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Operator: Good morning, and welcome to the Lucid Diagnostics First Quarter 2024 Business Update Conference Call. At this time all lines are in listen only mode. Following the presentation we will conduct a question-and-answer session. [Operator Instructions] 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.

Matt 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 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 our Lucid website. Please take a moment to read the disclaimer about forward-looking statements in the press release. The business update, press release and the conference call 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 Securities and Exchange Commission. For a list and description of these and other important risk factors 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-Q filed with the SEC and any subsequent updates filed in quarterly reports on Form 10-Q and subsequent filings on Form 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 and 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’d like to turn the call over to Dr. Lishan Aklog, our Chairman and CEO of Lucid Diagnostics. Lishan, take it away.

Lishan Aklog: Thank you, Matt, and good afternoon, everyone. Thank you for joining our quarterly update call today. I also like to thank our long-term shareholders for your ongoing support and commitment. Our team here at Lucid is singularly focused on driving our enterprise towards what we believe is a massive commercial potential and to enhance our long-term shareholder value. Very pleased with the excellent progress the team has made over on multiple fronts during the first quarter and the start of this year and really look forward to very exciting very near-term milestones for our business. In particular, really excited about the fact that we’re able to strengthen our balance sheet, closing out our $30 million preferred stock financing to long-term investors that extends our runway well past these near-term milestones and keep stock out of the market even further into the future.

Let’s start off as usual with some highlights. First, with regard to our commercial execution, we collected approximately just over $1 million in revenue for this quarter, which is flat quarter-on-quarter and about 124% increase on an annual basis. As we had noted last call, our first quarter test volume remained also in approximately the same range, about a 10% increase at 2,420 tests, that’s also a 31% increase on an annualized basis. We do still see increased productivity from a seller point of view improving. CYFT events are thriving. We had 32 such high-volume health fair events and we have now implemented a very streamlined centralized telehealth operation as part of it. We’re very much focused and engaged on our robust pipeline of direct contracting engagements, as we’ll talk in more detail later, that involve benefits brokers, third-party administrators and self-assured entities offering EsoGuard as a covered benefit.

Our efforts over the past six to nine months with revenue cycle management improvements continue to pay dividends. We continue to work on a variety of initiatives to improve this process further, including prior authorization, appeals, physician advocacy and others, while maintaining stable out-of-network allowed amounts averaging about $1800. Some key strategic accomplishments for the quarter include, as I mentioned, strengthening our balance sheet by completing a $29.8 million Series B preferred stock offering. Very key landmark accomplishment from this quarter was the peer reviewed publication of positive data from a landmark National Cancer Institute sponsored clinical validation study of EsoGuard esophageal pre-cancer testing that demonstrated unprecedented early pre-cancer detection.

We’ll cover those details a little bit later. This study strengthened EsoGuard’s clinical data supporting ongoing engagement to secure both commercial and medicare payer coverage. We’ve now secured a date, July 17, for our MolDX pre-submission meeting, which will be our opportunity to review data, with the MolDX group for a technical assessment seeking coverage of EsoGuard under its foundational local coverage determination for medicare coverage. We are actively executing on what’s an aggressive market access strategy that’s focused on securing medical policy coverage with regional plans and biomarker legislation states, we’ll cover that in some more detail later and as well as pilots with national plans. For those who are new with the story, just a few slides to tell you about Lucid.

Lucid Diagnostics is a commercial stage cancer prevention medical diagnostics company. We’re focused on early pre-cancer detection, and our goal is to prevent esophageal cancer deaths in at risk patients. And we have two technologies, our EsoGuard esophageal DNA test and EsoCheck cell collection device. The EsoGuard test is the first and only commercially available test that’s capable of serving as a widespread screening tool to prevent esophageal cancer death through the early detection of esophageal pre-cancer. As I said previously, and I’ll say it again, the performance of this test is really unprecedented for a molecular diagnostic test. That statement is highlighted here in a comparison of EsoGuard’s performance to some other sample tests in the colorectal cancer screening space, Cologuard, which is widely successful and widely available and has been for many years and liquid biopsy tests from Guardant that has published data recently and has got a lot of attention.

It’s important when you understand the performance of these types of tests to document it in a variety of different categories. When it comes to cancer, you don’t want to miss cancer and we have very similar, if not superior sensitivity for detecting esophageal cancer at or above Cologuard and other such tests, and certainly superior to the blood test like Guardant. But the real differentiation, the reason why I comfortably use the term unprecedented is when you talk about pre-cancer. Remember, that’s what we’re focused on and what we need to accomplish. In the pre-cancer stage, we’re still at that 90% plus or minus, very close to 90% sensitivity rate and that’s just unprecedented. Cologuard does a pretty good job at picking up late-stage pre-cancers, but that percentage sensitivity is about 40% to 50%.

The blood tests are just not really in the end of the cohort, when it comes to that. Even more impressive is that, we’re not just picking up late-stage pre-cancers, but we’re picking up early pre-cancers and that is truly unprecedented. Similar sensitivities for that early pre-cancer, those early pre-cancer numbers and there’s no ability in these other tests to pick up the earliest stage pre-cancer, which gives us the opportunity to have a real impact on these patients. Even within that early pre-cancer stage, we have sensitivity still maintained even if you only have a short segment of disease, which is actually the most common presentation of these patients that we’re trying to pick up and the most common scenario that leads to cancer and that’s at 89%.

