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DATE
Thursday, Nov. 12, 2026
CALL PARTICIPANTS
- Vice President of Investor Relations - Matthew Riley
- Chairman and Chief Executive - Dr. Lishan Aklog
- Chief Financial Officer - Dennis McGrath
TAKEAWAYS
- EsoGuard Revenue -- $1.2 million, representing flat year-over-year performance as the company transitions its commercial model toward Medicare reimbursement.
- Medicare Reimbursement Rate -- $1,938.01 per test, established under the Clinical Laboratory Fee Schedule for claims adjudicated through the Novitas administrative contractor.
- October Test Volume -- 1,800 tests, marking a monthly record for the company and achieving 70% of the previous quarter's total Medicare volume in the first month of the new quarter.
- Total Test Volume -- 2,871 tests, reflecting a 4% sequential increase from the second quarter of 2026 and aligning with management's transitional targets of 2,500 to 3,000 tests.
- Cash Position -- $33 million on a pro forma basis, including $18 million as of Sept. 30, 2026, and $15 million in gross proceeds from a Series C preferred stock financing closed in Oct. 2026.
- Average Revenue Per Test -- $446 year to date, representing a 17% increase over the $383 average recorded for the full year of 2025.
- GAAP Operating Expenses -- $13.5 million, which included $1.5 million in stock-based compensation and represented a 6% sequential decrease from the second quarter of 2026.
- GAAP Net Loss -- $6.7 million or $0.03 per common share, benefiting from a $5.5 million noncash fair value gain on convertible debt.
- Non-GAAP Adjusted Loss -- $10.6 million or $0.06 per share, excluding noncash items such as stock-based compensation and financing-related fair value adjustments.
- Quarterly Cash Burn -- $10.2 million, representing the lowest burn rate in the last four quarters.
- Realization Gap -- $140 million in total billings since inception compared to $16 million in collections, highlighting the scale of the installed base of submitted claims currently outside of functioning reimbursement pathways.
- Billable Value -- $7.9 million, calculated from 2,871 tests performed during the third quarter at the company's list price of $2,750 per test.
- Insurance Allowable Amount -- $1,700 per test for adjudicated claims, representing a 19% increase from $1,420 in the second quarter of 2026.
- Convertible Debt -- $22 million, carrying a 12% interest-only rate over a multiyear term.
- Fully Diluted Shares -- 330 million shares, accounting for common stock, advanced shares, and conversion shares associated with the Series C preferred stock.
- Medicare Target Population -- 15 million patients, representing 50% of the 30 million individuals recommended for esophageal precancer testing by professional society guidelines.
- Non-GAAP Cost of Revenue -- $1.4 million, reflecting laboratory and manufacturing costs associated with test delivery.
- Non-GAAP Sales and Marketing Expense -- $4.9 million, focused on geographic positioning and data-driven routing of sales resources to target Medicare-eligible populations.
- Non-GAAP General and Administrative Expense -- $4.5 million, representing a sequential decrease from $4.7 million in the previous quarter.
- Non-GAAP Research and Development Expense -- $1 million, supporting ongoing clinical studies and product refinements.
- Significant Shareholder Interest -- 25% of the voting interest in the company is held by PAVmed Inc. together with the board and management, despite PAVmed no longer holding majority voting control.
- Adjudication Outcomes -- 39% of third-quarter claims resulted in an allowable amount from insurance companies, with denials driven by medical necessity determinations (21%) and out-of-network status (18%).
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RISKS
- Aklog stated, "seasonality is clear and the holiday the combination of the holidays at the end of fourth quarter is always a challenge for not just ours, but for all commercial teams," noting that year-end holidays can impact commercial momentum.
- McGrath stated, "Revenue for the majority of our claims is recognized when the claim is actually collected rather than when the patient's report is delivered, invoiced, and submitted," highlighting the risk and unpredictability inherent in out-of-network insurance collections.
SUMMARY
Lucid Diagnostics Inc. (NASDAQ:LUCD) reported the commencement of consistent Medicare payments for its esophageal DNA test, transitioning the company into a commercial phase focused on revenue growth and operational execution. Management stated that the Novitas administrative contractor confirmed coverage through claim-by-claim adjudication, allowing the company to accelerate commercialization without waiting for pending local coverage determinations. The company reported record test volume in October and is realigning its sales infrastructure to prioritize the Medicare-eligible population, which represents 50% of its target market. Strategic initiatives include expanding the department of veterans affairs pipeline and securing additional commercial coverage through laboratory benefit managers.
- Management reported that the Novitas administrative contractor reviewed the company's clinical dossier and professional guidelines, resulting in Medicare claims being adjudicated as reasonable and necessary.
- CEO Aklog stated, "Lucid's near-term growth now depends almost entirely on our team's commercial and operational execution," regarding the impact of secure Medicare reimbursement.
- Management expects by the end of the year to have five client health plans that have formally adopted the Concert Laboratory benefit manager coverage policy.
- The American Gastroenterological Association released draft guidelines naming the company's diagnostic tools as an alternative to endoscopy with a high certainty of evidence rating.
- CFO McGrath noted, "Medicare claims coming out of our Texas lab and submitted to Novitas for payment are now predictable enough to consistently recognize upon report delivery."
- Management confirmed that laboratory and manufacturing capacity for EsoCheck and EsoGuard are sufficient to scale with short lead times to meet projected commercial demand.
INDUSTRY GLOSSARY
- EsoGuard: A proprietary DNA test used to identify esophageal precancer and cancer in at-risk patients.
- EsoCheck: A noninvasive cell collection device featuring a swallowable capsule and inflatable balloon used to sample esophageal cells.
- MAC (Medicare Administrative Contractor): A private health insurer with regional jurisdiction to process Medicare medical claims.
