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Good morning, and welcome to the Lucid Diagnostics Second Quarter 2025 Business Update Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Matt Riley, Lucid Diagnostics Senior Director of Investor Relations.

Thank you, operator, and good morning, everyone, and thank you for participating in today's business update call. Joining me today on the call are Dr. Lishan Aklog, Chairman and CEO of Lucid Diagnostics, along with Dennis McGrath, Chief Financial Officer. The press release announcing our business update and financial results is available on Lucid's website. Please take a moment to read the disclaimers about forward-looking statements in the press release. The business update press release and the conference call all include forward-looking statements, and these forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from the 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 any subsequent updates filed in quarterly reports on Form 10-Q and subsequent 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 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. Dr. Lishan?

Thanks, Matt, and good morning, everyone. Thank you for joining our quarterly update call today. As always, I'd like to thank our long-term shareholders for your ongoing support and commitment. Our team really remains singularly focused on driving this enterprise towards its substantial commercial potential and enhance our long-term shareholder value. Since our last update, the biggest development and near-term milestone is the upcoming LCD-CAC meeting, which will be the main focus of today's call. We're really excited about this. We see this meeting as a very strong indicator of progress towards a positive Medicare coverage policy outcome. And we really believe that we're in the final stages of this process. We're excited that we've kind of reached this moment in time with very clear and now concrete steps ahead of us to navigate and to succeed. Thanks to our financings earlier this year, we have plenty of runway and we are well positioned to successfully navigate these final steps. I'll talk about this a little bit more later, but we've already begun to take proactive steps to ensure that once Medicare coverage is secured, we will be able to accelerate EsoGuard's commercialization and ultimately capitalize on this very large market opportunity that we face. Let's start with some key highlights related to our commercial execution. EsoGuard test volume for the second quarter was 2,756 tests. This is within our target range of 2,500 to 3,000 tests per quarter. And we're really happy that the team continues to be successful at maintaining this level of volume, this target volume, while focusing on contractually guaranteed revenue opportunities and now with a new focus on Medicare patients. Revenue was $1.2 million, that's a 40% increase in revenue from the first quarter and matches our previous quarterly high. We're very excited to partner with Hoag, a large health system, a world-class health system in Orange County, California, and we've launched a comprehensive EsoGuard esophageal precancer testing program in partnership with them. What's really exciting about this program is that it's system-wide across the healthcare delivery network. So it includes partnerships between gastroenterologists, including the lead, Dr. Kenneth Chang, who has become a very passionate advocate for their mission to eradicate esophageal cancer in their region. It includes primary care, there are 200 primary care physicians that we'll be engaging with as well as the concierge medicine part of the health system. We really believe this is a model for additional leading health systems, both in that region as well as elsewhere about -- basically related to building comprehensive programs around using EsoGuard esophageal precancer testing. We continue to drive our cash pay and contracted programs that we launched earlier this year. These target concierge medicine practices, the self-insured entities, which include fire departments, municipalities and employers. Very steady progress on this front. We have a robust pipeline that is continuing to fill. We are getting traction on both fronts. We're learning -- our team is learning how to engage these concierge medicine practices, how to establish contracts and then how to drive patients within the practice to EsoGuard testing. And that's generating good traction so far. Same on the contracting side, particularly with contracting with fire departments and municipalities. And we look forward to seeing some yield from these efforts in the coming quarters. Of course, this effort is designed to complement our traditional reimbursement pathways with commercial payers as well as Medicare. Now let's discuss our recent strategic accomplishments. As I mentioned, we have a MolDX Contractor Advisory Committee or CAC meeting that's scheduled for September 4, that notice went out a few weeks ago. And I'm really excited about this and look forward to providing you with a lot greater context a little bit later on this call. We were excited to see that the Highmark Blue Cross Blue Shield positive coverage policy for EsoGuard that we had announced earlier actually became effective. This is our first positive commercial coverage policy. It covers Upstate New York. And it serves as a precedent, first for commercial payers. We've been able to cite this in our ongoing engagements with other commercial payers, including other regional Blue Cross Blue Shield plans and our engagement with the broader Blue Cross Blue Shield Association. So we've seen significant value in having this one under our belt. And actually even potentially for Medicare. We've highlighted the fact that we're starting to secure commercial coverage in our conversations with the leadership of the MolDX programs. It also validates the strength of our clinical evidence base, including the clinical utility of this test and that the overall healthcare economic arguments that we're making with other commercial payers. It's not just a theoretical policy, we are already seeing patients in this region that have Highmark that we're billing under this policy, and we remain deeply engaged on this front. Dennis will talk about it a little bit further. Of course, we strengthened our balance sheet with an underwritten public offering in the past quarter that netted $16.1 million in proceeds. This significantly bolsters our balance sheet. We have $30 million in proforma cash at the end of the second quarter. The key goal for this financing was to extend our runway well into 2026 and past the now concrete milestones that we are facing, particularly as it relates to Medicare and kind of mitigate risk from external factors. It also provides us with sufficient resources to ramp up our commercial efforts after we secure a Medicare approval. Another important development -- strategic development over this past quarter was, ultimately, the publication in the American Journal of Gastroenterology of the pilot study that was performed studying the EsoGuard in a target population of patients without significant GERD symptoms. This publication, if you recall from our previous call, led to a larger ongoing 5-year study sponsored and funded by an $8 million grant by the National Institute of Health. And it had two key findings: one, that EsoGuard performed extremely well with no degradation in performance in patients without significant GERD symptoms that had a 100% negative predictive value. And the prevalence in this population without symptoms of GERD remained high at 8.4%, approximately the same as in the traditional target population with standard criteria. So we really see this as a future opportunity not in the near term, but in the medium to long term, that if the NIH study can replicate this result we really do view that the large total addressable market of about $60 billion, could increase by a substantial amount beyond that if we include ultimately patients without GERD symptoms or at least without significant GERD symptoms are included in guidelines and in coverage policies. So I really want to focus the rest of my comments on the upcoming September 4 CAC meeting and its critical role in our efforts to secure a positive Medicare coverage policy outcome for EsoGuard. As I said, we're really excited about this. We view this as a very positive development. And I want to really give some -- go in a bit of depth on what this means for our pathway. And in order for us to do so, this process of securing local coverage determinations through the MolDX program is not straightforward. And I thought it would be helpful to go through in some detail the history of how we got to this point, understand what we expect from this meeting, the motivation for this meeting based on our conversations with leadership at MolDX and then what we expect to happen after this September 4 meeting. So let's go ahead and get started. Our first engagement with the MolDX program was in 2020. The MolDX program is run by one of the Medicare administrative contractors, Palmetto GBA. And they work with several other of the Medicare administrative contractors, other MACs that are MolDX participants in essentially outsourcing the review of molecular