False negative rates, false positive rates are all really in the excellent range for tests of this kind. This results in a very large market opportunity for Lucid. There are 30 million patients, actually more than 30 million patients that are at risk and are recommended for testing for pre-cancer testing by the professional society guidelines. Medicare has established a mark for payment for this test at $1,938 and as I’ve said, we will show further that price point has been holding up quite well with out-of-network payments. That translates into an approximately $50 billion total addressable market opportunity. We have a lot of opportunity even with low levels of penetration to generate substantial revenue. Our gross margin, at our current volumes is approximately 90%, which also facilitates our ability to derive this business.

We have developed over the years a multi-pronged commercial strategy, which is focused on getting patients access to this test in a variety of settings. We have our own physical test centers in about 13 cities. Our primary approach to testing is our satellite Lucid test center model, which partners with physician practices, primarily primary care physicians where our clinicians will schedule days in their office to test scheduled patients, 10, 15, 20, even 30 patients in a day. That’s the dominant form of our testing right now. We also partner with physician practices, especially specialty practices for us to work with them and their personnel to do testing in their office, and that model extends to smaller hospitals as well as larger integrated delivery networks.

We have a mobile Lucid test center that serves us well in the State of Florida, where that’s necessary to do this kind of testing. A big part of our activity — commercial activity remains for CYFT or CheckYourFoodTube health care type events focusing primarily on firefighters, but expanding to other targets as well. Let’s talk a little bit about how this quarter went. Our test volume has remained flat approximately, as we mentioned, 2,420 test for the first quarter. That’s consistent with what we described last quarter, where we have frozen our sales team actually going back to the early part of 2023. Although we are extracting some increases in productivity, we have some unfilled positions and have transferred some of those resources into market access and direct contracting.

And so this is where we expect to be until we reach points with regard to realization of revenue that justify us increasing our sales team and driving our test volume, which we’re confident we can do at the appropriate time. Revenue, again, was flat quarter-to-quarter. Dennis will be talking a bit more about those trajectories and the realization of revenue as a function of test volume and revenue opportunity. On the commercial execution side, we’ve had, as I said, our protected FoodTube events are thriving. We held 32 such events during the first quarter. We’ve implemented a really streamlined, centralized telehealth operation where people, for example, as — for testing on a fire department they can prior to — prior to the day of the event can actually register through our telehealth operation and get there, telehealth visit with the physician, confirm that they qualify for the test and actually have that referral made all prior to them arriving.

Our engagement with the firefighter community is just very — strengthening every quarter and is very powerful and very gratifying. Our team attended the FDIC International conference, the largest — the leading firefighter conference in the country and we’re in Indianapolis with 30,000 firefighters. We did on-site EsoGuard testing and engaged with fire chiefs from all around the country. Another major push as I hinted at remains our direct contracting initiative. We have a robust pipeline of direct contracting engagements with benefit brokers, third-party administrators and self-insurance entities. And how does this work in this pathway, we are offering EsoGuard as a covered benefit to drive contractually guaranteed revenues. We’ve targeted these three groups, benefit brokers, third-party administrators and such, self-insured entities such as employees and unions and other partners where there are large groups of patients such as 9/11 Funds and others where there’s an opportunity to access and then contract directly with these entities that cover these patients.

And there are a variety of ways that we’re engaging with these entities with some we’re negotiating direct ongoing contracts or just where we charge on a per patient basis, those that — where we enter through a benefit plan, we can charge for a lifetime benefit per member. And then we also offer testing days either full or half testing days at a fixed price. So we’re really looking forward to ramping this up during the second half of the year and feel we have the opportunity to do so as a supplement to the traditional pathways. So an update on our overall experience with claims and payment and coverage. Revenue cycle management remains critical. We continue to have ongoing improvements in our process in partnership with Quadax our RCM provider.

These improvements include — we’re going to start a prior authorization program, which accounts for approximately 1/4 of the denials and we’re hoping to eliminate those through prior authorization. Our appeals process is getting much more sophisticated and targeted and when our — the percentage of appeals that we win is improving steadily. We’re recruiting and this is actually gratifying. We’re including physicians, local physicians to advocate on our behalf with regard to local payers, which is something that could have a big impact. Dennis will talk about the numbers a little bit more detail, but we continue to have about half of our adjudicated claims allowed by the payers. This is all out of network and the payment is remaining stable at just under the Medicare rate.

Some big developments on the medical policy and coverage side, particularly with Multi X upon publication of the National Cancer Institute-sponsored study. And the outstanding results from that we pulled the trigger and asked for and secured a meeting with the Multi X group that’s scheduled for July 17. This is a pre-submission meeting, where we get an opportunity to discuss the body of clinical evidence. These are categorized as clinical validity data, clinical utility data, analytical validity data and review that data with them, get their feedback and proceed thereafter to submit what’s called a technical assessment, or TA that seeks coverage under the existing foundational local coverage and termination, or LCD that MolDX and other Medicare contractors published last year for tests in this category of the esophageal testing.

On the private side, we are, again, actively executing on this strategy. We’re focused on securing medical policy — positive medical policy coverage with regional plans and have engagements with a number of them and a high area of focus for us are biomarker legislation states, which I’ll show — talk about a little bit more as well as pilot plans with — pilots with the national plans where we see coverage with evidence development, where we are able to demonstrate the clinical utility of our study to that particular payer as well as the potential economic benefits to that payer in a study while getting covered and paid over that time. So those are the things that we continue to actively pursue. The biomarker initiatives are really, we think, will have a big impact.