- Novitas: The specific Medicare administrative contractor with jurisdiction over the company's Texas laboratory.
- MolDx: A program that identifies and establishes coverage and reimbursement for molecular diagnostic tests.
- LCD (Local Coverage Determination): A formal decision by a MAC regarding whether a service is reasonable and necessary and thus covered by Medicare.
- CPT (Current Procedural Terminology): A standardized code set used to report medical procedures and services for billing purposes.
- ICD-10: An international classification system of diagnostic codes used for medical billing and tracking.
- PAMA (Protecting Access to Medicare Act): Federal legislation that requires laboratories to report private payer rates to determine Medicare payment schedules.
- PLA Code: A Proprietary Laboratory Analyses code used specifically for identifying and billing proprietary medical tests.
- GERD (Gastroesophageal Reflux Disease): A chronic digestive disorder characterized by acid reflux, which is a primary risk factor for esophageal cancer.
Full Conference Call Transcript
Operator: Good morning, and welcome to the Lucid Diagnostics Third Quarter 26 Business Update Conference Call. Please note, this event is being recorded. I would now like to turn the conference over to Matthew Riley, Lucid Diagnostics' Vice President of Investor Relations. Please go ahead.
Matthew Riley: Thank you, operator, and good morning, everyone. Thank you for participating in today's business update call. Joining me today on the call are Dr. Lishan Aklog, Chairman and Chief Executive of Lucid Diagnostics along with Dennis McGrath, Chief Financial Officer of Lucid. The press release announcing our business update and financial results is available on Lucid's website. Please take a moment to read the disclaimers about forward looking statements in the press release. The business update press release and 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 filings with the SEC. For a list and a description of these and other important risks and uncertainties that may affect future operations, see Part I, Item 1A entitled Risk Factors in Lucid's most recent annual report. On Form 10-K filed with the SEC and in any subsequent updates filed on the quarterly reports on Forms 10-Q subsequent Forms 8-K.
Except as required by law, Lucid disclaims any intentions or obligations to publicly update or revise any forward looking statements to reflect changes in expectations or in events, conditions or circumstances on which the expectations may be based, or that may affect the likelihood that actual results will differ from those contained in the forward looking statements. I would now like to turn the call over to Dr. Lishan Aklog, Chairman and CEO of Lucid. Lishan?
Lishan Aklog: Thank you, Matthew, and good morning, everyone. Thank you all for joining us today and for your continued engagement and support. Last month, we announced a major breakthrough for Lucid, We announced that Medicare is now paying for EsoGuard. We believe this breakthrough represents a truly seminal moment in our mission to end the scourge of esophageal cancer. For the first time, Medicare beneficiaries nationwide have fully reimbursed access to our groundbreaking EsoGuard test. With this breakthrough, Lucid now enters a new and exciting chapter focused on commercial acceleration and revenue growth. For the first time, our pursuit of the massive clinical and commercial opportunity that EsoGuard represents will be mostly unconstrained by external factors.
And it will depend almost entirely moving forward on our team's commercial and operational execution. As we will discuss in more detail, only a few weeks into this new chapter, but so far, things are going very well. So, let's flesh out some of the details of how we got here. Our updated commercial strategy, and expectations for the fourth quarter and the New Year. First, I will do a little bit of a primer on Medicare coverage. Medicare claims for laboratory tests are adjudicated and paid by the Medicare Administrative Contractor, or MAC, with jurisdiction where the laboratory is located. Medicare's statutory standard for coverage and payment is reasonable and necessary.
So a test must be reasonable and necessary for a claim to be paid. Our Texas laboratory is in the Novitas, MAC jurisdiction. And this MAC operates outside of the MolDx Program. The adjudication and payment of claims submitted by this lab to the MAC is not dependent on the pending MolDx LCD. Late this summer, we introduced EsoGuard to the Novitas MAC. During a productive meeting with its medical directors and we informed them of our intent to begin submitting claims from the Texas laboratory. Following the meeting at their request, we submitted an extensive dossier. The dossier included our clinical evidence package, and supporting documentation, the manuscripts, the guidelines, and so forth.
The dossier incorporated their constructive feedback from the meeting. They acknowledged receipt and completed their review with no additional feedback. We, therefore, began submitting Medicare claims in late September and began receiving payments shortly thereafter. We have been consistently been paid on Medicare claims ever since. So what does this mean in terms of EsoGuard coverage? Means that the MAC with jurisdiction over our laboratory has reviewed our clinical evidence, and the professional society guidelines and it has adjudicated our Medicare claims as reasonable and necessary. Also means that EsoGuard claims now have Medicare coverage through claim by claim adjudication. The term coverage through claim by claim adjudication is a formal CMS term.
And it is worth noting, many people do not realize this, that the majority of all Medicare claims have their coverage determination through the same claim by claim adjudication process. What does this mean for the pending MolDX LCD? EsoGuard coverage through claim by claim adjudication by this MAC is completely independent of the MolDx LCD process. As we will discuss later, we remain engaged with CMS and are confident that the draft LCD will be published. They will complete the public comment process and become final and effective. What does this mean for our commercial trajectory? what is important to understand and what makes this a true breakthrough is that this coverage pathway allows us to immediately accelerate commercialization.
So we no longer have to wait for the MolDx LCD to become final and effective to do so. So in effect, what has been a marathon really now it is a sprint. As we will discuss in more detail we are moving quickly to leverage this EsoGuard Medicare coverage to accelerate commercialization nationwide. Let's dive a bit deeper on commercial execution starting with our target population and this commercial transition. As a reminder, the at risk population for EsoGuard testing consists of approximately 30 million patients who are recommended for esophageal precancer testing by professional society guidelines. We know that approximately 50% of these 30 million patients are of Medicare age.
