the early part of last year. It is now solidly under 5 percent. Turnaround times also have gone down quite significantly and have held at approximately
spk03: I'm going to hand things over to Dennis to provide us with a final answer. Thanks, Michelle. In the first quarter, the Ward authorized $20 million for offering 11 days. $20 million for your convertible. You got it? See it sliding. Team. previously mentioned. We completed the initial closing of the scoring a variety of alternatives, this preferred structure created a mutual win for the company and the investors by matching an Attractive dividend with strong incentive to hold the stock for more than two years. Additionally, in the first quarter,
spk07: $11 million in convertible debt securities with an accredited investor that has provided the same type of structures for PadMed over the years and currently holds PadMed's existing debt with similar terms. The note is interest only for six months at the $5 voluntary conversion price and has approximately a 7.9% interest rate. Amortization does not begin until the six-month anniversary in October. Both structures keep stock out of the market for long periods of time, likely two years in the case of the preferred, which allows the company to complete its work on the clinical utility studies and improving reimbursements. A runway is substantially elongated into 2024. When combining these financings with our cash at the beginning of the quarter, results in pro forma cash of 46.1 million. With an ending quarter cash balance of 39.5 million, the pro forma burn rate for the first quarter was 6.6 million. So on the next couple slides, the summary financial results for the first quarter 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 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. So cash, $17 million sequential net increase in the first quarter. Our vendor payables were relatively flat for the sequential quarter. It was offset by the intercompany debt to PadMed, a $2.7 million increase. It reflects largely the management services agreement that continues to exist in that intercompany debt account. And the shares outstanding, including unvested restricted stock awards as of today, is 43.7 million shares. The GAAP outstanding shares are reflected on the slide as well as on the face of the balance sheet
spk03: It compares this year's first quarter to last year's first quarter of certain key items. review the information like comments in light of the cautionary disclosure at the bottom of the slide about supplemental information, particularly non-GAAP information. Revenue for the first quarter refunds. Actual cash collections for the quarter. The prior year reflects the fixed monthly fee received from the third party lab that we used before setting up our at the end of last year's quarter.
spk07: Revenue recognition. The key determinant is the probability of collection. With a vast majority of patients out of network claim submission means revenue recognition occurs when the claim is actually collected. versus when the patient report is invoiced and submitted for reimbursement. As you 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 first quarter of $9.8 million reflects a 7.5% sequential decrease compared to the fourth quarter loss of 10.6 million. On slide 21, slide 21 is a graphic illustration of our operating expenses for the periods reflected. Total non-GAAP operating expense of 10.9 for the first quarter 2023 was relatively flat sequentially, however, The first quarter includes approximately $1.2 million of certain one-time expenses related to the reduction for severance costs, costs incurred to finalize the acquisition of ResearchDX, including 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 $9.7 million, reflecting about a 9% decrease sequentially. Cost of revenue primarily consists of the use of check devices, lab supplies, and fixed lab facility costs. Consistent with recent SEC filings, this presented in our 10 as operating expense consistent with practices of other diagnostic companies.
spk03: Sequential decreases in R&D and marketing will offset by approximately 1.2 million one-time costs all mentioned, including terminating the relationship with ResearchDx, which will avoid approximately $2.7 million in future costs. First quarter to cost. Together. The highly variable. Quarter to quarter. Convertible debt. Cash short. charges, which I've shown below the line, account for approximately $0.07 of the $0.07 gap loss. With that opportunity, let's turn it over to questions. We will navigate. in the question and answer session.
spk02: If you would like to ask a question, please press star then 1 on your telephone keypad now. You'll be placed into the queue in the order received. Please be prepared to ask your question when prompted. Once again, if you have a question, please press star then 1 on your phone now. Your first question today comes from Kyle Nixon with Canaccord. Please go ahead.
spk01: Good morning, Kyle.
spk06: Hi, Kyle. Hi, this is actually for Kyle Nixon. Good morning, everyone. Hey, Mark. So really good question from me. Just kind of on what you're seeing in terms of the claims process, it seems like, you know, you had a really solid quote on terms of revenue. I was just curious if it seems like the process has kind of been, you know, trending upwards towards that level that, you know, you were expecting to reach, you know, maybe a few quarters earlier. And maybe we'll have to talk to that. Thanks.