There are multiple states now that you can see here that it passed biomarker legislation that effectively mandates by statute that they’re different from state to state, but effectively mandate that local payers cover these kinds of tests and ours — and we’re going state by state and working with the local — with each state to confirm that we are covered under these — under this legislation and use that to seek coverage at a minimum coverage under the biomarker legislation for individual payers. So it gives us a great opportunity to do that. I’m going to provide a brief overview. We had a press release about this. The results of this exciting, what I believe is a landmark study from a National Cancer Institute sponsored a group called BETRNet consortium sponsored by the NCI and they published a landmark paper weeks ago in the American Journal of Gastroenterology on EsoGuard performed on samples collected with EsoCheck compared to upper endoscopy, and its performance in detecting esophageal pre-cancer and cancer plan and the conditions along that spectrum.

The highlights are impressive and again unprecedented. The sensitivity for cancer was 100%. All of the cancers were detected. The overall sensitivity and specificity was 85% each, a very, very key number that we believe is critical to demonstrating the value of this test is something called the SSBE or short segment BE sensitivity. That’s your ability to detect the short segment, less than 3 centimeters, 1 to 3 centimeters of disease. That’s the hardest thing to detect because it’s just a small patch of disease and down by the far end of the esophagus, and it’s the one that’s most challenging for any type of molecular test. The key — the reason why this is important is that about 70% of the cases we’re trying to identify in the screening population as defined by guidelines are short segments.

So, if you can’t detect — sorry, and they account for about half of the cancers. So if you can’t detect short segment BE, with high level of sensitivity, then you’re not going to have the ability to have an impact on cancer death because that’s where most of this disease is. And we’re hitting that at a really high rate of 89% rate and a negative predictive value, so a really low false negative rate, NPV of 98%. They documented something that we continue to see, which is the average procedure time of 2.5 minutes. That’s an average. We’re seeing times less than that. Some of us in the office had — were tested last month and it took 30 seconds for the test to be completed. So really outstanding and particularly in comparison to potential alternatives, it’s a critical part and you believe in having a highly efficient screen test.

We have the study has shown no adverse consequence of adverse events from the testing, consistent with other studies that we’ve shown to date. I’d also like to spend 1 minute or 2 reviewing the results of a paper that was published last month on the technology from an academic institution on a test that’s been called [encoga esophagus]. The group used a sponge on a string device called EsophaCap to sample cells from the lower esophagus and apply a new molecular test with methylation marketers audit. I’ll note that the EsophaCap device is a device that we acquired and supplied for a portion of the study, although we no longer supply that. Some highlights to note, particularly in contrast, are that the test showed poor sensitivity for short segment BE, which as I mentioned last time is really the most critical number in having an effective screening test for esophageal pre-cancer at 63%.

There were also some troubling complications, about 20% had mild abrasions of esophagus, but 2% had serious abrasions, with bleeding, and there were two catastrophic device failures in the form of detachments. I thought it was worth summarizing a head-to-head comparison of our results. These are pulled results, although they’re pretty consistent across the various studies as EsoGuard and EsoCheck with the results that were reported in this publication on the OncoGuard test in combination with a sponge in the string test. So again, let me emphasize the importance of short segment BE as critical because these are the patients that account for about half of the cancers, a 63% sensitivity in that category. It just — is not going to be sufficient to serve as a commercial test.

And again, that data is from this publication that was published last year. Also note that, that level — that 60% — approximately 60% sensitivity in this critical category is about the same as the sensitivity that was published in the paper on that used the Medtronic Cytosponge another sponge on strings, old technology sponge on strings that led Medtronic to withdraw that technology from the market. A variety of ways that — a variety of areas to contrast. If you look at the device effectiveness, as I noted, EsoCheck gives you anatomic targeting of the area, just a very small area where this abnormality occurs, sponge on string devices developed. EsoGuard — EsoCheck provides protected sampling. So there’s no dilution and no contamination from cells elsewhere, only in the area where the targeted area, sponge on string devices do not.

Lots of issues with regard to procedural efficiencies, the paper showed that the SOS device required a topical anesthesia, essentially numbing medicine applied to the mouth. EsoCheck does not require that. The SOS devices have to sit in the stomach and desolve for 8 minutes, again, as reporting the study, there is no dwell time. EsoCheck does not require that. They had two devices that failed to deploy, and they didn’t dissolve. They pulled them out and they were still not fully deployed. But we don’t have that issue at all with EsoCheck. If you take the 8 minutes and time to swallow them back, the time to actually complete the procedure is about 15 minutes, as I mentioned, we’re doing them in 1 minute to 2 minutes or less, a little as 30 seconds.

That’s really important if you’re doing these large events like one of these CheckYourFoodTube events. We’ve done 100 — we’ve tested 100 patients in a day at a firehouse. You can’t do that if it takes 15 minutes or more per patient. And the only reason we can do that is because of the — these low procedure times. The technical failing rate or sort of being able to complete the test without patients being able to swallow and get a sample, our numbers and data that was presented at a big GI conference on 1,500 patients was 98%, which is a 2% technical failure, much higher in the sponge on string devices. But the key area here and one that I think is going to be ultimately the message here is on device safety. There were two detachments that are serious, if not catastrophic.