Approximately 10% to 15% of the 50,000 EsoGuard tests that have been performed to date have been on Medicare beneficiaries. With EsoGuard now fully reimbursed by Medicare, we can now seek to offer this test much more broadly to the entire at risk Medicare population. So with Medicare reimbursement secured, we immediately and aggressively transitioned our commercial to focus on access to EsoGuard in the Medicare population. We have already implemented numerous changes to our commercial efforts, focused on patient identification and partnering with local physicians. These include geographic positioning of our sales and clinical resources, updated comp plans, data driven routing, a number of creative programs to find and engage with at risk Medicare patients.
Really excited to report that these efforts are very quickly bearing fruit. Just 6 weeks into the transition, we are seeing very strong early momentum. Our messaging with providers on the importance of offering EsoGuard testing for their Medicare-- to their Medicare patients is resonating. They get it. These patients are at higher risk, and will benefit the most from esophageal precancer testing. The patients also get it. We educate them that heartburn can lead to cancer and on the value of our simple 1- to 2-minute office precancer test. October was a record month for test volume. The team is now laser focused on converting this great start into a really strong quarter.
Over the past 6 weeks, Dennis, Matthew and I have frequently been asked whether our growth is limited by capacity in any way. it is not. We have plenty of lab capacity, including at our Texas lab. And that capacity is scalable with short lead times. The same applies to our manufacturing capacity for both EsoCheck and the EsoGuard collection kit. Our clinical specialist team is also well positioned to support this transition, and they can scale as needed. Thanks to our recent $50 million financing, we believe we have sufficient runway to drive commercial acceleration and revenue growth.
The next most common question that we are asked is how fast can you scale commercial activity to take advantage of this significant revenue opportunity? The answer to that is that we plan to be aggressive but responsible. Dennis will dive in a bit deeper on the near term revenue opportunity simply based on closing the realization gap at our current level of activity. In terms of our sales infrastructure, we currently have approximately 30 sellers in the field. We are confident that we can drive near term growth by driving productivity through the efforts we have already implemented in the past few weeks.
Future sales infrastructure growth will be responsibly calibrated based on the near term revenue trajectory that we see. Let's now move on to a broader update on other aspects of our business. Starting with CMS and the MolDX LCD. As I mentioned, we continue to wait for publication of the draft MolDX LCD. We remain engaged with CMS on the status of this LCD given the persistent backlog of MolDx LCDs. We held a formal meeting with CMS leadership this past quarter to discuss our pending MolDX LCD request for reconsideration. And based on that meeting, we remain confident that the draft LCD will be published when the backlog begins to clear.
And that it will complete the public comment period and become final and effective. We also announced 2 important billing and coding milestones. A new Category 3 CPT code for an ICD-10 diagnosis code linked to a positive EsoGuard test was also issued. The ICD-10 code gives physicians a dedicated way to document the need for follow-up endoscopy after a positive EsoGuard result. You may seem a bit mundane compared to Medicare reimbursement, but they serve a very important role making EsoGuard and EsoCheck easier to bill and track and integrate into clinical practice. Turning to commercial coverage. Our focus on Medicare reimbursement commercialization has in no way detracted from our parallel efforts on the commercial coverage front.
Concert Laboratory benefit manager, EsoGuard, coverage policy that we announced last quarter is bearing fruit. We expect by the end of the year to have a total of 5 concert client plans that have formally adopted it. Including the 3 that we previously reported last quarter. So effective next month, this concert coverage policy and the plans associated with it will actually translate into nearly all commercial lives in the state of Minnesota being covered, and we intend to apply our commercial strategy accordingly. Our overall commercial payer pipeline remains very active, and we expect further coverage policy wins this quarter and into the new year.
We also notched 2 additional wins that will be important in the years to come. The American Gastroenterological Association or the AGA has formally released for public comment its draft updated guidelines for esophageal precancer, Barrett's esophagus, diagnosis and management. We were happy to see that EsoGuard and EsoCheck are named as an alternative to endoscopy and rated as a high certainty of evidence. that is very significant relative to prior guideline publications. We are the only commercial available test that is cited in these guidelines. The draft guidelines remain subject to final publication, However, the AGA and the ACG guidelines remain critical in our engagements with both physicians, health systems, and, obviously, with payers as well.
And finally, quick update on the VA. Our VA work continues to progress. Our engagement with dozens of systems and their physicians remain strong. In the end, what we are learning is that each VA is effectively a separate health system, and we are learning to navigate and streamline the steps to translate this engagement into clinical and commercial activity. Happy to report that our first 2 VA programs are up and running. We have a robust pipeline of other centers behind them. We continue to have a dedicated strategic accounts team that is focused entirely on the VA. And we continue to expect the VA to be a meaningful long term contributor to our overall commercial activity and revenue.
So before handing the baton over to Dennis, let me leave you with Medicare reimbursement has changed what is possible for Lucid. Opportunity ahead is enormous, and I can assure you that our team is approaching it with the urgency and the determination that it deserves. So with that, I will turn it over to Dennis for the financial update.
Dennis McGrath: Thanks, Lishan, and good morning, everyone. The summary financial results for the third quarter were reported in our press release that has been distributed. On the next 3 slides, I will emphasize a few key financial highlights from the third quarter, but I would encourage you to consider these remarks in the context of the full disclosures covered in the quarterly report on Form 10 Q. With regard to the balance sheet, cash at quarter end September 30 was $18 million As you know, subsequent to quarter-end on October 21, closed a $15 million Series C convertible preferred offering which brings our pro forma cash position to approximately $33 million.
