Greetings, welcome to the Lucid Diagnostics Business Update Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] And please note that this conference is being recorded.

I will now turn the conference over to Adrian Miller, Vice President of Investor Relations. Thank you, sir. You may begin..

Thanks operator. Good afternoon, everyone. This is Adrian Miller, Vice President-Investor Relations at Lucid Diagnostics. 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 of Lucid Diagnostics.

The press release announcing our business update and financial results is available on Lucid's website.

Please take a moment to read the disclaimer about forward-looking statements in the press release, the business update press release and this conference call, both include forward-looking statements, and these forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from the 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 risks and uncertainties that may affect future operations, see Part I and Item 1A entitled Risk Factors in Lucid's most recent annual report on Form 10-K filed with the SEC and the subsequent update filed on quarterly reports as Form 10-Q and any subsequent Form 8-K filings.

Except as required by law, Lucid disclaims any intentions or obligations to publicly update or revise any forward-looking statements to reflect changes in expectations or in events, conditions or circumstances on which those expectations may be based or that may affect the likelihood that actual results will differ from those contained in the forward-looking statements.

So with that, I would like to turn the call over to Lishan Aklog. Dr. Aklog..

Thank you, Adrian, and good afternoon, everyone. I'm happy to report that Lucid Diagnostics is making excellent progress on all fronts and that we're laying a solid foundation for driving our long-term growth strategy.

We continue to drive EsoGuard commercialization, expand our sales infrastructure, execute the second stage of our Lucid Test Center rollout, transition to our own fully staffed laboratory and update our clinical trial strategy to best serve our growth strategy.

Our balance sheet remains strong, providing us with the resources to execute this growth strategy. Before proceeding, I'd like to thank our long-term shareholders for your ongoing support and commitment. We are singularly focused on growing Lucid while enhancing long-term shareholder value.

I'll start by providing an overview of our business and then we'll pass the baton over to Dennis who will provide a financial before opening it up to questions. Let me first provide some background on our company and its mission.

Lucid Diagnostics is a commercial stage cancer prevention diagnostics company focused on the millions of chronic heartburn patients who are at risk of developing highly lethal esophageal cancer. Unlike other common cancers, mortality rates are high even in their earlier stages.

So preventing deaths requires us to detect esophageal pre-cancer, which occurs in approximately 5% to 15% of that risk chronic heartburn patients. Esophageal pre-cancer can be monitored in its early phase and cured with an endoscopic ablation procedure in its late phase. Ablation reliably halts progression to esophageal cancer.

Although, esophageal pre-cancer screening is already recommended in millions of chronic heartburn patients, fewer than 10% undergo traditional invasive endoscopic screening. The profound tragedy of nearly every esophageal cancer diagnosis is that likely death could have been prevented if the patient had been screened.

The missing element for a viable early detection program to prevent these thousands of tragic deaths has been the lack of a widespread screening tool.

We believe our EsoGuard NGS methylated DNA test performed on samples collected in the brief noninvasive office procedure using our EsoCheck Collection Device is the first and only commercially available diagnostic test capable of serving as such a widespread screening tool.

We believe EsoGuard has a potential to become the standard of care to detect esophageal pre-cancer in at risk chronic heartburn patients with a total addressable market greater than $25 billion.

As we previously announced, the American College of Gastroenterology recently updated its clinical guideline on the diagnosis and management of esophageal pre-cancer. The first such update since 2016, the guideline reiterates the longstanding recommendations that chronic heartburn patients should undergo esophageal pre-cancer screening.

If they have at least three of six defined risk factors, which include male sex, age over 50, obesity, smoking and a family history. I would like to highlight two key updates that greatly enhance the commercial potential of Lucid products contained in this guideline. First, the guideline no longer hedges on recommending screening for women.

This more than doubles the target population for EsoGuard testing to an estimated 30 million Americans. Second and most importantly, for the first time, the guideline endorses non-endoscopic biomarker screening as an acceptable alternative to costly and invasive endoscopy.

EsoGuard and EsoCheck which are described in a guideline are currently the only such non-endoscopic biomarker screening test. This is an exciting development for Lucid and I can't over emphasize it's important in supporting our efforts to eradicate esophageal cancer.