The sponge attached from the string. In one case, it had to be retreated endoscopically and another pass through the intestine, but with the — putting the patient at risk of a serious obstruction and serious health risk. As a result of these detachments, we actually initiated the recall of the space device that was used in the study after notifying the FDA about this. And that was something that was mandatory. So that’s going to be a significant issue that we just don’t have to address. We’ve never had any device failures for EsoCheck in now over 10,000 tests. And the abrasions in the series abrasions are not surprising, but significant contrast here. These sponge on devices are literally like a sponge like brillo pad that scrapes the esophagus.

So it’s not surprising that you would see patients who have these abrasions, including 2% that have a serious abrasion. EsoCheck is a balloon that has a soft sort of cushion surface to it with soft ridges on it, and we just simply don’t see these issues with EsoCheck. So with that, I’m going to pass the baton on to Dennis to talk about our financial results.

Dennis McGrath : Thanks, Lishan and good morning, everyone. Summary financial results for the first quarter we reported in our press release that was published earlier today. On the next three slides, I’ll emphasize a few key financial highlights from the quarter. But I encourage you to consider those remarks in the context of full disclosures covered in our quarterly report on Form 10-Q. Balance sheet cash at quarter end March 31 was $24.8 million. We added $11.6 million to that amount with the financing completed last week for a pro-forma cash of $36.4 million. The average quarterly burn for the trailing four quarters is $9.5 million per quarter. The burn in the first quarter included $7 million from ongoing operations and $2.5 million from the quarterly management services agreement with a PAVmed.

Additionally, the company paid down the intercompany debt to PAVmed with PAVmed accepting 3.3 million shares for a $4.8 million debt reduction as previously disclosed in connection with the dividend distributed by PAVmed to the PAVmed shareholders of Lucid stock plus $2.8 million in cash payments. We disclosed in the 10-Q that our ability to fund operations beyond one year from today is largely dependent upon how revenues ramp over the next four quarters, which is, of course, dependent on how the reimbursement landscape for both government and private health insurance continues to improve. Additionally, our direct contracting efforts with self-insured employers and/or corporate finance activities, including refinancing the outstanding debt at that time can also work to exceed that threshold.

Beyond that, there is nothing substantively remarkable about the remainder of the March 31 balance sheet, shares outstanding, including unvested restricted stock awards as of last week are 52.2 million shares, which includes $1.1 million issued subsequent to quarter end in connection with conversion notices received from a convertible debt holder. The GAAP shares outstanding as of March 31 of 46.7 million are reflected on the slide as well as on the face of the balance sheet in the 10-Q. GAAP shares do not reflect unvested restricted stock awards. On Slide 20, it compares this year’s first quarter to last year’s first quarter in certain key items, plus your review of the information in my comments in light of the cautionary disclosure on the bottom of the slide about supplemental information, particularly non-GAAP information, I’m required to say that.

As previewed in our fourth quarter earnings call, revenue of just over $1 million for the first quarter sequentially about even with the fourth quarter reflects more than a two-fold increase over the prior year first quarter. The amount reflects actual cash collections for the quarter, plus a small amount of invoice EsoGuard tests delivered to the VA, plus about $25,000 for direct contracting. Test volume at 2,420 tests for the quarter, represent just over $6 million in submitted claims at our $2,499 ASP. Revenue recognition and I know this gets repeated each quarter, but it’s important key determinant is the probability of collection. And therefore, due to the fact that we are in early stages of our reimbursement process means revenue recognition for claims submitted to traditional government or private health insurers will be recognized when the claim is actually collected versus when the patient report is invoiced and submit it for reimbursement.

As you’ll see and disclosed in our 10-Q, this is called variable consideration of the jargon of GAAP’s ASC 606 revenue recognition guidelines. And presently, there is insufficient predictive data to reflect revenue when the test report is delivered to the referring physician. For billable amounts contracted directly with employers and that are fixed and determinable, they will be recognized as revenue when the contracted service delivered. That means — generally means when the report is delivered to the referring physician. Our non-GAAP loss for the first quarter of $9.4 million, reflects about a $500,000 sequential improvement compared to the fourth quarter loss and about a $400,000 improvement year-over-year from the prior year first quarter.

Slide 21 is a graphic illustration of our operating expenses for the periods reflected. Total non-GAAP OpEx is $10.4 million for the first quarter of ’24, reflects about a $500,000 decrease sequentially and is fairly flat year-over-year. Cost of revenue primarily consists of EsoCheck devices, lab supplies and fixed lab facility costs, and it is in line with the last couple of quarters where the test volume has ranged between 2,200 and 2,600 tests. The non-GAAP net loss per share has been relatively flat for each of the last five quarters, plus or minus $0.01 between each of those five quarters. On a GAAP EPS basis, non-cash charges accounted for approximately $0.19 per share in the first quarter of which $0.17 was directly related to the non-cash deemed dividend connected to the March financing of $18.2 million.

A couple of reimbursement highlights. Focus on the last two quarters with our first quarter of this year and the last quarter of last year. Collectively, there were just under 4,000 claims, 3,975 claims, representing just under $10 million in pro-forma revenue that were submitted for reimbursement. About 75% have been adjudicated, 25% are pending. Out of the 75% that been adjudicated about 46%, almost half resulted in an allowable amount by the insurance company with a mean average of about $1,700 per test. And as you collect these things over a longer period of time with a longer aging time horizon with appeals, approximately $1,800 per test, which is in line with previous quarters, we report the same statistic. Of those denied, about 53% of the denials are deemed not medically necessary or require a prior authorization and about 28% were deemed to be non-covered.

So with that, operator, let’s open it up for questions.

Operator: [Operator Instructions] Your first question is from the line of Mike Matson from Needham.