diagnostics for payment and coverage to the MolDX program. That includes Noridian, which is the MAC that our laboratory falls under in Orange County, California. That first engagement led to several meetings, and submission for payment and coverage. We secured our payment rate very soon thereafter in early 2021 at $1,938. And we submitted our request for a coverage policy based on the availability of non-endoscopic biomarker tests. At that time, we didn't have significant data. We had no clinical utility data. We had just the original science translational medicine paper. And we went to work to collect more data. But fortunately, our efforts to trigger the LCD process were successful. There was somewhat of a lull from COVID, but ultimately, the process of actually putting forth a proposed draft and ultimately a final LCD started going into effect. In late 2021, there was an actual first CAC meeting, analogous to the CAC meeting that's coming up in September. And that meeting went well. It was an early effort by MolDX to get expert opinion to get a sense as to whether they felt -- whether the experts, the clinical experts, they were gastroenterologists primarily in that group and a pathologist as to whether the evidence for -- broadly for non-endoscopic biomarker testing supported identifying these patients with esophageal precancer. And that meeting was positive. And it led, we believe, directly to a decision to actually publish a draft LCD in the spring of 2022. That draft LCD wasn't perfect. It had issues with regard to the way the coverage criteria were outlined. It was listed as a noncoverage LCD because there was no data. We didn't have any data, and there were no other tests that fell into this category. But we saw that as a very important development of that indicated motivation for the group to actually get in the game and start establishing the groundwork for coverage of these kinds of tests by Medicare. There was sort of the obligatory processes that go with the draft LCD. There was a comment period and a public meeting and written- in public comments were submitted on how to fix the LCD and that was successful. About a year later, a final LCD was published. Again, we remained not covered, but the body of it was really written as a coverage LCD. It said we will cover tests like this and it fits the criteria, the criteria match the standard criteria for -- that the American Gastro -- American College of Gastroenterology has published. And we were off to the races at that point. We had a clear road map ahead of us as to how to secure coverage based on the data that we collected. By mid-last year -- by the summer of last year, a year ago, we had essentially completed much of the clinical research that we needed to provide in order for us to secure coverage under this coverage determination. That data consists of three types of data, clinical validity, which is the actual intrinsic performance of the test; clinical utility, which is the evidence, published evidence, that the test can be -- is used appropriately to manage patients; and then analytical validity, which is about how it actually operates in the laboratory, that's less important. So we requested and had a very successful pre-submission meeting with -- in-person with the MolDX leadership and went through our data and presented what we had. And that began a several month period, a very close engagement and discussions with the leadership at MolDX about the process by which we should put our data together, how to collect it, how to actually go ahead and submit for what -- for the process, which is called reconsideration of the LCD that had been previously published. That engagement was very positive. It was very collaborative and it culminated at the end of the year in November of us submitting and then ultimately them accepting the formal request for consideration that included all of our data. That was in December of last year. There was a bit of a waiting game, which we were all waiting for. And we waited through the first half of the year to -- for the MolDX team to review our submission, to review the updates to the data. The request was very straightforward. It was just simply that we now have data. We believe we have sufficient clinical validity, clinical utility and analytical validity data and that we are ready to be granted coverage for this. We know in retrospect now that there were some delays related to the change in administration and cuts at CMS that delayed the overall activity level at the program. But a few weeks ago, we reengaged with MolDX leadership in-person, had discussions just prior to the publication of this meeting notice. And we're excited when the meeting notice was published as an indication that we are well on our way to the final stages of this process. Let me talk a little bit about the meeting itself. The MolDX process has very sort of concrete -- some -- portions of which were set by statutory requirement processes by which local coverage determinations can be provided. These coverage determinations can incorporate two buckets of information. One is published peer-reviewed data as well as expert opinion from these public meetings, expert opinion that is by key opinion leaders in this space. So that's the purpose of this meeting. The purpose of this meeting is to provide clinical context to the clinical evidence, which we firmly believe is complete to show how the utility of our type of test, the non-endoscopic biomarker testing, enhances the care of patients. And it's important to note that we've been asked this question a bit that this is not an FDA panel. This is an advisory committee. There's no thumbs up, thumbs down decision at the end of it. It's informative. It's intended for a 2-hour meeting, intended that we'll have questions in advance that's intended to engage the experts and provide clinical context of the evidence that's already presented -- that we already presented in our package. And so we have very high expectations for this meeting. We think it will be positive. We are highly confident not just in our clinical evidence, but in the clinical utility of this test. We've performed 40,000 tests so far today in all sorts of settings, whether, as we mentioned, with Hoag, in building broad programs within health systems, in individual practices whether they be primary care or gastroenterology. And so we're very confident that, that message will come out by the experts, which we think will be a diverse group of both the gastroenterologists and primary care physicians as well as a mix of academic experts and patients and folks in practice. So what happens after the meeting? The meeting is again designed to, on the record, have the experts opine on the utility of our test and the clinical validity. From that point on, the results of that meeting will be incorporated into what we believe is the work that's already been performed to date. And the next step in the process will be, as was the case in the initial proposed LCD, there will be a publication of the draft LCD. Again, we have every reason to think based on our discussions that this is -- that we are in the late stages of this, and we are certainly hopeful that a draft LCD will be forthcoming in the early period after the completion of the CAC meeting. Then after that -- sorry, the draft LCD itself is really, from our point of view, is the milestone itself. Draft LCD means that the group -- that the MolDX Group on behalf of the other contractors has committed -- has made a determination that this test should be covered. And then there's the mandatory process that we went through the last time. There will be a comment period, a public meeting to get public comments and then a final LCD will be published after incorporating those comments. We have no reason to expect that there will be any pushback with regard to the comment period. We and others in the industry are supportive, obviously, of this moving forward. So that's what we expect. Again, just to summarize, we are really looking forward to this, just a few weeks away. Everyone is really excited about it. And based on ongoing conversations with folks within MolDX and elsewhere in our consultants, we have really a strong expectations for a very positive outcome. So as we really now do believe that Medicare coverage is coming, and as a testament to that, we are already positioning resources within our company to focus on increasing our Medicare population. We've already taken some proactive steps to ensure once coverage is secured that we'll be able to accelerate our commercialization and capitalize on this market opportunity. Of course, in parallel, we -- as I said earlier, we are continuing to drive our market access efforts that are targeting commercial payers. We've had some very encouraging engagements even in the last couple of weeks with regional and larger plans. And we're looking forward to starting to secure some additional positive coverage policies even before the final Medicare process is complete, and we have final coverage there. And we're also looking forward to starting to see our concierge and contracting pipeline, which, as I said, is robust, start to yield tangible results in the coming quarters. And so with that, let's pass the call over to Dennis.