spk09: Yeah, I'll have Dennis flesh it out. But just at a high level, just a reminder that some timing here that the first time that lucid um dx lab our clear laboratory started submitting claims was at the end of the third quarter of last year so we really we've had two full quarters of claim submissions um since that process started so uh data is still early um where where we have a positive trajectory and i'll let dennis so flesh out any other details yeah the the claims collection continues to be choppy so that's why the predictive value um in terms of um
spk07: 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 and have taken steps to do so by changing our revenue cycle management company, which comes on board in the early part of June. And we think that will help us on many dimensions, particularly on the processing of any initial non-payment charges and processing them through the denial process.
spk03: process, which we believe will have a benefit in the second half of the year to accelerate payments. Got it. Thank you. Another question. I'm changing gears here. Looking at your your overall commercial strategy. It seems like these centers are are taking more of a spot in the limelight here. I was just curious if over time if this becomes possibly your one if not the you know
spk06: key revenue driver for, for the business going forward.
spk09: Yeah, I think that's, I think the, uh, important in answering that question to, to, to, uh, flesh out some of the details, uh, a little bit, just to be clear. Right. So the, the, the key factor is that we've decided to build a, uh, uh, a team of clinicians of nurse practitioners who are highly skilled at performing the cell collection procedure who have demonstrated in the published, um, in the presented results that I mentioned, uh, really outstanding rates of 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 these check procedures is just not viable. And so that is the model, as you described. 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 two to one, which is good. But the proportion of patients that are undergoing their cell collection procedure by one 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 spaces is also increasing. And all of that we see as a very positive direction and a really important sort of horizon that we're chasing because the – 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 a nurse practitioner extend over a substantially greater geography.
spk03: actually can include in areas where we have no physical location where if a practitioner comes on board, we can actually have the nurse practitioners travel to that location for the periodic lucid testing days at the office. So you're absolutely right, that is the trend. And I think we all will continue to have institutions and And specialists play a significant role. I think that balance is probably going to remain stable, but the model of having our own Some clinicians are on nurse practitioners who are highly skilled and effective, being the primary operator for the cell collection procedure.
spk06: One last one from me. So just looking at the LucidDx lab operations, 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, I guess I wouldn't say the apex, but like more or less kind of headed towards the peak of what we're 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 or do you think that the efficiency should continue to be reached? Okay.
spk03: Yeah, those are both great questions. Let me answer the DNA question first because one thing I didn't mention in my prepared comments was that That happened by accident. That happened because our team, once we took over the laboratory, made substantial improvements. improvements to the DNA extraction process. So that number, that 3% for the last quarter is a reflection improvement in the laboratory, but also a reflection of that really high 98% technical success rate. It's our nurse practitioner. 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. So the combination of essentially 3% or so of patients who don't have enough DNA and 2% who are unable to perform the actual procedure. Those are sort of stumbling high numbers for the type of, you know, for a requires a test. And so, yeah, there's always, it's never going to be 100% between those two. But if you add those two up, it's around 95. not only have a technically successful cell collection procedure, but also have sufficient DNA to run the assay.
spk01: that's a very, very high number.
spk09: And so, sure, I mean, could we extract another percent or two, but that is absolutely sort of at our goal and our target and, you know, for a test of this type is really outstanding. The turnaround time is, you know, a turnaround time of approximately a week is actually probably where it needs to be. There is a limit in terms of how Getting the turnaround time much shorter than that. The ESA-GARD assay has a variety of steps in it, some of which require hours and over multiple days. So getting it down to five or six days may be possible, but seven is just fine. And the reason it's fine is that this is an elective test. This is not an urgent test where some immediate action is required. is awaiting the result of that test like other tests would be. 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 our target, and our goal is really to maintain it. The goal is to maintain it at seven 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 200 samples in a day, which it had not been used to, and the lab's done a great job of absorbing not just a general increase in volume, but also those peaks.
spk01: A really good color.