Michael Matson : I wanted to start with the small DX pre-submission meeting. So can you maybe just tell us more about what you’re expecting to happen there and kind of what the potential outcomes of the meeting would be?

Lishan Aklog : So just to be clear, these are pre-submission meetings. I think the analogy for those who have had experienced or heard about descriptions of FDA pre-submission meetings. It’s not quite a structured in formal, but similar. And the purpose of these meetings is to meet with the key personnel, the medical directors at Multi X and to review the full evidence base consisting of clinical validity, clinical utility and analytic validity data and to do so in the context of the elements of the already published and finalized foundational LCD and simply to have a conversation about that also in the context of new information such as guidelines and so forth. So we expect to be well represented with both ourselves and others who can describe the context of our data in that result.

And the goal of that is to be able to inform the actual document, the technical assessment that would be submitted following that meeting to formally seek coverage under the foundational LCD. In addition to personnel from the company in various key roles, we expect to have other key experts to Stan Lapidus, our Vice Chairman, expert and diagnostics will be contributing as well as one of our medical advisers who was an expert and an author on the guidelines, and we expect to provide some additional support. So that’s the nature of the meeting. We will leave with that with a sense of where we stand with their data and will inform the actual formal process, which is to submit the technical assessment and have that clock start following the meeting — following the submission, excuse me.

Michael Matson : And then just in terms of the — so you’ve been running at kind of like this 2,500, 2,400 tests per quarter now for a few quarters. And your revenue has been growing a little as you get more able to collect more payments, I guess. So how long should we expect you to remain in this sort of holding pattern? And at what point would you start to try to grow the test — at what point would you need to get to in terms of the coverage or the payment rate would — before you would start to really try to drive more test volume again?

Lishan Aklog : So I’ll talk about a little bit on the test volume side, I’ll have to just chime in on the translating test falling into revenue. So we talked about this a bit at the — on our last call, which is that we’ve had a fixed level of personnel on the sell side, we obviously have been and remain in a posture where we’re trying to maintain our OpEx is flat to the best of our ability during a period of time. And as I also mentioned last time, but I’ll reiterate, the claims — the test volume we have has been sufficient to drive claims history and to drive our engagement with private payers. The — as again, just sort of reiterate a bit from our last call, this level, kind of in the 2,400-plus range is a level that we think we can maintain with our current team.

We did actually have fewer sellers in the field this quarter as we transported some resources and did not fill certain open positions in order to make sure we have sufficient resources under the same overall OpEx in our key market access and direct contracting initiatives. And so there certainly, there is a possibility that even with — at this current level, we may continue to see some modest growth. We saw about 10% quarter-on-quarter as a result of increasing CheckYourFoodTube events, which tend to be more efficient in terms of personnel sales personnel in the field per test. And obviously, if we start seeing some — when we start seeing some traction on the direct contracting side, which can drive test volume independent of — essentially independent of the sales activity.

So I’ll transfer to Dennis to talk a bit about what — where our thresholds are and at what point in our revenue — the revenue and the realization of revenue as from test volume, would we consider increasing our OpEx and adding some resources in order to drive test volume as a method of driving — as a lever to drive revenue.

Dennis McGrath : Mike, I think it’s — those decisions are going to be on a quarter-by-quarter basis as we see realization, meaning cash collections as a percentage of billable claims increases. And as Lishan’s pointed out, there are a couple of influences there that we will start to make those investment decisions at the time some of these events start to show themselves maybe even in advance of actually collecting. And they are direct contracting because the price is guaranteed as we see that start to increase that will give us reason. In fact, we’re already putting some additional resources behind that. In addition, I think we’ve previously mentioned, we have submitted some formal applications for some of the larger regional insurers to move from out-of-network to in-network as those decisions become available, that will influence making those investments.

Clearly, that’s an indication of what realization will become in the subsequent quarters after those approvals. Obviously, in response to the Medicare upcoming decisions, that will influence timing as well. We’re also in the process of trying to fully understand the biomarker legislation and what influence that might have is the — both states that are requiring coverage with insurers operating within their states, how that plays itself out. We’re staying pretty closely in tune with that in terms of does that make sense for us to put additional resources in those states as they work out those logistics between the state legislation and the actual carriers covering biomarkers. They’re all the influences that will have us step on the accelerator to do so.

Obviously, with the recent financing, we have the resources to be able to be responsive to those events. So pretty much stay tuned. As I indicated at the outset, it’s a quarter-by-quarter basis. And we have and are ready to put these things in place to be responsive to these events.

Operator: Your next question is from the line of Anthony Vendetti from Maxim Group.

Anthony Vendetti : Some of those questions were around some of mine, but maybe just further talk about the process. You did mention that you’re hoping that some of the coverage benefit goes from out-of-network to in-network, that’s obviously would be significant. Can you just remind us where we’re at in terms of the number of insurers that will reimburse — maybe the number of large insurers, if we talk about the Cigna’s, the Aetna’s, UnitedHealthcare’s of the world. Where are they in terms of their reimbursement coverage? And what’s the likelihood that they sign up either this year or within the next 12 months as either in-network, out-of-network?