Thanks, Lishan, and good morning, everyone. The summary of financial results for the second quarter were reported in our press release that has been distributed. On the next three slides, I'll emphasize a few key financial highlights from the second quarter, which I encourage you to consider these remarks in the context of the full disclosures covered in our quarterly report on Form 10-Q. With regard to the balance sheet, cash at quarter end June 30 was $31.1 million. During the quarter, we completed a CMPO with net proceeds of $16 million. The quarterly burn rate was $10.3 million, which is slightly better than the average burn rate for the 4 preceding quarters of $10.5 million. The burn in the second quarter included $7.2 million from ongoing operations and $3.1 million from the quarterly MSA with PAVmed. You will recall at the end of last year, we refinanced our convertible debt into a $22 million 5-year note interest only at 12% with a dollar conversion price, which is held by long-term shareholders. The fair value of the convertible notes in the amount of $25.3 million at quarter end is really the only other substantive change from the previous reported balances at the end of the first quarter. The fair value decrease of $7.5 million reflects a mark-to-market quarterly adjustment in parallel with common stock price changes between the periods. The fair value decrease also drives the corresponding income pickup of $6.8 million reflected in other income in the P&L. The shares outstanding, including unvested RSAs as of last week, are approximately [ 108.5 million. ] The GAAP outstanding shares as of June 30 of [ 101.8 ] million are reflected in the slide as well as on the face of the balance sheet in 10-Q. GAAP shares do not reflect unvested RSA amounts. At present, PAVmed continues to be the single largest shareholder of Lucid Diagnostics with ownership of approximately 29% of the common shares outstanding. Although PAVmed no longer has voting control of Lucid, PAVmed together with the Board and management still have significant influence over Lucid with more than 27% voting interest. Lucid has convertible preferred securities whereby the preferred shareholders are significantly incentivized to delay conversion of the preferred shares into common shares until 2026, namely, the second anniversary from the closing. If all of the preferred shares outstanding were converted to common shares as of today, there would be an additional 49.6 million common shares outstanding. With regard to the P&L. This slide compares this year's second quarter to last year's second quarter and year-over-year on certain key items. I trust you'll review the information in my comments in light of the cautionary disclosure at the bottom of the slide about supplemental information, particularly non-GAAP information. With over 2,700 tests for the second quarter, we invoiced nearly $7 million and recognized revenue of approximately $1.2 million, reflecting a 40% sequential revenue increase and a 19% year-over-year increase. With new investors once again joining us for this call, it's worth repeating that we've communicated in the past quarters about revenue recognition, key determinant in how revenue is recognized at this point in our reimbursement journey is the probability of collection. And therefore, due to the fact that we're in the early stages of the reimbursement process means revenue recognition for the majority of claims submitted to traditional government or private health insurers will be recognized when the claim is actually collected versus when the patient report is delivered, invoiced and submitted for reimbursement. As you'll see in our 10-Q, this is called variable consideration in the jargon of GAAP's ASC 606 revenue recognition guidelines. And presently, there's insufficient predictive data to reflect revenue from all of our quarterly test volume at the point the test is delivered to the referring physician. For billable amounts contracted directly with employers or through concierge medicine and they are fixed and determinable will be recognized as revenue when our contracted service is delivered. Generally, that means when the report is delivered to the referring physician. It's important to note that a pending Medicare approval decision impacts 40% to 50% of our addressable patient population, and therefore, will have a significant impact on our future revenue recognition analysis. Furthermore, for tests performed on Medicare patients with dates of service within 12 months of a final positive Medicare policy will also get paid within a reasonable time frame after the final policy is issued. Our non-GAAP loss for the second quarter of $9.9 million is better sequentially by $1.2 million and better than the trailing 4 quarter average of $10.5 million. The non-GAAP net loss per share of $0.10 is better sequentially as well as better than each of the last 4 quarters with a trailing 4- quarter average loss of $0.16 per share. On a GAAP EPS basis, the second quarter noncash charges accounted for an income pickup of approximately $0.02 per share, including $0.07 income per share from the change in the fair value of the debt and offsetting P&L charges of $0.05 per share related to the Series B1 preferred dividend issued on May 6 as well as other noncash charges disclosed in the press release. With regard to our 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 $11.1 million are modestly lower than the average of $11.6 million for the last 4 quarters. Let me close with a few reimbursement highlights for the second quarter as we've done in past calls. In the second quarter, we billed for 2,756 tests, reflecting about $6.9 million in proforma revenue. During the second quarter, we recognized revenue of about 17% of that amount or $1.2 million. Of that amount, about 41% was from claims submitted in prior quarters with the longest dated item from about 24 months ago. Of the claims submitted in the second quarter, about 65% have been adjudicated, 35% are pending. Out of the 65% that have been adjudicated, about 30% resulted in allowable amount by the insurance company with an average of about $1,786 per test, which obviously is bumping up against the Medicare rate all of it out of network. Although denied, about 40% fit into 1 of 3 buckets, deemed not medically necessary or require a prior authorization or require additional medical records. Additionally, about 49% were deemed to be noncovered. With that, operator, let's open it up for questions.