Our burn for the quarter was $10.2 million the lowest of the last 4 quarters. The average burn rate for the last 4 quarters including cash interest on debt was $11.6 million per quarter. Our $22 million secured convertible debt is a 5-year note, interest only at 12% and is held by long term shareholders. The fair value on the notes at quarter end was $17.3 million which is down from $23.5 million at the end of the second quarter. About $5.5 million of that decrease is a mark to market adjustment moving in parallel with our common stock price between the periods And it is substantially all of the $5.6 million of other income reflected in the P&L.
This is a noncash accounting item. It does not change the principal we owe. And also note that upon issuance of the Series C, the conversion price on those notes reset from a $1 to 35.19 cents, the Series C conversion price. With regard to share count, GAAP shares outstanding as of September 30 were 191 million, which is on the face of the balance sheet in the 10 Q. On a current basis, including unvested restricted stock awards and the 3.6 million shares we issued out of advance in October, the figure is approximately 207 million That leaves 18.7 million shares still in advance under certain investors 4.99% ownership blockers.
At present, PADMED continues to be the single largest common shareholder of Lucid holding 31.3 million shares or about 15% of the common shares outstanding. Although PAVmed no longer has voting control, PAVmed together with the board and management still have considerable influence with approximately 25%. Voting interest. Let me spend a moment on the Series C. Since it closed after quarter end and is the most significant item in our subsequent events footnote. We sold 15,000 shares of Series C convertible preferred a stated value of $1000 per share for gross proceeds of $15 million. The investors include holders of a majority in principal amount of the secured notes.
In other words, the people who know this company the best put more money in. The economics, the conversion price, as I mentioned, was just over 35¢. So the stated value converts into approximately 42.6 million common shares. Preferred carries a 20% annual dividend, but is payable in stock, not cash. A fixed 5% of the conversion shares each quarter beginning December 30 first of this year and running through 03/31/2030. Putting that together at present on a fully diluted basis, approximately 330 million shares not including the 12 million stock option significantly out of the money. But including the notes for the advanced shares and the Series C conversion shares.
With regard to the P&L, this slide compares this year's third quarter to last year's third quarter and year over year on certain key items. Trust you will review the information and my comments in light of the cautionary disclosure at the bottom of the slide about supplemental information, particularly non GAAP information. Our sales team sold 2870 tests in the third quarter with a billable value of approximately $7.9 million resulting in recognized revenue of $1.2 million. Volume was up about 4% sequentially and about 1% over last year's third quarter. And sits comfortably within the 2500 to 3000 range we had been targeting in this transitional reimbursement period.
Of course, the fourth quarter update on Medicare payment with Novitas will begin to change that. Revenue of $1.2 million is essentially flat with the $1.2 million we reported last year's third quarter and down $1.5 million in the second quarter. I want to be direct about what drove that sequential change because it is almost entirely 1 item. Direct contracting. We delivered 517 direct contract tests in the second quarter and 60 in the third. The change is mostly just event timing with the fourth quarter picking back up to historical levels even with the commercial team largely focused on chasing Medicare patients.
Direct contract billings are fixed and determinable, they are recognized on delivery and a flow straight through to the revenue in the period. Setting that aside, our insurance based revenue was modestly higher quarter over quarter, and the quality of what we are collecting improved, and I will come back to that. If you look through the quarterly noise, the underlying trend is better than the headline Revenue per test sold, is $446 year to date. Against 383 for all of 2025. A 17% improvement. The third quarter came in at $419 per test. Essentially in line with the $426 it did in last year's third quarter and ahead of the $3.95 in the first quarter of this year.
The second quarter is $532 as an outlier, and direct contracting is why. Medicare test volume for the third quarter represented about 16% of that third quarter mix. About 450 tests. In just the first month of the fourth quarter, our commercial team already achieved nearly 70% of that Medicare volume and they are just getting started. Furthermore, October test volume for all patients, both Medicare and non Medicare, achieved a record monthly level for the company at more than 1800 tests in just the first month of the fourth quarter. With new investors once again joining our call, it is worth repeating what we have communicated in the past quarters about revenue recognition.
The key determinant of how revenue is recognized at this point in our reimbursement journey is the probability of collection. Because we have been and still are in the transitional stages of our reimbursement process. Revenue for the majority of our claims is recognized when the claim is actually collected rather than when the patient's report is delivered invoiced, and submitted. As you will see in our 10 q, this is called variable consideration, in line with ASC 606, the accounting jargon. And presently, there is insufficient predictive data to reflect revenue from all of our quarterly test volume at the point the report is delivered. To the referring physician.
For billable amounts contracted directly with employers, That are fixed and determinable Revenue is recognized when our contracted service is delivered. What is now changing that picture is the Medicare reimbursement breakthrough with our Texas lab and Novitas Medicare payments that have begun consistently in mid October. Medicare claims coming out of our Texas lab and submitted to Novitas for payment are now predictable enough to consistently recognize upon report delivery. And a reminder that Medicare represents approximately 50% of our addressable patient population. With regard to the remainder of the P and L total operating expenses of $13.5 million were down approximately 6% from $14.3 million in the second quarter.
On a non GAAP basis, operating expenses were $11.8 million versus $12.3 million. The non-GAAP net loss per share of $0.06 in the third quarter is level with the second quarter. And I would point out that our GAAP loss per share of $0.03 versus $0.08 last quarter benefits from the noncash fair value gain I described a moment ago and I encourage you to look at the non GAAP figure in the operating trend. Next slide. With regard to operating expenses, this slide is a graphic illustration of our operating expenses after eliminating noncash expenses for the periods reflected. Non GAAP operating expenses of $11.8 million are below the average of $12.4 million for the previous 4 quarters.