We look and expect other – we look forward for other professional society guidelines to follow suit. Let's now review how EsoGuard commercialization has been going. We continue to see excellent traction with robust growth in EsoGuard testing volume.

We processed 533 commercial EsoGuard test in the first quarter of 2022 that represents a 76% sequential increase from the fourth quarter of 2021 and a nearly 500% increase annually from the first quarter of 2021.

Testing volume growth was strong in both sales channels, primary care physician referrals to our Lucid Test Centers, as well as tests performed by gastroenterology and foregut surgeon, specialty practices and institutions.

Now that our sales process and sales training is well honed and increasingly predictable, our near-term growth strategy is clearly defined.

We are investing in sales infrastructure, training and supporting resources sufficient to drive steady testing volume growth to demonstrate clinical utility and generate claims history to support our reimbursement efforts.

Once reimbursement is more fully established, we will transition to full throttle efforts to drive testing volume and revenue growth.

Our sales team consists of market development managers who focus on establishing EsoGuard testing at gastroenterology, foregut surgeon, large primary care and multi-specialty practices as well as large academic medical centers and integrated health networks.

Our sales reps are focused on engaging with primary care physicians, including those within the referral networks of our gastroenterology and foregut surgeon practices, the team led by our national VP of Sales now consists of three area directors covering the East, Central and West respectively, six market development managers, 17 sales reps, and several sales operations staff.

We are hitting our hiring targets and are actually bit ahead of schedule to hit our end of year goals. Our sales training process is continuing to be developed and is well honed and quite intense. Our goal is to have new reps operating effectively within about four months of hire.

Some of our growth strategy remains our expanding network of Lucid Test Centers. To test centers operate in leased medical office suites, each staff by a Lucid employee EsoCheck trained nurse practitioner or medical assistant.

The center support our primary care physician sales channel by providing a facility where a patient referred for EsoGuard testing could undergo the EsoCheck Cell Collection procedure.

The reps work to educate the primary care physicians on the relationship between chronic heartburn and esophageal cancer and on EsoGuard's availability as a new non-invasive alternative to screen at risk patients, the physician then just orders a test, which is performed at one of our test centers.

Single nurse practitioner can reasonably perform 20 EsoCheck procedures on a normal workday. Each test center covers its personal and medical office lease costs with only a couple of reimbursed tests per week.

The Lucid Test Center program completed its first stage during the first quarter of 2022, having advanced from a pilot program in Phoenix launched in the third quarter of 2021. The program has developed into a regional program covering seven metropolitan areas in Western states. We recently launched Stage 2 of our Lucid Test Center program.

We plan to open test centers in nine additional states this year. And last month, we hired a Director of Clinical Services with extensive experience in operating dialysis facilities for Fresenius and DaVita to oversee this expansion.

We continue to pilot our EsoGuard telemedicine program, which we launched in December, patients who learn about EsoGuard testing can request an online visit with the telemedicine physician who can send the patient if appropriate to a Lucid Test Center for EsoGuard testing.

Although, patients in any Lucid Test Center city can access the telemedicine program, we continue to only actively pursue direct-to-consumer advertising on a limited pilot basis in Phoenix, consistent with the near-term strategy of previously described.

We're just over four months into the program and will soon have sufficient numbers to assess the efficacy of various modes of direct-to-consumer engagement. I'd like to now discuss our laboratory operations.

The first quarter and recent months have been full of important developments in our laboratory operations, which are critical to the future success of the company.

At the end of February, Lucid DX Labs, the wholly-owned subsidiary of Lucid Diagnostics acquired the assets necessary to operate its own – our own CLIA-certified, CAP-accredited clinical laboratory. The laboratory operates in the freestanding 20,000 square foot building in Orange County, California.

And last month, we hired a new VP of Laboratory Operations with nearly two decades of clinical laboratory experience, including at LabCorp, Abbott and Rosetta Genomics.

Under his and our Chief Scientific Officer’s leadership, we plan to accelerate the transition from the current management services agreement to the lab being fully staffed by Lucid employees. In parallel with the acquisition, we upgraded our revenue cycle management provider to SYNERGEN Solutions.