[Operator Instructions] And we now have our first question. This comes from Mark Massaro from BTIG.

Congrats on the quarter. I guess the first one is for Lishan. I thought it was interesting that the Medicare contractors are meeting together. And so I was just curious, I think it's your MAC is in California, that's Noridian. And then it's sort of -- this appears to be almost like a coordinated group effort. I was just curious if there's anything that you could perhaps opine on about the fact that these contractors are coming together. And then related to that, you guys are in a series of medical guidelines. And so I was trying to think back on a time where a test was not granted Medicare coverage being included in multiple guidelines across the board. Do you think I'm interpreting this reasonably well? And just can you share your perspective on perhaps why these Medicare contractors are all coming together?

Great. Yes. Thanks, Mark. Great questions. So you're right. This is -- the official term is this is a Multi-Jurisdictional CAC meeting. And so that means, as you said, that all four MolDX participating MACs, including Palmetto, which is where MolDX is as well as Noridian, which is the MAC that our laboratories under are co-hosting this event. And so yes, I think that's a really positive sign. I think it's an indication that they're coming together and sort of at the late stages of this process. Although the MolDX program is run by Palmetto, ultimately for the program to work for the other MolDX-participating MACs, ultimately, they have to provide their own version of the Local Coverage Determination. It only works if they're all identical. If you look back at the LCD that was previously published, they were very identical between the three MACs that were participating at the time. And so having them all come together is really -- I would view that very positively as a sense that they are coming together at the late stages and looking to hear the expert opinions to sort of have on the public records. As I mentioned these meetings are an ability for -- officially on the public record for the experts to opine on the clinical utility. You're right, as it relates to the fact that this test not only has outstanding clinical validity data on its performance; clinical utility, both the published data and just the intrinsic implicit clinical utility based on the guidelines, is clear. We have guidelines from the two major GI societies that clearly indicate that endoscopic biomarker testing such as EsoGuard as an acceptable alternative to endoscopy with an equivalent level of evidence. And recently, the NCCN, which is very powerful in payer circles and market access circles, for the first time published a section on screening for esophageal precancer that mimics -- that really mimics those guidelines. So we think really, at the end of the day, that's a very -- pretty fundamental vote of confidence by the expert community on the clinical utility of this test. We expect that at least one of the experts will, in fact, be one of the co-authors of the guidelines and that person will be able to reiterate that in a public setting. So that is the foundation at the end of the day. At the end of the day, the physician experts, the KOLs have published their opinion with regard to the clinical utility, and we expect that to be reflected during the meeting.