The composition this quarter was $1.4 million of cost of revenue $4.9 million of sales and marketing, $4.5 million of G&A, and $1 million of R&D. We are holding operating expenses steady. While initial Medicare volume grows, which will be beneficial to our burn rate. But we are standing at the ready to pour additional resources into our commercial efforts as the Medicare test trajectory is more certain. And we are pretty optimistic based upon the early results so far. Let me close with a few reimbursement highlights for the third quarter. In the third quarter, as we mentioned, we sold 2870 tests, reflecting about $7.9 million in pro forma revenue at our list price of $2750.
During the quarter, we recognized revenue of about 15% of that amount or $1.2 million. Looking at the claims with third quarter dates of service, and these figures are as of beginning of this month, about 78% have been adjudicated. Of those adjudicated, 39% resulted in an allowable amount from the insurance company. The number I would point you to is the average insurance allowable amount for successful claims itself, which is $1700 per test in the third quarter, up about 19% from $1420 in the second quarter and ahead of our year to date average of $1600. This is the clearest financial evidence I can give you that the mix of what we are getting paid for is improving.
Of the claims that were denied, the mix is more evenly spread than it used to be, roughly 21% deemed not medically necessary or investigational. 18% out of network, out of network provider, 17% from noncovered routine screening exams, and 17% requiring additional documentation and prior authorization. And on Medicare, During the third quarter, we began submitting claims for EsoGuard tests performed at our Texas laboratory. The first payments from Novitas arrived in October. At EsoGuard's established clinical laboratory fee schedule rate of $1940 per test under the PLA code 0114U. Every Medicare claim allowed to date has been allowed at the full rate.
That is a fourth quarter event, and it is the single most important development in the company's commercial history. 1 last piece of context on scale. As Lishan mentioned, we have now performed more than 50,000 EsoGuard tests since inception, reflecting more than $140 million billings. Against approximately $16 million collected to date. That realization gap is only part of the opportunity in front of us. It is not a receivable, and I am not forecasting but it is the installed base of submitted claims at a functioning reimbursement pathway that lets us build upon. With that, operator, let's open it up for questions.
Operator: Thank you. Ladies and gentlemen, we will now begin the Q&A session. Should you have a question, please press star followed by the number 1 on your touch tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the calling process, please press star followed by the number 2. If you are using a speaker phone, please lift the handset before pressing any keys. The first question comes from Kyle Mikson from Canaccord. Please go ahead.
Kyle Mikson: Congrats on the progress. Can you talk about. Hey. Can you talk about the.
Dennis McGrath: In the test in October, 1800 can you talk about how many were paid and how can we arrive at a revenue assumption?
Lishan Aklog: Thanks. Yeah.
Dennis McGrath: So the payments are progressing, and the first payment in October was at test filing for Novitas, which came through clear. And we will give that update as we continue to move forward here.
Lishan Aklog: So Hello, Kyle? Helen?
Operator: Operator, is Kyle still there?
Lishan Aklog: Helen, Kyle? Are you still there?
Dennis McGrath: Maybe put him back in the queue.
Lishan Aklog: Yeah. Thank you.
Dennis McGrath: All right.
Operator: Thank you. The next question comes from Mark Massaro with BTIG. Please go ahead.
Lishan Aklog: Hi, Mark.
Mark Massaro: Hey, guys. Congratulations on the quarter and for the important goal of getting paid by Medicare. This is very significant. I wanted to start actually with the volume So I am really interested in that record month number of over 1800 tests in October. I think, Dennis, in your prepared remarks, you indicated that Q4 you may begin to change the trajectory of the 2500 to 3000 quarterly number. You know, I am also looking at the calendar, and I see Thanksgiving and Christmas coming up.
So I wanted to just try to level set if we could figure out it looks like you will probably be able to clear 3000 tests in Q4, but I wanted to get a gauge as how you are thinking about seasonality in Q4 and what that run rate might look like going forward.
Lishan Aklog: Yes. Look, Mark, I mean, I think as you noted, seasonality is clear and the holiday the combination of the holidays at the end of fourth quarter is always a challenge for not just ours, but for all commercial teams. So I would really look at the October number. The reason we wanted to highlight it was that it is just sort of a reflection of the. Of a of a great start here. So we do expect.
You know, we really do expect a very solid fourth quarter, but it is probably too premature to kind of extrapolate from that number in terms of how things will play out for the rest of the year for the rest of the quarter. But we will just leave it at the great start. We expect both the combination of that trajectory with regard to the volume as well as the sort of the rapid and consistent payments from on the Medicare side really bode well for this quarter.
Mark Massaro: Okay, great. And then of the 30 people you have in the field, are substantially all of them now focused on Medicare age folks or how are you guys thinking about the plan of attack here? You know, whether it is by state, or by clinic size or clinic patient type? How should we think about the way that you are going to the market right now?
Lishan Aklog: Yeah. So we did attack it directly and fully. So everybody, the entire team, the entire sales team except for as we mentioned there, we do have some targeted efforts at the VA and some targeted efforts with regard to health systems.
But our regular sales team is all under the same construct, under the same paradigm, which is to engage with the physician community and their local health systems and really tailor their message to encourage offering EsoGuard to the Medicare population, because, as I mentioned, and this has become we have already learned this is actually a very straightforward message that resonates with the physicians because the Medicare population is at the highest risk and represents the majority or at least half of the patients who are targeted. So it is actually quite universal across the entire sales force.
Now, of the things that you mentioned with regards to targeting and allocation of resources regionally, sure. that is ongoing. it is data driven. And we continue to look for areas where we think there is a high likelihood of there being patients and physicians that would fit within this strategy. Historically, we have always had stronger concentration of our commercial team in areas that happen to have larger elderly populations such as, you know, Arizona and Florida. And so it is a kind of a natural transition from that.