SYNERGEN will be up and running this month and will begin billing and processing claims on behalf of Lucid DX Labs. This will be the first time a Lucid entity will be billing directly for EsoGuard testing. Claims held since the lab transition in February will be submitted once SYNERGEN is active later this month.

The transition from fixed monthly payments from our former laboratory partner to direct billing will result in a temporary pause about a network receipts and recognize revenue as Dennis will describe in more detail. Now, a brief update on where we stand with reimbursement.

On the private payer side, we were pleased to announce earlier this week that we executed our first commercial payer agreement, Lucid DX Labs entered into a participating provider agreement with MediNcrease Health Plans, LLC, and national directly contracted multi-specialty PPO provider network with over 8 million lives covered through its clients and payers.

Persons covered by Medicare by MediNcrease clients and payers will have in-network access to the EsoGuard testing. The agreement provides rates of reimbursement as a percent of charges for services rendered, including performance of the EsoGuard test.

We are pleased that the effective payment for EsoGuard under this agreement which is based on a list price of approximately $2,500 is consistent with our goal of protecting the effective Medicare payment of just over $1,900.

We will continue to work tire tirelessly to secure many more such participating provider agreements, covering millions and more lives in the coming quarters. In parallel, we continue to collect critical clinical utility data demonstrating that EsoGuard positively impacts patient care.

Such data will be necessary for us to secure direct in-network coverage from major regional and national health plans. We've also seen progress on the Medicare reimbursement front.

Last month, Medicare contractor, Palmetto GBA’s MolDX program published a proposed Local Coverage Determination, or LCD for test designed to detect upper gastrointestinal pre-cancer and cancer. Consistent with its practice over the past couple of years, the proposed LCD is a foundational LCD.

That means it provides criteria for a category of testing, not a specific test. Proposed LCDs are by definition works in progress for public review.

We have impatiently awaiting this important next step in the process since we completed CMS’ Clinical Laboratory Fee Schedule or CLFS process culminating in the important first step, namely final Medicare payment determination, which became effective on January 1, 2021.

The proposed LCD outlines criteria that MolDX expects upper gastrointestinal pre-cancer and cancer molecular diagnostic tests to meet. These criteria include active gird with at least two risk factors, as well as evidence of analytic validity, clinical validity and clinical utility.

Although it found that no currently existing test has fulfilled these criteria, it indicated that it will monitor the evidence and will provide coverage based on the prudent literature and society recommendations.

It’s important to emphasize that the provisional LCD was published prior to the publication of the updated ACG guideline, and as such does not take into consideration the recommendation supporting non-endoscopic biomarker testing, such as EsoGuard as an acceptable alternative to endoscopy for esophageal precancer screening.

The publication of the proposed LCD triggered a written comment period that extends until this Saturday. We along with multiple other stakeholders will be submitting comments suggesting important modifications to the proposed LCD.

MolDx also held a substantive open meeting yesterday during which we along with other stakeholders and interested parties had the opportunity to address the proposed LCD. We previewed our suggested modifications to the proposed LCD subsequently Dr.

David Poppers of NYU, who has performed hundreds of EsoGuard tests discussed the clinical utility of EsoGuard testing in his practice.

And finally, Mindy Mordecai, Founder of the Esophageal Cancer Action Network and a widow of an esophageal cancer victim offered a moving and passion statement on how critical non-endoscopic biomarker testing is to prevent esophageal cancer deaths.

In addition, we recently learned that Meridian Healthcare Solutions, the Medicare contractor which covers LucidDx Labs in California and participates in the MolDx program has scheduled its own open meeting on May 26 and a written comment period that extends through June 11.

We look forward to the opportunity to address the proposed LCD directly with Meridian as well. A final LCD will not be issued until the Medicare administrative contractors have had the opportunity to assess and consider the comments written and comments during the public meetings. Let’s now wrap up with our clinical studies.

As I’ve said on many occasions, expanding the clinical evidence for EsoGuard testing is a pillar of our growth strategy and was a key impetus for us raising capital in the fall.