Okay. That's really helpful. And then I think I heard you guys talk about how you're taking steps now, early steps to begin to target the Medicare population. It might be helpful just to get a refresher on what percentage of your business today is Medicare. Of that 2,756 volumes, how much of that was Medicare or of the revenue? And what steps are you taking? Of course, I could guess, but I would just be curious if you could expand on how you're sort of repositioning perhaps some of your salespeople? Or are you looking to make some headcount additions?

Yes. Great question. So let's start with the portion of -- let's start with the target population. So as you know, there are 30 million patients at a minimum who are recommended for screening under existing guidelines. The estimates are 40% to 50% of those are Medicare population patients. Now our experience to date hasn't reflected that. And that's because we've made really no particular effort to target Medicare patients. In fact, a lot of our activity, as you know, one of the most efficient ways for us to drive volume has been through these healthcare type events, these Check Your Food Tube event, which have been focused on firefighters. And that's been a nice way for us to keep our sales team lean and to keep our OpEx down while still maintaining sufficient volume to drive engagement with commercial payers. As you know, that's sort of the baseline of how we've been trying to operate here. And again, you might imagine, the fire departments tend to be employed, non-retirees. Sometimes, we test a retiree, but for the most part, those are working people and they're not a Medicare population. So the portion of our testing that has been Medicare over the years has vacillated a bit. I don't believe it's ever been much higher than 20%. Right now, it's running in the kind of 10% to 15% range, again, specifically because we made no effort to target them and the areas we have targeted tend to be a bit on the younger side. So we do think -- and this is one of the reasons why we're getting geared up here. Once we have Medicare coverage, then we do have the ability to get that 10% to 15% number up substantially higher just from our own sales execution. It won't have anything to do with how quickly we can turn over our commercial coverage policies or things that are really dependent on third parties. Ultimately, that will be within our control once we have Medicare coverage. So we -- there's no reason we can't go out and find these patients. And you asked about the steps that we're taking. Yes, there are other companies, and I think others even in your coverage universe who've done this and it's a combination of what you just said, which is positioning resources. We already have a pretty strong presence in the states where that have higher concentrations of Medicare patients, Florida, Texas, Arizona and even Southern California. And so, yes, there's some element of reallocated resources. We don't have any plans to increase our headcount and increase our OpEx or burn until we actually secure Medicare coverage. And at that point, we'll do so judiciously as we see growth and revenue coming in from that. There are other ways. So there's lots of opportunities for digital targeting. We've started some of that right now already, where we can work with data partners to identify through heat maps, areas that have high concentrations of Medicare population, physicians that have a combination, for example, of a large Medicare practice as well as those combining that -- the intersection of that with, let's say, people who have physicians who have a high rate of ordering proton pump inhibitors, which would suggest that they have a GERD population. So this is 2025. There's lots of data out there that we can utilize to help our team better target positions where they -- where we'll encounter more Medicare patients.

Okay. Great. And then maybe one last one for me, I'll hop back in the queue after. I think I was getting some investor questions about perhaps some more expectations around timing on -- after the CAC meeting. I know you talked about how there's a comment period and then you expect a draft LCD after the CAC meeting. I'm just curious, I mean, is that perhaps roughly the fall or so where we could get the draft? And then as far as it relates to the final, is that perhaps either late '25, early '26? Or how are you guys thinking about that?

Yes. So one thing just to correct, I'm not sure if you misspoke. The comment period is after the draft, right? So the sequence is the CAC meeting is completed. They go back and hopefully finalize things into the form of a draft. The draft gets published. And then there's a 45-day window for a comment period and a public meeting, a comment meeting, just like we did last time, a public comment -- a public meeting for comment. Then they are expected at that point to incorporate those comments. Again, we just have no reason to think there'll be any comments beyond what the CAC meeting will say and what we've already said. And then some period of time to get to the final. Now again, just to reiterate, if there's a draft, they want to cover this. And so we view the steps and the time between a draft and a final is really just a bit of a bureaucratic formality. Now in terms of the timing, I mean, look, it's hard to know, that's out of our hands after this meeting is completed. But everything is pointing to the fact, both based on our conversations with the leadership as well as other folks who have a lot of experience in this space, everything is pointing to the fact that the bulk of the work is done. And that this -- the fact that they're convening, as you said, from the very beginning, multiple MACs together convening the experts to opine would suggest that we're really quite late in the process, and we're certainly hopeful that the time between the CAC meeting and the publication of the draft is relatively short. How long that will be? I have no -- yes, so I would rather not speculate at this point, but we think it will be relatively quick.

And the next question comes from Anthony Vendetti from Maxim Group.

Just as a follow-up to that. So without knowing exactly how long to comment -- would you know how long they're going to make a decision after the 45-day comment period, if as we assume right now that the decision is positive, and like you said, there's no reason to assume it wouldn't be based on everything that's to date been published in the comment period and so forth. But assuming that happens, it looks like it's bumping up against 1/1/26 and it's not likely. It sounds like that it would be -- a decision would be made and a [ right ] decision or a decision to move forward would be as of 1/1/26. Could that happen right after that? What's the likelihood that this gets -- once it's decided, implemented across the board?