Mark Massaro: Okay. Great. And then you know, you have done over 50,000 tests Obviously, you have not been paid on all of them. Now that you are getting paid by Medicare,, how are you thinking about the claims that you have not been paid on? Are you planning to submit those that were previously rejected to Novitas, or are you perhaps waiting on the LCD to be finalized?
Lishan Aklog: So the submission of a claim has to happen where the laboratory. At the at the lab, from the laboratory that performs the test issues to report. So there is no sort of mixing and matching those 2. The issue of the backlog of claims of tests that have been performed at the California lab within the Noridian jurisdiction, will ultimately depend on when the LCD is issued. Right? So when the when the LCD is issued, there will be a 1-year back for the. For a test that had been performed there. Now you know, from this moment on, that number will decrease depending on when the LCD arrives. Because Medicare claims are being submitted.
To are being processed right now in the Texas laboratory and being submitted to Novitas. So it really depends on when the LCD is issued. If the LCD is issued, tomorrow, then that will go back the full year. If the delay continues, then the 1-year look back will, you know, will overlap with the period of time during which we are getting paid by Novitas. Okay. that is great. Let me just add 1 other thing, and maybe. Let me add 1 other thing. Maybe Dennis can concur. At the end of the day, the.
That in an era that we believe we are in this chapter that we believe we are starting on where we believe we can drive revenue growth that backlog will represent a smaller and smaller proportion of and be somewhat less relevant. You agree, Dennis?
Dennis McGrath: Yes. Agree. Yeah.
Mark Massaro: Okay. And maybe 1 last quick 1. You know, the concert was significant. There are some other lab benefit managers I am curious if, since you have announced getting paid by Medicare, has that has that been a little helpful as you are engaging commercial payers?
Lishan Aklog: I would not say. it is a little too early to just I think the. Actually, the bigger factor as it relates to our engagement with the other laboratory benefit managers, but some of the larger ones, actually relates more to the Concert. Policy. So getting the first LBM under our belt does, in fact, has changed some of the dynamics with regard to our conversations with some of the other RHLBMs, which have been moving forward, but it is certainly a helpful part of the equation. There are certainly plans and even LVMs that have held out and sort of been waiting for Medicare. Coverage, and that may we may see that.
But the more important thing is having starting to get some commercial plans under our belt through that LBM. Another thing which I think actually could kick in as volume grows, and we know this once, it is sort of an interesting dynamic between the LBMs and the individual client plans, right? The plans are clients. And we have noticed we have had a couple of examples that are encouraging where the utilization within a particular geographic plan has gone up. And the plan has gone to the LDM and said, hey, we are we are getting a lot of claims from this particular on this particular test.
We would rather be in network, and it has encouraged the LDM to push forward on a coverage policy. You see 1 very encouraging example of that. Fantastic.
Mark Massaro: Thanks. For all the time, guys.
Dennis McGrath: Yeah.
Lishan Aklog: Thanks, Mark. Appreciate it.
Operator: Thank you. The next question comes from Kyle Mikson with Canaccord. Please go ahead.
Dennis McGrath: Kyle, welcome back. You dropped before I gave you a fulsome answer to your question about collections. Let me give you a little bit more color to that 1. So Novitas is consistently paying on a week in and week out basis, and sometimes twice a week. So the Novitas claims, are predictable.
And I gave you a little bit of a glimpse of what that was of the 1.8 thousand-test mix in October when I indicated that we had already, in October, did about 70% of what we did the entire previous quarter. that is over 300 Medicare The mix of the 1800 is across 3 pools here: direct contracting, which will get paid when the reports are delivered within a reasonable period of time. Novitas, which will get continue to pay as that momentum continues to build through the quarter. what is left in the middle is normal submissions to all of the other carriers.
And that is the 1 that is less predictable, but I will give you an indication that in October, we have had a record collection month in 1 of our weeks. Is that predictable going forward? We are still developing those statistics, but the early collections in October are very encouraging in terms of what that will represent in terms of recognized revenue knowing that 2 of the 3 buckets Novitas and the direct contracting, will contribute definitively to that total. And the unpredictable piece is the 1 in the middle where it is just submitting to insurance companies out of network, and we are beholden to what that collection is.
Now I also will tell you that most of the deductibles and co pay components that are influential in the first quarter of a year are largely satisfied, and that will you know, be to our advantage in terms of total collection for that third bucket. Alright.
Kyle Mikson: Awesome. Thanks, Dennis. Yeah. Sorry for dropping before. I guess-- and I know that will make sense. And, you know, I wanted to ask about the you know, the CLFS kind of update recently, and we will get finalization soon. So EsoGuard is part of this gap bill process given there was not enough commercial claims. Or medical claims either. Is there a chance. Or maybe just. Can we just kind of walk through the process there and the chance that maybe you are not granted the same $1940 rate, and especially amid this, you know, this new facility, Texas lab, and a lot of stuff. So maybe just some clarity there.
Lishan Aklog: Yeah. The process is obviously fast moving and a little bit maybe complicated for others. Are not in the weeds like you and I are to follow. But let me try to make it a bit simple. This you are referring to, just for others on the call, a panel meeting that was held a bit over a month ago that relates to this PAMA reporting and repricing. We are in an interesting situation in that we were under the LCD and therefore did not have the sufficient Medicare claims to be reportable laboratory.
But if we had reported, we our reporting numbers would have been fine and would have been consistent with that rate. it is really a fast moving process. As you know, the preliminary determinations have come out. The final determination will be out later in the year. We are in active discussions with CMS, and we are quite confident that our pricing will be preserved.