Over the past couple of months, our management team, along with our Board have been reviewing our clinical trial strategy to make sure that the substantial capital we are investing in clinical trials is being deployed in an optimal fashion, consistent with our short and long-term strategic goals and situation on the ground.

There are numerous factors we’re considering in addition to optimal cap – in addition to optimal capital utilization.

These include our current understanding from the trenches on what drives clinical adoption, the rapidly evolving reimbursement landscape I just described, promising research data on a next-generation version of the EsoGuard assay and the opportunity to conform the clinical trial processes to current clinical practice.

We expect this updated clinical strategy to be finalized in the coming months. One key aspect of our updated strategy is already underway. We are doubling down on our efforts to generate clinical utility data to support commercial and Medicare reimbursement.

Clinical utility trials are designed to demonstrate that EsoGuard impacts medical decision making. We have multiple such studies, which we expect to launch in the coming weeks, including a retrospective review of Dr.

Popper’s NYU experienced focused on the impact of EsoGuard on medical decision making, additionally multiple prospective clinical utility studies, including a Lucid sponsored registry at existing commercial sites, a perspective Lucid sponsored clinical utility study named CLUE C-L-U-E and prospective clinical utility studies that are institutionally sponsored at Northwell Health and at St.

Joseph’s Health, New Jersey. With that I’ll pass the baton onto Dennis to provide an update on our financials before opening up for questions..

Thanks, Lishan and good afternoon, everyone. Our preliminary and summary financial results for the first quarter ended March 31, 2022 were reported in our press release that was published earlier today. We plan to file our annual – quarterly report for Lucid Diagnostics on Form 10-Q with the SEC on May 16, the due date.

And at that time it’ll be available at sec.gov and on the Lucid website. As you already know from our previous quarterly corporate update calls that as a rule EsoGuard test performed recognizes GAAP revenue when cash is collected by the company.

Also as previously mentioned, this more than likely will be true during this transition period of negotiating third-party private payer reimbursement contracts and related coverage policies.

As I reported to you in previous quarters, the compliance purposes during this reimbursement transition period, we negotiated a short-term month to month fixed payment arrangement with the contract laboratory that was processing the EsoGuard assay and was performing the insurance company, billing and collections function.

This commercial agreement became effective on August 1, 2021, and terminated to concurrently with the opening of our own lab on February 25, just a couple weeks back.

We recognized $189,000 of revenue as part of the EsoGuard commercial agreement with ResearchDx for the partial period from January 1, 2022, through the end of the agreement on February 25. Now that we are operating our own laboratory during following the February asset purchase agreement, we will be able to directly bill payers.

As Lishan described direct billing will occur in the second quarter once our new revenue cycle provider comes online. Future revenues will be recognized based upon actual collections until such time as the coverage policies are in place with CMS and payment contracts with the private payers.

This obviously can result in timing of revenues recognized versus timing they are submitted for third-party reimbursement until these future conditions are met. The gap in claim submission from this transition will impact near-term GAAP revenue recognized until the system catches up with claims for tests performed during the transition.

The number of EsoGuard test performed and submitted for payment are provided in the press release and was discussed earlier by Lishan. Obviously, we’re in the early stages of our commercial launch, particularly with our test centers.

We’ll continue to evolve our reporting metrics as various sales and marketing efforts further influence adoption, particularly with the ramp up of our Lucid Test Centers and our EsoGuard Telemedicine Program in cooperation with UpScript. Presently, there are five banking analysts who have issued coverage on Lucid and others doing their diligence.

The quantity of EsoGuard tests payable at the CMS payment rate required to meet the 2022 revenue estimates provided by the analysts are achievable. The quantity and collections – of collections are highly dependent upon the evolving reimbursement landscape.

With regard to revenue Lucid recognized approximately $200,000 of revenues related to EsoGuard for the quarter end at March 31.

Despite the negative gross profit for this period, which reflects the initial test center startup-related costs at modest volumes, incremental gross margins continue to be around 90% and contribution margins can be north of 60%. These lower test volume amounts have a minimum level of fixed cost associated with just being operational.

Now a few comments about operating expenses, sales and marketing to start. For the quarter ended March 2022 sales and marketing expenses were approximately $3.3 million for the quarter compared to $700,000 for the corresponding prior year.