Yes. So let me just clarify a few things. One, just to be, again, to be 100% clear. The comment period happens after the draft, right? So that's a 45-day window. So there's nothing -- the CAC meet will happen and the next thing we'll hear is a published draft. And so the unknown really is how long that will take. We believe there's some urgency to get these done. I mean there is a sort of a cadence to the overall productivity of the MolDX Group with regard to getting LCDs and TAs out and so forth and as the year wraps up, I think, there'll be some urgency to get it done. The time between the draft getting through the comment period and completing the comment period and getting that to a final, I think I've said this before, I think there's probably at least 3 months if you include the comment period to go from a draft ultimately to a final. But as long as we get the draft reasonably soon, we'll feel -- we feel we're quite good about our prospects. And yes, let's just say hope -- let's just say, we certainly hope that we'll get a draft before the end of the year.

Before the end of the year. Okay. And when you were talking about the initial draft before the end of the year, 45-day comment period and then the final draft. So we're into somewhere in the beginning of '26, correct?

Yes. But I just want to remind you something. So again, the reason why we're focused on the draft as the sort of the actual milestone and we will feel confident that this process has come to a successful outcome is that, if you remember, I don't recall if Dennis mentioned this or not, we have a year -- a backlog of a year that we can bill upon the issuance of the final LCD from that date backwards. So look, we love the draft to convert to a final as quickly as possible. But all of the things that we need to do to extend the activities, the initiatives that we started and accelerate them, there'll be time to do that. And so once we know the draft is done, we'll start working on that. And we'll be able to submit those claims going back a year once we get a final. So that's kind of why our focus is really on the time between the CAC meeting and the draft and then we certainly hope that things will move quickly after that. But there'll be plenty of work to do upon completion of the draft to get things geared up and those -- and that activity will ultimately -- we'll get paid for those ultimately.

Right. Okay. So you'll have the years' worth of claims you can submit, which is helpful, too. But I mean, if we were looking at like -- and maybe it's tough to pin down because we don't know exactly how long it's going to take to do the draft and how long before the final draft is done, but is it possible that it's somewhere around 4/1/26, where you think, okay, boom, everything is ready to go? Or could it drag on into second half '26 as a possibility?

We certainly would be disappointed if that -- if it dragged on beyond that. I don't expect it will.

You don't expect that will? Okay. And then in terms of your commercial pipeline, maybe talk -- if you could just give us a little more color on that because you...

You are -- talking about commercial payers? Commercial payers, yes.

Yes, yes, yes, out of Medicare into commercial...

Yes, I think my perspective on that has evolved a little bit. Once we've gotten Highmark -- let's just backtrack a second. So we didn't really have a final package to engage with the commercial payers until the beginning of this year. So this -- all of our activities, we've had engagements with them. We've talked about them. They know our test. We submitted test to them. We've engaged, as Dennis has mentioned before, with their Chief Medical Officers because they're reviewing our claims out of network and so forth. But the actual sort of meaningful policy, please give us positive medical policy, discussions have really begun earlier this year once we have -- based on our full data package. And with the commercial payers, you actually have to do healthcare economic data that's not required by Medicare, but that's generally part of that process. And so that culminated in our first -- fairly quick turnaround for our first commercial plan in Highmark Blue Cross Blue Shield with that policy becoming effective in May. Now as I said, that getting the first one through the door has had a very significant effect in our ongoing conversations. And we have a pretty significant pipeline. We -- just about every week, literally every week, myself and the Chief Medical Officer and our Chief Operating Officer are on phone calls with medical directors of plans and to push them towards securing policy decisions. Now those don't happen overnight, sometimes they happen in discrete cycles through the year. But those conversations have really been going well because now we have data and we can engage -- it's helpful that myself and we have two physicians on our side on the call talking to physicians on the other side. And the conversations have been very positive. And so we still think that to get broad coverage and particularly to secure the larger plans, particularly the ones that operate under these laboratory benefit manager constructs where they outsource some of the technical analysis to these third parties, I think those will need to secure, those will probably need to wait for Medicare. But I really do expect we're going to start filling the pipeline beyond Highmark with some of these regional plans. And even some other national plans that are not on sort of the typical top 5, but that do have broader coverage beyond regions. Those calls are going well. And it's not surprising that they're going well because the data is pretty overwhelming. I mean we just got really strong data. As Mark mentioned, the guidelines are there. People are really -- the notion that this test operates very effectively as a triage test, that the first thing that people hear is that you're taking 80% to -- 75% to 80% of people are recommended for testing and saying they don't need an invasive test. And that's the kind of -- those are the kind of clinical utility endpoints that really resonate with payers. So if all is positive, it takes time to lock these things down. Highmark has broken ground for us, and we expect to continue to have success in that regard.

Yes. No, that's really helpful, Lishan. And that's kind of how I was trying to tie it together as -- you had Highmark in May of this year and the commercial pipeline is building. And the coming Medicare termination here, it sounds like it should accelerate and some may be waiting for that determination. So the combination of Highmark coming on and now this termination, which is on the near-term horizon, that should increase probably the conversion of that pipeline into actual contracts, right?

Yes, I think that's fine -- go ahead, sorry, Anthony.