Kyle Mikson: All right. Great. And then just last 1. The--you know, how are you thinking about Salesforce additions investment next year? So is there a run rate, like, volume level that you think you want to hit that, and then you, you know, start kind of being really added to the team, or just how you are thinking about. and what makes sense for it given it is too early with it.
Lishan Aklog: Yeah. I think it is a little too early. So I think what our primary focus in this quarter and heading into the New Year, and this will this will change rapidly once we have sort of a few data points in that trajectory, is taking our existing team and shifting them towards this new paradigm and driving productivity within our current team. We continue to remain sensitive to our OpEx and our burn rate, and we would love to see a revenue trajectory that can drive that burn rate down in the in the immediate term. So we think we can drive volume. We think we can drive revenue with our current team.
Simply through this through this transition and by increasing productivity. And increasing the percentage of our total volume that is represented by Medicare from, you know, the historic 10% to 15%, certainly and hopefully quickly up to the 50% that the target population represents and perhaps even higher than that. So, we will go through that process. That process, we may go through that rather quickly before we and see how that revenue trajectory looks and the associated, obviously, volume trajectory. And then, you know, fairly soon, we will be in a position to determine when it makes sense for us to start ramping up the sales team. We are not we are not shy about that.
We are happy to be aggressive about it, but certainly, we are going to be responsible with regard to that with a close eye on our OpEx and our burn. And not put ourselves in a position that other companies certainly found themselves in where they got ahead of themselves. In terms of dialing up infrastructure.
Kyle Mikson: Got it. Okay. Yeah. That makes sense. Sorry. I will just hop in. Thanks, guys.
Lishan Aklog: Great. Thanks. Mhmm.
Operator: Thank you. The next question comes from Mike Matson with Needham. Please go ahead.
Lishan Aklog: Yes.
Mike Matson: Thanks for taking my questions. Hey, guys. So, just, you know, obviously, great news on the situation, the fact you are getting paid for Medicare now. But I am just curious, is there any kind of trade offs or drawbacks of using going to the Novitas route versus the Palmetto MolDX route? I know you are still hoping to get that with time, but or is it basically equivalent at this point?
Lishan Aklog: Yeah. No. there is no downside. I mean, I would just really view this, you know, a very straightforward way. We have 2 laboratories. 1 is in the Noridian jurisdiction with, which is a multi jurisdiction. We have a lab in Texas that is in the in the Novitas jurisdiction, which is outside of MolDX. The Texas laboratory is submitting claims and getting paid, so we have effective Medicare coverage on by claim-by-claim adjudication for that laboratory. And we are expecting, I would say more than hope, we are based on the meeting that we described with CMS we absolutely expect to get the LCD completed.
And published through a draft, through a comment period, and ultimately to be final and effective. We have every expectation to do that. We are now, as I mentioned, very confident that the delays are related to the administrative backlog at MultiX, including having been exacerbated by a change in leadership there. So would just encourage you to view them as 2 completely separate things. How it ultimately plays out over the. This the long term, you know, over the years, you know, that is to be determined, but that is really not our focus at this point.
Mike Matson: Okay. Understand. And then when you get the Palmetto MolDX coverage, do you expect to continue to operate both labs? Are there advantages to having 2 labs? Or would it make sense maybe to consolidate into 1 location or the other?
Lishan Aklog: No. I think I think we do view the you know, we opened the second laboratory several years ago as it relates to just having dual sourcing. Right? And we feel better about the fact that we are we are we are we are sourced with regards to capacity. It turns out that having it in 2 jurisdictions is helpful at this immediate point in time. But look, this is a large market opportunity. We expect over the long term to have substantial growth, and we need additional capacity.
So operating that in 2 laboratories has certain attractions to it that at this point I would argue, I would say that it is likely that we would maintain both of them and there would be no need to consolidate that. We will be able to use that capacity over time. Okay.
Mike Matson: And then other good news is the Category 3 CPT code. But my understanding is that those generally are not associated with payments. They are more of a tracking code. So you know, how important is it that there is ultimately a payment there for the physician that is doing the collection and you know, when do you when would you see yourselves getting a category 1 code, I guess, that would have a payment. Yeah.
Lishan Aklog: Yeah. You nailed it for those who are not sort of nerds about CP. About how CPT codes work. So the entire purpose of seeking out the CPT code was not to provide a payment pathway for the cell collection procedure. We view the cell collection procedure really no different than a phlebotomy, frankly, as it relates to other tests. it is something it is not sort of central to the overall economic path here and to the value proposition to any of the stakeholders involved here. The reason we pursued this code, which you correctly described as being a tracking code, is for the purposes of is that it really facilitates our ability to engage in health systems.
So when you go into a health system and put a product on the shelf, and have a procedure associated with it, there is sort of an expectation that there is a code associated with that procedure so they can track it so forth. it is not in any way designed to try to garner additional reimbursement. That reimbursement, even if we saw it a reimbursable code that was associated with payment would be a drop in the bucket relative to the economics of the overall test Okay.
Mike Matson: Understand. Thank you.
Lishan Aklog: Yeah. Great. Thanks, Mike.
Operator: Thank you. The next question comes from Jeremy Perlman with Maxim Group. Please go ahead.
Lishan Aklog: Jeremy, good morning. Hi, Jeremy.
Dennis McGrath: Helen, Jeremy.
Operator: I am ready to put him back in queue. Alright. Thank you. The next question comes from Ed Woo with Ascendant Capital. Please go ahead.
Ed Woo: Good morning. Good My question is as the with the expected ramp up in test volume, do you see margin and you know, opportunities for better operating leverage?
