Lucid Diagnostics Inc.

Good morning and welcome to the Lucid Diagnostics second quarter 2024 business update conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. Please note, this event is being recorded. I would now like to turn the conference over to Matt Riley, Lucid Diagnostics Director of Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. Thank you for participating in today's business update call. Joining me today on the call are Dr. Lishan Akhlaq, Chairman and Chief Executive Officer of Lucid Diagnostics, along with Dennis McGrath, Chief Financial Officer of Lucid Diagnostics. The press release announcing our business update and financial results is available on LUCID's website. Please take a moment to read the disclaimers about forward-looking statements in the press release. The business update, press release, and the conference call all include forward-looking statements, and these forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from statements made. Factors that could cause actual results to differ are described in the disclaimer and in our file to the Securities and Exchange Commission. For a list and a description of these and other important risks and uncertainties that may affect future operations, see Part 1, Item 1A, entitled Risk Factors in Lucid's Most Recent Annual Report on Forms 10-K, filed with the SEC, and any subsequent updates filed in the quarterly reports on Forms 10-Q and subsequent Forms 8-K. Except as required by law, Lucid disclaims any intentions or obligations to publicly update or revise any forward-looking statements to reflect changes in expectations or in events, conditions, or circumstances on which the expectations may be based, or that may affect the likelihood that actual results will differ from those contained in the forward-looking statements. I would now like to turn the call over to Dr. Leshawn Ackog, Chairman and CEO of Lucid Diagnostics. Take it away, Leshawn.

Thank you, Matt, and good morning, everyone. Thank you for joining our quarterly update call today. As always, I'd like to thank our long-term shareholders for your ongoing support and commitment. Our team remains singularly focused on driving this lucid enterprise towards its substantial commercial potential and to enhance our long-term shareholder value. I'm very pleased with the solid progress the team has made over multiple fronts during the past second quarter and in recent weeks. We are now fully armed with a complete body of outstanding clinical data and are poised to make our final push towards broad coverage and reimbursement to drive e-cigarette revenue and revenue growth. Let's start with some highlights, first on commercial execution. Revenue for the second quarter of 2024 was $1 million. That's flat relative to the prior quarter and up approximately 500% on an annual basis. eCigar test volume, as we previously reported, was 3,147 tests, which is a 31% increase on a quarterly basis and 44% annually. And that represents a record eCigar quarterly test volume. Our CYFT events continue to thrive. We held over 50 high-volume health fair events during the quarter. That's a 60% increase relative to the prior quarter. In partnership with the Fort Worth Fire Department, we held our first large CYFT event with upfront contracted payment. We've made solid progress in our direct contracting initiative, targeting benefit brokers, third-party administrators, and self-insured entities to offer e-cigar as a covered benefit. We also continue to make progress with our revenue cycle management processes, including prior authorization expansion, physician and professional society advocacy, and our pricing, as Dennis will describe in more detail, is holding with median out-of-network allowed amounts remaining near the Medicare rate. Some key strategic accomplishments. Again, as I stated earlier, we are now fully armed with a complete body of outstanding clinical data. Much of this has come in recently. We reported on the NVET-BE clinical utility study, which showed positive data with a 2.4-fold increase in the yield of endoscopy. And the BE1 clinical validation data, which was also just recently released, showing e-cigarette sensitivity of 88% and a negative predictive value of 99%. We'll discuss both of these studies in greater detail later. The previously released data from the Cleveland VA clinical validation study was published in a peer-reviewed journal, the American Journal of Gastroenterology, and showed similar e-cigarette sensitivity of 88% and negative predictive value of 99%. Last month, we held a productive meeting with the CMS Moldex program focused on e-cigar clinical data, and we look forward to submitting our data and working with the Moldex team to ultimately secure Medicare coverage. The American Foregut Society, a leading professional society focused on esophageal disease, published a formal statement that strongly advocated for commercial payer coverage of e-cigar to align with guidelines of biomarker legislation. This is a formal request. It was strongly worded, and we believe it will have an impact on seeking coverage from commercial payers. So for