Yes, Anthony, another example of Medicare triggering some of the reimbursement. The biomarker legislation, which is still working its way through 23 or 24 states now have adopted. And as you read through some of those policies, many of them require -- or one of the evidence to get covered under is an LCD with Medicare. So that will also have some benefit for us once Medicare is onboard.

But the point I was making at the beginning is that my sense previously that really most of them will wait for Medicare has evolved really based on our discussions over the last few months now that we have a full package. The package is pretty powerful. And I do think there'll be a subset -- a meaningful subset of payers that especially the regional plans and especially the Blue Cross plans that won't wait for Medicare. Yes, there'll be probably some that do. But the notion that kind of everybody is going to hold off and say, well, that sounds great, but call me when you have Medicare. That just doesn't seem to be -- my thinking is really evolved on that. That doesn't seem to be a universal hurdle. Our hurdle previously was the data package and now we have a data package that we can sink our teeth into in these conversations. And all of those with regard to the data, all those conversations have been really positive.

And the next question comes from Mike Matson from Needham & Co.

So just curious what sort of feedback you've received from MolDX on the decision to hold the CAC because earlier this year it didn't sound like that was something that you guys were expecting. So I guess, why are they choosing to do this versus just taking the evidence that you -- the data you already have and just going ahead with an LCD.

Yes. I think we have had -- as I said, we've had very good relationship, very good engagement, very open conversations with the MolDX leadership. But as you know, once we submitted, there was a lot of activity prior to the submission of the request reconsideration just to make sure that, that was all buttoned up and consistent with their expectations. And during the first half of the year, while they were working on it, we didn't really get in their way. I mean we won't let them do their work. But after the publication of the notice, we had quite a bit of ongoing engagement with them. And it's really -- honestly, I feel like it's checking all -- it's an opportunity to kind of check all the boxes to make sure that when everybody convenes together, that every piece of information that can be brought forth to this decision is officially available. And one of the things that I didn't realize really until this notice came out was how important the CAC meeting is to supplement clinical evidence with key expert opinions beyond just the guidelines and just having them having physicians, including private practice physicians talk about how they incorporate in their practice. And how the intrinsic utility of EsoGuard is allowing them to do what they otherwise previously were not doing, which is screening these patients who are well identified and under guidelines were recommended for testing. So there's a bit of a narrative in a clinical context, it's not -- that is not immediately -- it's not sort of necessarily immediately available in the published literature. They understand that clinical evidence, they can read the papers. It's more providing clinical context from specialists who actually are engaged in this day-to-day. And so having that supplemental information is really just an important part of locking down the argument so that they can receive a consensus among the four MACs so that all of them can sign on to the coverage determination.

Okay. Got it. And then just want to clarify, I think I know they answered this, but in case any investors are wondering, there's no discussion or potential change resulting from this CAC meeting around the amount of that $1,938 payment amount? I mean that's a separate thing, correct?

Right, yes. So there's no -- this is about coverage. And the payment side goes through the CLFS process, so that's locked in.

Okay. And then just given that this is likely going to take 6-plus months longer than you had thought to get the LCD. Are you going to do anything to reduce your cash burn rate? Would you consider throttling back the test volume some in the meantime. And I mean, I imagine you've got a backlog, you could still collect some revenue from the tests you've already done.

Yes. I think -- I'm sure Dennis has some thoughts on this. And the answer to that is no. I mean we don't want to slow down as -- just as we're entering a phase where we expect to start seeing some commercial contracts and policies come into play as well as Medicare. If anything, we want to be -- look, I'd love to be in a position we're not going to do this where we can pre -- start dialing off some of our resources in anticipation of expanded commercialization. We're not going to do that. We're looking to maintain our burn and perhaps have a decline a little bit by contributions from contracting and concierge medicine. But this is coming, and so we don't want to be -- we want to be in a position where we're operating on all cylinders as these coverage policies start to come in. I don't know, Dennis, if you have any other thoughts on that.

Yes, a couple. So beginning the current quarter, the third quarter with $31 million in cash and average burn around $10 million, theoretically got 9 months of runway without considering any reduction of the burn from any of the cash pay activities, which we think will be more meaningful in the second half of the year. So it makes sense to continue along this trajectory. We also have optionality on the capital market side. We're no longer baby shelf limited. We have an ATM that we've barely used. And so with these meaningful events coming up, it makes sense, particularly knowing that anything that we engage on the Medicare side in terms of test volume will ultimately get paid during that 12-month look back. It just seems to make sense to continue on in this path. And we expect that the realization gap between what we build and what we collected to continue to shrink. We also have a backlog of submitted claims at around $15 million that our teams are continuing to pursue collection [ in ] my comments in terms of analyzing the revenue for the current quarter. The oldest data item that was part of the revenue base was from 24 months ago. So hopefully, that time lag will shrink as we continue to move forward. But working that backlog will also help us as well.

And the next question comes from Ross Osborn from Cantor Fitzgerald.

Congrats on the progress. So starting off on the Hoag partnership, would you provide some more color on the organization in terms of the amount of patients on board? What those patients look like and how you will fit into the workflow, allowing patients to get access to your Eso products?