Dennis McGrath: So at the $1940 just call it, let's say, $2,000 test volume, the next price. Yeah. The next patient in the door contributes about 90%. And just to be more specific about that, you know, the cell collection device, EsoCheck, costs us under $60 to make and will go down in volume. So that will add some incremental margin. Process and test through the laboratory is roughly $120. That will go down over time as volume picks up as well. So there is opportunity. But when you do the simple math, next patient in door is 90% margin.
So it gives us you know, lots of opportunity to you know, grow the Salesforce and at the same time, not increase our burn rate dramatically. And that is why we are being judicious about that. Productivity first in the Salesforce then increase if we clearly have the capability to increase. But we will do so in tandem with decreasing our burn rate in the rush to get the cash flow breakeven.
Ed Woo: Great. Thanks for answering my questions, and I wish you guys good luck.
Dennis McGrath: Thank you. Yeah.
Lishan Aklog: Thanks, Edward.
Operator: Thank you. The next question comes from Jeremy Perlman with Maxim Group. Please go ahead.
Dennis McGrath: Sorry.
Lishan Aklog: Okay.
Jeremy Perlman: So just firstly, maybe you could help us understand why there seems to be such a seemingly disparate path to coverage between the different MAC areas? And is there-- if this is-- if you are-- wait. If this does not LCD currently, is there any risk that it could get pulled or someone down the line can decide, you know, maybe we have to reevaluate Whereas if the. If you get that LCD, it is pretty much, you know, set in stone more or less?
Lishan Aklog: Yeah. So, yeah, look. This is this is the fragmented world we live in. Right? That of all the max a portion of the max operate under the MolDX program, are participators of the MolDX program and other MACs including a large 1, in this case Novitas does not. And that is just sort of the current different landscape, right? The fact is that are moldy. If you are operating. If you are within a moldy expert. If your laboratory is within a moldy participating MAC, you are not allowed to submit claims during that until an LCD is final and effective.
And so the disparate nature of that is just simply a function of the fact that the MolDx program functions under a subset of the a subset of the max. Second part of your question is, no, we do not really have any concerns about what you described, which is that the there would be effectively a non coverage LCD that would come in and change the dynamics within Novitas. And the reason for that is that, and this was clear from our engagement, the our clinical evidence package, with clinical validity, clinical utility, clinical validity, existing guidelines, and guidelines that are about to be substantially upgraded to a high certainty of evidence with the American Gastroenterology Association.
And as was evidenced in the CAC meeting for the LCD, there really is no controversy with regard to the underlying clinical evidence and support of this test and in support of the fact that this test is reasonable and necessary within the Medicare population. We believe that is a settled fact and that the LCD process is just bogged down by administrative delays. And you know, do not just believe that. We have been given every reason to believe that. And so the fact that the process within Novitas is simpler because of outside of the MultiX program is obviously something that is worked in our favor.
But you know, we think the fundamentals underlying this are incredibly rock solid. So it is not a concern of ours.
Jeremy Perlman: Okay. Understood. And then just last question. You know, I know you talked about some of the, you know, the targeting efforts to focus on the Medicare population. Is there anything that is a little outside the box? I used to you hosted those events for high risk populations for the firefighters. Is there something maybe in the pipeline to do that for similar maybe you know, retirement communities? And, like, you. I know you said focused in Florida, Arizona, but any other type of strategies you are gonna be using to really. Or maybe run You also in the past had run Lucid. Lucid testing centers, maybe, you know, set those up. Any.
Anything outside of the normal just sales teams going after the physicians? We could think about?
Lishan Aklog: Are you looking for a sales job, Jeremy? Just kidding. The answer is yes. Obviously. You know, 1 of the things that 1 of the things that, we have not. We have been. You know, our team has been working incredibly hard over the last 4 years coming up to this point. And so there is a substantial amount of sophistication and institutional knowledge about how to navigate all the various scenarios and ways to identify patients. Right? At the end of the day, you know, what I tell our team is this: at the end of the day is about identifying patients.
Obviously, we are trying to build a commercial enterprise here and grow commercial enterprise, but if that is in furtherance of just getting patients access to this incredible technology. So the mission is to go find these patients and find them and buy whatever means necessary. And as you sort of already hinted, there are a lot of creative ways to do that, and our team is incredibly creative in their ability to do that. All of those methods are on deck. Ultimately, direct to. Direct to patients, so called direct to consumer efforts, are you know, will be will play an important part of this.
So this is a very creative team, and they have already. we are already well on our way with regard to many of the pathways that you discussed.
Jeremy Perlman: Okay, great. Thank you for taking my questions.
Dennis McGrath: Yeah. Great.
Lishan Aklog: Thanks, Jeremy.
Operator: Thank you. There are no further questions at this time. I will now turn the call back to Dr. Lishan Aklog, chief executive officer, for closing remarks. Please go ahead.
Lishan Aklog: Great. Thanks, operator, and thank you all for taking the time and for your attention this morning. As always, great questions from our analysts despite some of the technical issues. So, I hope you all found this discussion to be really informative. So it is obvious that our core takeaway message today is that with Medicare now paying for EsoGuard, Lucid has entered a new and exciting chapter of commercial acceleration and growth. it is been a long time coming. it is been a marathon to date, and we are really excited about that. We are just a few weeks into this chapter, and things, as we described, are off to a great start with the record.
We expect a very strong, very solid fourth quarter and really strong momentum entering what we expect to be a transformational 2027. Hopefully, you have gotten the sense of how, you know, our team is excited and energized now that really the, in some sense, the shackles are off, that our commercial and operational execution is really no longer meaningfully constrained by external factors. We have navigated those. And we are probably looking forward to this commercial sprint ahead. So thanks again. As always, we encourage you to keep abreast of our progress.
So Please follow our news releases, these update calls, our website, social media, And as always, feel free to reach out to us if you have any questions. Everybody, have a great day.
Operator: Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
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