Lishan Aklog : Yes. Let me outline that a bit at a high level. So you asked about the larger payers. So just to be clear, on the out-of-network side, we do get paid. We have — we get — we do get paid out-of-network, then it went through those numbers. We do get allowed claims and allowed claims at just under the Medicare rate on average. And some of those larger payers are actually doing that as a distribution and some of those are doing that at a higher clip. Our focus with regard to getting near-term changes in medical policies — or positive medical policy for coverage is not focused on the large payers. Our engagement with the large payers is focused on pilots seeking coverage with evidence development because it’s our understanding the expectation that the larger payers are generally will wait for positive coverage by Multi X and Medicare in general.

However, there’s very fertile ground that we’re actively pursuing on the regional plans. We mentioned last time that we have — we’re engaged with the Blue Cross, Shield Association, which is a National Association that assists us, and they’ve been quite remarkable in doing so in our engagements with individual state plans. And those are actually, we’re chipping away at those and those are — we’re having some success. And as Dennis mentioned, in particular, those that are in states with biomarker legislation, we really believe we can actually make progress and coverage under those regional plans in the near-term independent of the MolDX process. And then there, of course, are these direct contracts, which are completely independent of the entire payer process.

So one example of that is our — in the slide that I showed over on the right, there are entities that have a large number of patients under that have — where they cover their expenses on the — for covered conditions and one that we’d already given a preview of is the World Trade Center 9/11 Fund. We have active discussions with them, we are optimistic that we’ll be able to have a final engagement with that group through one of their centers of excellence, which we’re talking to right now. And so that’s a pathway to provide patients within, who were covered by that of which there are about 100,000 access to our test as a covered benefit without completely independent of the insurer payer process.

Michael Matson : And maybe just more very big picture here. You had a great Investor Day with a couple of gastroenterologists and a thought leader that talked about how the PAP changed surgical cancer and obviously, Cologuard, as you see this process continuing to unfold and some of your competitors having a recall, is there a tipping point? Do you think it’s a three to five year process before EsoGuard or EsoCheck becomes a standard and it becomes more well-known because that’s just when I was speaking to the guests — one of the gastroenterologist was at this investor conference. And he was just saying that it’s — it is difficult to get the word out there because not everyone associates esophageal cancer as a major cancer even though we know it’s one of the most lethal. How long do you think this process takes before you hit that tipping point? I’m just curious what your view is on that?

Lishan Aklog : And let me start with the latter part. So it’s not going to be that hard because there is a lot of attention and a lot of increasing attention on esophageal cancer. And you’re correct that over the decades, it’s been under — we focused on breast and colon and prostate and some common cancers. But our efforts and our ability to get that message out and for that to resonate without a lot of effort across the physician community, both primary care and specialists is straightforward because we have a straightforward story. We have a well-defined target population. We have a well — we have a methodology and an understanding of the biology. We know what to do in patients who come back positive. And so the message you heard from the physicians, for example, at the Investor Day is resonating across the country.

And that’s actually playing itself in local markets across the country in news media, the firefighter events have been very helpful for us. We were in the — at a great piece at the — on ABC News in L.A., And we have a variety of those that are happening, and we expect that pipeline to translate into national awareness for this. And it’s a process, but it’s not a process that I believe will take years because all the pieces are in place. We’re not — we don’t have to define the population. We don’t have to make all of the elements for us to tell the story, which is a very compelling story. I can tell you, in every interview I’ve ever done in a late population, we were an NPR recently. It’s been a very straightforward moment conversation where we’re actually — it’s actually quite amazing to me how frequently I think it happens once a week or so when we’re talking to folks and they objective — just sort of objectively about the business, and we hear about a family member or a friend or a colleague who had suffered from esophageal cancer.

And the physician community, the GI community, that’s actually also quite straightforward because it’s already in their guidelines. We didn’t write their guidelines stated. And so the need to identify pre-cancer and to do so as a methodology to prevent cancer, that’s well established. We don’t have the hurdle to overcome to suggest that detecting pre-cancer in this condition is something that’s controversial. It’s not in guidelines in the last three guidelines. And unlike Cologuard, for example, which was operating in an environment where there was already about 50% to 70% of patients were getting colonoscopy is very few, less than 5%, essentially no patients in our target population are getting endoscopes. So we’re completely allied with the gastroenterologist and our ability to talk to them about going out and expanding their funnel and identifying patients that they’re not seeing an increase in the yield of the — the number of endoscopies and the yields of their endoscopies.

And so we have great relations with the leadership in the GI community that all of the KOLs — we’re really excited. We have a big presence coming up at the major — the biggest GI meeting in the country every year, which is the DDW meeting, which starts this weekend. Our Medical Advisory Board is the meeting there, and it consists of who’s who in the GI community of esophageal disease, and we’re going to be meeting for a couple of hours on a Friday and talking about all of the key issues that I already highlighted earlier, such as the importance of short segment Barrett’s Esophagus, the importance of having a cell collection device that has low excellence device safety and the features of EsoCheck. And so that story is — we’re already getting that out.

When we’ll actually the expansion of the activity will be a result of the triggers that we mentioned with regard to coverage and so forth. But the story is getting out there and not going to take that long once we’re in full throttle to have that spread nationwide. It just hasn’t been a hard to story tell, Anthony.

Operator: Your next question is from the line of Mark Massaro from BTIG.

Vidyun Bais : This is actually Vidyun on for Mark. So it’s great to hear the date for the presub. You touched on this a little bit, but just remind us what the average time for the technical assessment process is and I just wonder you would expect that final CMS coverage decision?