Reflects about – and also reflects an increase of about 12% sequentially, not including stock based compensation charges. This largely reflects head count increases and related costs. On the G&A front.

G&A expenses were $5.7 million for the quarter ended March 31 compared with $1.2 million for the corresponding period last year, and approximately a 13% increased sequentially. The increase are largely related to compensation and other outside consulting services related to patents, regulatory compliance, legal costs and public company expenses.

R&D expenses for the quarter just ended were approximately $2.9 million as compared to $1.8 million for the corresponding period last year, and are slightly lower sequentially with the changes between the periods largely tied to clinical trial expenses.

There’s a table we provide in the press release published earlier that adjusts each of these components of operating expenses for the embedded non-cash stock based compensation expense.

Without the stock based compensation expense total operating expenses for Lucid were $8.1 million compared to $2.9 million for the three months ended March 31 and 2021 respectively.

With respect to the loss per share amounts, Lucid Diagnostics reported a first quarter 2022 net loss attributable to common stockholders of $12.3 million or a loss of $0.35 per common share versus the same period in the prior year of a loss of $3.7 million or $0.26 per share.

The press release also provides a tabled entitled non-GAAP, which highlights these amounts along with non-cash charges, namely depreciation, stock-based compensation, acquisition related costs, all to enable better understanding of the company’s financial performance.

You’ll notice from the table after adjusting the first quarter GAAP lost by approximately $4 million for non-cash charges, the company reported a non-GAAP adjusted loss for the first quarter of $8.2 million or $0.23 per common share. Lucid had cash of $47.9 million as of March 31 that compares to $53.7 million at December 31.

As you aware from our last call Lucid entered into a committed equity facility with an affiliate of Cantor Fitzgerald, where Cantor committed to purchase up to $50 million in the company’s common stock from time to time at the request of the company. Any future funding from this facility is completely at the discretion of the company.

And if utilized likely would extend the company’s runway well into 2024. Unlike PAVmed, Lucid is not eligible to put a shelf registration action until after November, 2022 or more than 12 months after the IPO.

Likely described about the PAVmed shelf, the Board considers having available financing options, part of their governance duties, even if utilization would finance as well under 2024.

So they consider part of their duties to understand what the long-term opportunities the company are and this gives us that vehicle short of being able to put a shelf in place. There were no issuances of stock under this vehicle so far. With that operator, let’s open it up to questions..

Thank you, sir. [Operator Instructions] Our first question comes from the line of Ross Osborn with Cantor Fitzgerald. Please proceed with your question..

Ross, good afternoon..

Hi. Congrats on the progress. Thanks for taking our questions..

Hi, Ross.

How are you?.

I’m well. How are you all? So starting off maybe just I’d love to hear what you’re seeing in the operating environment.

Are you seeing any lingering headwinds that are still limiting growth at this point?.

You’re referring to kind of macro issues like COVID and such..

Yes..

No. I think we’re – yes, look, I think with the lifting of various restrictions and so forth, it’s really no longer a significant issue. As I’ve emphasized in the past because we’re entirely outpatient based. The sort of challenges associated with inpatient access are just something we don’t deal with, so we’re in good shape there..

Okay, great.

And then could you provide a little more detail of where you stand in the commercialization process with regards to the Phase 2 of your plan?.

You mean with regard to the test centers?.

Yes..

Yes, right. So we are – as we said, we announced the launch of the second stage. We’ve identified nine locations, in nine metropolitan areas across the country. And these include larger states, such as California, Texas, Florida, New York, Ohio and Illinois.

And we are in the process of doing what we do to open these centers, identifying geography, looking at various factors that impact that proximity to health facilities and primary care practices, other demographic criteria. We are hiring – in the process of hiring and have hired sales reps in these areas.

I think I noted last – during our last call, that actually in several of these states, for example, in Ohio and in Southern California, we actually already have a presence with market development managers and supporting reps who’ve been calling on gastroenterologists.

So it’s a little bit different, a little bit of a lower hurdle than in some of the states where we were coming in fresh during the first stage. So making solid progress at identifying locations and hiring nurse practitioners and sales reps. And we look forward to starting to bring these cities online very soon..