those of you who are new to the Lucid story, this is a few slides to provide you some background on our company. Lucid is a commercial stage cancer prevention medical diagnostic company. We're focused on early pre-cancer detection, and the mission is to prevent esophageal cancer deaths in a well-defined at-risk population. We have two technologies, ESAGARD, an esophageal DNA test, and the ESA Check Cell Collection device. The ESAGARD test is the first and only commercially available test that's capable of serving as a widespread screening tool to prevent esophageal cancer deaths through the early detection of esophageal pre-cancer. e-cigar performance is really unprecedented for a molecular diagnostic test. Here we show, compare the e-cigar performance in various categories compared to some comparable, some other early detection tests, including Cologuard, the colorectal stool test, and the Guidance Shield colorectal blood test, which was recently approved. And I say it's unprecedented really around its ability to detect pre-cancer and early pre-cancer. So you can see this is pooled data from multiple recent clinical validation studies that show 100% sensitivity for cancer, which compares very favorably to these other tests. Pre-cancer sensitivity, however, is 83%, substantially greater than the other tests and really any other test in this category. And then most notably, early pre-cancer sensitivity remains high at 86%, while other tests have no ability to detect early pre-cancer. Isagard even has a high sensitivity of 91% in the very shortest segments of disease, 99% negative predictive values, a very low false negative rate, and a positive predictive value of approximately 30%, which is comparable to other such tests. The commercial opportunity here is very large. There are a very well-defined population of approximately 30 million people in the United States who are at risk with chronic heartburn and are already recommended for pre-cancer testing. Medicare has established a rate of $1,938, and our out-of-network payments with commercial payers have held up. Pricing has held up in that range. So a very large addressable market, a lot of opportunity for us to generate revenue, substantial revenue, even with low levels of penetration. Our gross margin for the next test in the door at our current volumes is approximately 90%, which we believe will give us an opportunity to drive our business moving forward. We have a multi-pronged commercial strategy with multiple venues and multiple locations where patients can get access to our test. We have physical test centers now located in 23 cities. Our dominant approach right now is what we call our satellite lucid test center model, where our team partners with typically primary care physicians, and perform cell collection at the physician's office. And we also have physician practices who are building programs around, typically specialists who are building programs around the e-cigar test where they perform the test itself. We have a mobile test unit in Florida, which provides us with a good opportunity for visibility and marketing. And as I hinted at earlier, we have these large check your food tube, health fair type events. We've initially focused on firefighters, but we're expanding to other targets. We're starting to get some increased traction with larger health systems. These are longer lead times, but really are high value once we have programs in place, and we're looking forward to expanding our efforts in that area. So as previously noted, we had record quarterly test volume this past quarter. at just over 3,100 tests. Revenue has been flat compared to the last quarter. And this commercial activity has been with a flat headcount for sellers over the past couple of quarters and really a 30% decrease in the headcount compared to our peak in approximately the fourth quarter of 2022. So really, this represents an increase in the productivity of our sales force. On commercial execution side, let me first talk about our high-volume Check Your Food Tube pre-cancer detection events. As I mentioned earlier, we had over 50 such events during this past quarter. That represents a 60% increase relative to the first quarter of 2024. We're happy to note an important milestone where we tested our 4,000th firefighter recently, and we continue to have a very robust pipeline of events scheduled full through October. Direct contracting remains an important part of our near-term strategy, which we believe will meaningfully contribute to long-term revenue growth. We're deploying additional resources to this initiative, and we held, as I mentioned, our first large CYFT event where we received an upfront contracted payment with the Fort Worth Fire Department. This is a really important milestone. We'll increasingly seek to have guaranteed revenue from these CYFT events outside of the usual insurance claims process whenever possible. We are making solid progress targeting benefit brokers, third-party administrators, and other self-insured entities in our effort to offer e-cigar as a covered benefit to, in the near term, drive contractually guaranteed revenues.