spk03: Thank you very much. Yeah, thanks a lot. Great questions. The next question comes from Mike Mastin with Medium. Please go ahead. Yeah, thanks. So, good morning. So, I wanted 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 the firefighters in the quarter? Yeah. So we had just the first quarter, to reflect to just that one that we previously announced the San Antonio event, which was just under the I just don't know, 400 tests, right? So, we saw growth both in our organic numbers as well as our organic numbers. as well as our the testing events, the CYFT events. I just maybe I'll use this as an opportunity
spk01: to comment on this.
spk09: You know, we see, you know, 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 emphasizing, 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. 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, you know, we obviously expect to see a meaningful volume from the testing events as well, and they'll both be contributing to what we believe will be ongoing solid growth.
spk08: Okay, and then just following up on that, at those events, I mean, what's the expectation for getting paid for those tests? Is it, you know, more likelihood of getting paid versus your other distribution channels, or is it kind of similar?
spk09: 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 about two months ago. purely speculating and purely on a theoretical basis, you might 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 conjunction with these events, um, uh, has the potential, uh, although we don't know for sure, we don't have any, um, have a direct evidence of this yet to enter more, more quickly into, uh, 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 that, the kind of the random in the wild activity that goes off. So there is an opportunity there. We're quite cognizant of it. We're focused on it. We're, we are, um, um,
spk03: tailoring the way we engage with the entities that are sponsoring these events in a way to situate what you're suggesting, but way too early to say whether that will actually materialize in terms of how it translates into payments and into payment as well. Okay. Okay. And then as far as the that you've done to the I know you're you're trying to go through this company is in collect payment but you what we You sort of give up on trying to get paid for a test. You know, you know, Has any portion of that volume gone to date? Have you, you know, given up on any of those, written them off, or are you just continuing to try to collect?
spk09: I'll let Dennis flesh out some of the details, but the answer, I'm taking your question to mean on an individual claim, right? And the process by which an individual claim gets adjudicated is actually quite long. You know, you get submitted, there's all these back and forth about, you know, all the I's being dotted and T's crossed. And then often in the absence of a, there's two possible ways that I can proceed. One is is that if you don't have an in-network contract, you can still 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-network, where there is no out-of-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. It's a relatively small portion of those. 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 who've done this before that this entire process, going through the client submission process, getting on the radar of insurers, getting denied, going through an appeals process and all that, that actually all is sort of a positive experience that gets you traction. That whole history is important to get traction to actually engage to secure a network contract. So hopefully that answers your question.
spk07: Yeah, 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 I 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 of process.
spk03: But right now, that is all part of gaining value, gaining attention, and getting towards contracts. So we're not given up on any claims just yet. But later down the road, that probably makes more sense. Okay. 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. Correct. In conjunction with our. But.
spk00: Yeah.
spk03: Is that there. We outsource that, and they're obviously geared towards that. 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, you know, what's happening with individual pairs.
spk09: That's the reason we're looking to upgrade in this. Much more sophisticated in their processes.
spk08: Yeah, okay. Got it. Thanks.
spk01: Thanks, Mike. Thanks, Mike.
spk02: The next question comes from Mark Massaro with BTIG. Please go ahead. Morning, Mark. Hi, Mark.
spk10: Hey, guys. This is actually Vivian. I'm for Mark. Hi, Vivian.
spk00: Hi, Vivian.
spk10: Hi. Yeah, so I wanted to grab your thoughts on volume pacing for 23. It's probably safe to say sequential volume growth for the remainder of the year, but I just wanted your thoughts around ASP traction as well. Thanks.
spk09: Yeah, I'll let Dennis handle that.
spk07: We think it will continue to grow quarter to quarter. Last quarter, we did give a preview of the first quarter because we were within 17 days of the end of the quarter. This quarter is still unfolding. We're optimistic about that and optimistic about the balance of the year and what that represents in terms of total claims 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 quarters so far. But we're thinking that it continues to grow sequentially.
spk10: Okay, perfect. Understood. And then I 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.