Lishan Aklog : Well, we can’t predict the latter. The turnaround time for a response to the GA is a minimum of 60 to 90 days typically, but that part can get extended if there are questions along the way. Again, for those who are familiar with the FDA process, it’s not dissimilar to that in that once the data submitted — once the TA submitted, they’ve had a chance to review that. There may be opportunities to come back with questions or questions about the data and so forth. So it’s really impossible to say how long it will take for that process to be completed and resulted in a final decision. But we think we’re going in well-armed with great data. We have literally multiple consultants that we’re working with, who are experts on this who’ve done advanced tests through the Multi X process and there’s quite a bit of optimism amongst the group around that.

But in terms of timing, it’s a little bit hard to — I say it’s already possible to predict at this point, but we go in with a lot of confidence in the substance and the quality of our data.

Vidyun Bais : And then I just have a follow-up on last quarter, I think you had discussed like a $5 million or $6 million revenue bullish within the pipeline. Are you seeing any success in realizing that revenue and just how we should think about maybe any contribution in pacing throughout the year?

Dennis McGrath : So yes, there is the backlog of pending amounts to be adjudicated and the appeals process is picking up from an intensity standpoint with our omni-cycle manager. It’s hard to predict the timing of that. The appeals process is a longer period of time. The statistics that we gave on our prepared remarks, there’s 25% or so of them still waiting to be adjudicated. That backlog is still about that same amount. And it’s hard to match up that phasing. But we know what the fields look like. We know that we’re having some success there and it’s starting to gain some momentum. So no additional color to offer just yet.

Operator: Your next question is from the line of Kyle Mikson from Canaccord.

Kyle Mikson: So just starting with the — like the esophageal Class II FDA recall, I wanted to ask things about this. Basically, first of all, just kind of rewind back to ’21, like around the time of the IPO when you made the acquisition of CapNostics. Like why did you do that? What kind of commercial agreements or manufacturing agreements are sort of sign that now are relevant or sort of impacting expenses that aren’t really useful? Just kind of update us on that maybe. And then secondarily, if you could just talk about the competitive dynamics here and how maybe certain companies or vendors were using the Esophageal. And now, obviously, that doesn’t look great for them and maybe this is advantageous for you.

Lishan Aklog : So yes, we’re happy to rewind back a good to get some of the history for those who are not fully — so we in 2021, we had the opportunity. We engaged with the small companies, CapNostics that was making the sponge on string device. And we acquired it. We had an interest in it as a research tool. There are potentially other applications that we were considering and looking at. And after we acquired it, we had discussions with the two institutions that had ongoing research that were being supplied by it, and we agreed to supply it for that research. We had really no concerned about doing so at the time. And really because we were quite confident at the time that EsoCheck was a superior device for this particular for this particular application, we were well aware of the limitations of the sponge on string.

But we have some interest in potentially using it as a research tool and had no problem providing it to these studies because we were quite sure where the results would land based on prior experiences with Cytosponge. That continued until early last year. We were not unable to come up with a business agreement with the two institutions around how to continue supplying it. So we stopped supplying the sponges approximately a year ago in the early part of 2023. And it was only after the publication of the most recent publication that the data, which I highlighted that we became aware of the two detachments. And we were aware that Cytosponge, the other sponge on string which both — again, both of these technologies have been around for years. EsophaCap is essentially identical to technology that was developed in the early 1990s by the same company that we acquired it from.

We are aware that Cytosponge had numerous detachments as well, but EsophaCap hadn’t. And Cytobange is, as we mentioned in the press release is under a global recall right now, specifically for those detachments. And if you read the Medtronic language that we highlighted in the press release, it was specifically for potential serious risks associated with these detachments. So when we saw the report of the two detachments in the manuscript that was published, we were a bit alarmed because they were not reported, they had not been reported to the FDM database. And so we acquired an FDA and concluded that we had to initiate a recall of that. What — how this played out is where we thought it would play out, which is that the technology, the electro tests are one thing.

But at the end of the day, the cell collection device matters and all of the head-to-head features that I showed you in the table there are critical to get the level of performance and particularly the sensitivity of the short segment and the features of EsoCheck, particularly the collect and protect features of EsoCheck that allow for targeted sampling is critical for that. So we weren’t really that surprised with the results of the study and using this sponge where we resupplied a portion of it, it’s in that category, in particular, it’s really no different than the Medtronic data, the data on Cytosponge and TTF3 that was published by Nick Shaheen in the U.S. a few years ago that led to Medtronic withdrawing that. With regard to the competitive landscape, I leave that for you guys in terms of the overall business.

We have enormous confidence in both the cell collection and the molecular diagnostic test, the published data is what it is. And I think the most recent data really highlights the fact that if you’re going to have a test that can be efficacious in detecting pre-cancer to prevent cancer, you have to pick up the short segment pre-cancers if you’re going to have any kind of an impact because they account for about half the cancers. And so — at the end of the day, I’ll leave it up to you guys to sort of look at the data and so forth. But from our point of view, we are proceeding with profound confidence in our technology.

Dennis. McGrath : Kyle, it’s important to understand even if a reengineering effort could figure out how the safety issues could be overcome. This study pointed clearly to the contamination because of the lack of the ability to protect the sample. So they have to figure out how to put the sponge back in the wrapper, which is physically impossible to overcome that limitation — that design limitation. So we think unless there is a way to engineer around our patents on EsoCheck, it’s going to be really difficult for someone with a nice biomarker to be able to sample in a way that’s going to allow the biomarker to perform similar to what our combination of EsoCheck and EsoGuard.