Yes. Thanks for giving the opportunity to talk about that a little bit further because it's really an exciting model and it's an exciting template. And it's great when you have -- when you're working with a group that has such a passionate leader in Dr. Ken Chang. He literally has billboards up and down the highways of Orange County saying how he's going to eliminate esophageal cancer in Orange County. So it's been great. This is a true multidisciplinary program across the whole health system. It's being led by Dr. Chang and his GI colleagues. But the plan is to extend throughout the system, including, as I mentioned, there are 200 primary care physicians in addition to the gastroenterologists, and they have a fairly robust concierge medicine practice as well. So the logistics of that are what you might imagine. We are working through with them on who will do the cell collection, we're going to help with that. We'll help with the training and we will help with some of the actual cell collection portions. The outreach, the patient acquisition efforts in terms of determining where to find these patients at risk working within their EHR systems to identify patients at risk, educating the primary care physicians on the risk factors on the guidelines to drive patients within this practice. So it's a large system. There are a lot of patients, a lot of primary care physicians, but a very comprehensive systematic program that will go out and find these patients and pull them through in a very systematic way. So it's really a template for how we are talking. We're already talking to other local with the news. Hoag is quite good at telling their story publicly, and that news has got out in the region and we've gotten inquiries from other large systems within the region about their interest in replicating what Hoag is doing. And we even have some activity all the way across on the East Coast that centers here in the Northeast that are looking to replicate this model. And obviously, they'll all be tailored to their individual health system structures, but the model is the same.

Okay. Great. And then, Dennis, what does the business model look like here for you guys? And how should we think about margin contribution?

Yes. So it roughly a $2,000 test using the Medicare rate as kind of the benchmark. The next patient in the door drives a 90% contribution margin. The cost of the collection device is in the $55 range. The cost of consumption of lab supplies to process the report, you're talking less than $125, so under $200 to process the next patient in the door. You're talking about pretty high margins. The fixed cost to run the lab is pretty consistent quarter-to-quarter, it's about $1.2 million per quarter. So as we continue to grow volume that we get paid for at or around the Medicare rate and that 90% contribution margin will continue to drive the actual GAAP and non-GAAP margins that are reflected on our P&L as you absorb those fixed costs. So volume-dependent pathway to profitability is pretty straightforward. We've got -- for the last several quarters, our OpEx has been pretty flat. We don't see a significant increase in the overall OpEx to drive that process. We think G&A and R&D will be pretty steady as we move forward. Obviously, we'll make some investments in the sales and marketing area. But even if you were to go full bore with full reimbursement, you're talking about the cost of acquisition for a patient even with a very active kind of outreach program, probably less than $400 per patient, you can still drive 70% margins. Obviously, we won't spend that money until we have great assurance that we're going to get paid for it. But that's, overall, what the pathway to profitability looks like in self-sustaining.

And the next question comes from Ed Woo from Ascendiant Capital.

Congratulations on the progress. My question is on capacity of tests. Assuming you do get approval for Medicare, what is the current capacity of tests you could do per quarter? And will you need to significantly invest to ramp it up?

Great question. You're a little bit breaking up there, but the question was around capacity. Operator can -- we have a issue with the -- okay. Great. So yes, so we've touched on this before, but it's worth reiterating that the laboratory has plenty of excess capacity, fivefold capacity, even within the physical location with very minimal additional personnel that would be required to increase that capacity. So that same is true on the manufacturing side. The bulk of the manufacturing right now is happening on our high-volume manufacturer, Coastline, in Tijuana. And that can be scaled in an unlimited way. I mean it's just adding manufacturing lines along the way. So our -- and also with regard to the cell collection kits, the vials, that -- we've transferred that to a high-volume manufacturer. So all three of those, none of those will be, in any way, a limiting factor and won't require a significant capital investment to get us to be able to handle upcoming increases in volume. And as Dennis mentioned, it will really come down to how we -- sort of an incremental fashion of how we dial up the sales and marketing team in parallel with volume growth and revenue growth.

No further questions that came through at this time. I'll now turn the call over back to Dr. Lishan Aklog for closing remarks.

Great. Thanks, operator, and thank you all for taking the time and for your attention this morning. Thanks for all the great questions. I really hope you leave today with a better understanding of the LCD process, the role of the CAC meeting, our expectations from the meeting, and to the best of our ability, our expectations with regard to events after the CAC meeting. I appreciate your patience. There's a lot to talk about there. And we spent quite a bit of time on it, but hopefully, that it was worth getting into the details. Again, really, this is a key milestone. We really are confident that we are going to get Medicare coverage, not a matter of if, but when. And this CAC meeting is sort of an indicator that we're in the late stages. So we encourage you to keep in touch, to listen in on the call. Feel free to reach out to Matt, if you'd like to -- if you don't have the information for the CAC meeting, if you'd like to listen to that, I remember it's a public meeting. We expect that it will be useful that the clinical experts will provide very strong support for the clinical utility of the test. They'll talk about the experience to date and tens of thousands of patients based on their own experience. And then also, obviously, as we discussed during the questions, emphasizing that the guidelines recommend this and there is a need for this that's been universally accepted within the community. So with that, I really appreciate it. We appreciate your time again. We encourage you to keep abreast with our progress via news release, our calls like this as well as our website and through social media. So thanks again, and everybody, have a great day.