spk09: Sure. Yeah. Nothing really new to report on that. As you hinted at, both Moldy X, the Palmetto MAC, as well as an Iridian MAC, which is the MAC that covers our laboratory in California, published final and effective local coverage determinations. These are foundational local coverage determinations that cover the category of tests within. And so that was
spk03: on my end of March. Thank you, Ted. So nothing to report on that front. No ongoing. activity there. What we're the process moving forward is one where we get efficient clinical utility data whereby we believe we achieve 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 requested to make it truly operational.
spk09: So the criteria are solid. They're very much focused on the newly published guidelines. And we believe that the clinical utility data is what we need in order to try to convert this to coverage, Medicare coverage for ISA card. But, you know, as is the case with, has been the case now for three or four years that we've been working on this, the activity with Medicare and with Moldy X and with LCD is very kind of, We hear it, we get a bunch of news, it's a flurry of activity, and then there's sort of a waiting period while you're collecting data or awaiting responses. So 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 that we will continue to get traction with the private payer side, and the private payers represent 90% of our total volume. So that activity is day-to-day. Medicare is basically awaiting the completion of our clinical utility, the publication thereof, and then subsequent steps from there.
spk10: Okay, awesome. Thank you. If I can just squeeze in one more, I guess on the commercial payer front, Can you just remind us on the number of commercial pay contracts, number of covered lives 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.
spk07: Yeah, I'll let Dennis answer those. So we have just under, I think it's 15 in-network contracts, secondary PPOs. the largest of which is Multiplan, that recently entered into a contract with us. You'll recall that they have 60 million consumers as part of their overall umbrella.
spk03: And we – the – The revenue collected in the quarter was $446,000. And the average claim, as indicated in the slide deck, was $14,000. And I was looking for my notes to do the division, but couldn't find it quick enough. I'm sure you can do that yourself. Okay, perfect. Thanks for taking the time. Questions? Thanks, Vivian. The next question comes from . Go ahead. Good morning, Ed. Yes. Hi, good morning. Yeah. Congratulations on the quarter. My question is,
spk05: This is on the check your food tube, you know, detection events. They seem to be very, you know, high value and relatively low cost events for you to, you know, get, you know, patient outreach. Have you considered making that your primary marketing event? And is there, you know, how hard or difficult would it be to expand these events, you know, exponentially across, you know, the country?
spk09: Yeah, 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 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 of time, we've gone from one to having completed half a dozen or so and having quite a robust profile. And now, as you can see from that map, 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 to other areas. So our commitment, our motivation, our determination to use this as a way to garner access to the e-cigarette test to as many people as possible is 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. That's not the way we're thinking about this at all. We're looking at all of the modalities, all of the ways, all of the methodologies for doing this. 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 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.
spk03: You only have to work with one physician or two physicians, and you can end up you know, hundreds of tests. But that doesn't take away from the importance of establishing this test as the standard of care for patients profile criteria and who are recommended for testing. And that will continue to involve driving adoption within the broader physician community. And maybe just one additional comment to further ...analysis... ...there. Ultimately... ...a good... ...of the patients who are our target population, are self-medicating, and as well as reimbursement
spk07: So our test centers will continue to have a prominent position as we do direct-to-patient advertising, that educational marketing to go after those patients will come through telemedicine. So all of these components are important. And 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 dimensions.
spk09: Yeah, just to close on that, I mean, the broader patient pool is large. We've talked about that repeatedly. It's at least 30 million patients, and we're not sort of segmenting that to some narrow group that we're looking to get. I mean, at the end of the day, the market opportunity here is across the board. And if you think about it, the number of the – we don't know for sure, but the proportion of those 30 million 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 is not going to represent the vast majority of those patients. The vast majority of those patients are either self-medicated, as Dennis said, and could be contacted directly or through their primary care physician or a specialist.
spk05: Great. Well, thanks for answering my questions, and I wish you guys good luck. Thank you.
spk01: Thanks a lot. I appreciate it.
spk02: As a reminder, to ask a question, please press star then 1 to join the question queue.
spk03: That's star then 1 to enter the question queue. Think operator, we can close out now.
spk09: So I'd like to thank you all for taking the time this morning. 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 regard. So his email address is nep.pavmed.com.
spk03: Thank you very much. Great day. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Disclaimer