Lishan Aklog : Just to be clear, there’s no evidence of that. And we have strong issues and pending IP on that. And so we don’t really yes, there’s — we have no concerns there’s nothing out there that would suggest that there’s another technology out there that’s not — again, that was not invented in the 1990s that can do the kind of targeted sampling you need for those very, very specific purpose of collecting cells in a very small portion of the lower soft use.

Kyle Mikson : And I’m sure one day if someone’s going to make the argument that a blood-based test could be useful here, but we can wait for another day to do that discussion.

Lishan Aklog : I need to touch on that real quick. So yes, well, we won’t debate the sort of what — how the blood-based tests are doing as a whole. Again, I’ll leave that for you. You you’re right, very informative reports on that on a regular basis. But let’s talk about blood-based test for esophageal cancer, right? So to whatever extent there may be ongoing progress or actually good data now or ongoing progress with regard to detecting cancer in the blood, there’s been little or no progress in detecting pre-cancers. And as we’ve stated before, you cannot have an impact on esophageal cancer deaths unless you are picking it up at the pre-cancer stage because unlike colon and other cancer is a Stage 1 diagnosis of esophageal cancer, where it still carries about a 50% mortality.

And the biology of trying to detect, I’m going to show the slides of sort of how Guardant does. Guardant does okay with cancers. But as you were — you’ve highlighted in your reports, the results in — even in late-stage free cancers for — and even the [indiscernible] data would suggest that is even lower. So the biology of picking up the abnormality that required to pick-up early stage free cancer, which you have to do in order to prevent esophageal cancer, there’s not any inkling yet to date that you can do that with a blood test. So for our little corner of the world here in esophageal cancer, I feel very confident that liquid biopsy tests are not a threat in any way in any time in the foreseeable future. Thanks for letting me highlight that.

Kyle Mikson : A final one for me, both of you guys but maybe Dennis specifically think about the model. The $1 million in revenue this quarter, flat compared to last quarter, I guess the volume kind of increased sequentially, pretty nicely, actually. How should we think about the seasonality in this business in other screening businesses there is seasonal kind of early in the year kind of gets better throughout the year. There’s flu season, et cetera. So is there anything to consider as we kind of go ahead here in terms of sequential increases in revenue growth?

Dennis McGrath : Yes, I think the only seasonality to consider is the times — first off, our test is very conveniently administered. And so the times of the year where it’s not convenient for patients to get tested, the holiday season in December. Physicians are just not going to schedule this. The large check your food tube events are probably not going to happen Christmas week. They’re probably going to be in around that. It’s probably the only time that we see it. People think about seasonality during the summer and the last two weeks of August, maybe. But September tends to overcome that whatever time period is. So I don’t think seasonality, particularly while we’re in this kind of mid throttle range is something for us to consider. It really is the volume is directly related to the realization on submitting claims and our reaction to that momentum that we’re expecting to pick-up in the coming quarters.

Operator: [Operator Instructions] Our next question is from the line of Ed Woo from Ascendiant Capital.

Edward Woo: Congratulations on the progress in the quarter. I know you’re a lot all focused on the U.S. business. But have you thought about international opportunities?

Lishan Aklog : So we have over time, I think we’ve talked about it on occasion inquired with have had inquiries actually from commercial entities outside looking to potentially partner with us. The current business model around reimbursement in the U.K. and in Europe for screening test is not attractive. And so we haven’t made any particular effort. But there are other groups in South America and in Asia that have contacted us that would have to be sort of essentially a license type agreement, where we have no plans, and we don’t think it’s consistent with our current strategic approach to put resources in other countries. But there are market opportunities there. We do the case when you get inquiries, and we have one actively that we’re discussing with right now. But I don’t expect that to be a significant contributor in the near-term.

Edward Woo : Just a quick question. The soft gift cancer is obviously very daily. I assume it’s similar globally as it is in the U.S. in terms of triple getting yet and death rates?

Lishan Aklog : There are two types of esophageal cancer. The one we see here in the U.S. and in the west is esophageal adenocarcinoma. There’s esophageal squamous cell carcinoma, which used to actually even this country be the do manufacture more associated with smoking and tobacco and other things as opposed to adenocarcinoma, which is what’s related to curator hard brand. In Asia, the numbers for squamous cell carcinoma remain higher, although as is true with many things, there’s sort of homogenization across the world, because of Western diets and the lifestyle and the diseases that come with that obesity et cetera, that there is a large — there is plenty of opportunity for a softline carcinoma worldwide. So that there is — and hopefully, that gives you a sense that.

Operator: There are no further questions at this time. I would like to hand the call back to Dr. Lishan Aklog for some closing remarks. Please go ahead.

Lishan Aklog: Great. So thanks, everybody, for taking the time. As always, thanks for all the great questions and I really believe we have a great discussion. Hopefully, you can get the sense that we’re really excited. We have a lot of a bunch of near-term activity and milestones, starting with the DDLB meeting this week and followed with a bunch of activity, our engagements with brokers the MolDX meeting coming up, more data, which we didn’t really talk about, that’s forthcoming beyond the data package that we’re already putting together. So we look forward to keeping you abreast of our progress of the news releases and periodic calls such as this one. And as always, the best way to keep up with our news, updates and events is to sign up for e-mail alerts on the Lucid Investor Relations website to follow us on social media, including Twitter, LinkedIn on our website, and always feel free to contact Matt with any direct questions.

So thank you, everybody, and have a great day.

Operator: Ladies and gentlemen, this concludes today’s conference call. Thank you very much for your participation. You may now disconnect.