Okay, great.

And then last one for me regarding the ACG update I realize this one, it’s only been a month but have you seen any acceleration in testing volumes since that went out or at least interest?.

Yes. I don’t – we never, I think I’ve said this before, so I’ll reemphasize that. Our interactions with clinicians in the field has been relatively straightforward in terms of making the case based on the existing data and the actually the existing ACG guidelines.

So it’s not like there was this big gap that we were trying to fill with these updated guidelines.

And so – and that’s not to in any way understate the importance of EsoGuard and EsoCheck being explicitly mentioned, and literally a photograph of the EsoCheck device in the guideline and the fact that the guideline really addresses us as the only existing test that it serves as a non-endoscopic biomarker screening tests.

But the greatest impact from the guideline is certainly going to be around reimbursement.

As I mentioned in my comments, the proposed LCD specifically references the importance of guidelines and making final coverage determinations and preceded the publication of this guideline and also what our private payer engagements, the updated and more specific guidelines are extremely important.

So will it have some affect a tool in our armamentarium as we talk to GIs and to primary care physicians? Sure. But it’s not like we’ve been struggling to get that message across without it – with the prior guidelines..

Okay. Got it. Thanks for taking my questions and congrats again..

And our next question comes from the line of Mike Matson with Needham and Company. Please proceed with your question..

Hey guys, this is Joseph on for Mike..

Hi, Joe.

How are you?.

Quick question around, I guess, Phase 2. I’m doing very well. Thank you very much. Yes, in terms of Phase 2 for the launch of the nine additional sites is this, I guess a full launch in 2022, you have nine additional sites that will be up and running and completing EsoGuard tests.

I guess, part two to that is there a certain cadence that you guys are expecting or is this going to be kind of one lump sum of site additions as we saw in Phase 1?.

Yes. Great. Thanks for the question. This definitely is a 2022 plans, our goal and our ramp up with regard to sales reps that will be driving cases to these test centers is consistent with a ramp culminating in the fourth quarter of this year.

And the cadences we’re moving forward on online, simultaneously, in some locations it’s easier to add, to identify and hire nurse practitioners and reps than others.

And so this is a multi – this is a parallel path across online states simultaneously in contrast to what we did in stage one, where we started with Phoenix, then we did three and then we did another three..

Okay, great.

And I guess since you guys really only need a small office at the end of the day, there hasn’t been any trouble finding space in these metro cities, correct?.

No, I mean, we have high standards. We look for nice space and nice locations that are convenient for patients to based on traffic patterns and so forth. But there are plenty of these – these are not big, big locations, they’re two or three offices. And they’re not hard to find..

Okay, great. And then maybe just one around I guess, revenue per test, a big drop off sequentially. Was this all based on cash collection timing or did this have anything to do with the coverage? The inclusion of coverage from the Med increased health plans? I don’t know if you guys have already started..

Yes. It has nothing to do with – just briefly comment and I’ll Dennis add to it. It has nothing to do with the reimbursement issues around Medicare or otherwise.

It’s entirely timing with regard to the transition between the model where we were collecting a fixed revenue – fixed amount of – fixed payments from ResearchDx, which was the provider of record and the billing entity going into fair worry. And that transition to us billing directly it’s entirely based on that.

It’s just not – there’s no issue with regard to sort of dips in volume or in reimbursement or anything like that.

Dennis, do you want to maybe elaborate a little more?.

Yes, sure. Joseph it was purely formulaic. You had been collecting $100,000 per month from ResearchDx, $189,000 recognized was $100,000 for January and 25 of 28 days in February times $100,000 gives you $89,000.

The tests that we can bill after February 25 because of our own lab have all been delayed until we have our own revenue cycle provider up and running. So all of the tests that were done in March, which were significant will be billed and that will occur.

It’s obviously a timing delay, but they will be billed and we will collect if it’s at the out of network rates, use the – the past is kind of an indication of what the out of network rates, it’s somewhere between $1,000 and $1,300 per test. And we expect to be able to collect that.

So purely formulaic in terms of the past arrangement and the transition from using a third-party lab provider to our own lab..

Okay, great. Yes, that makes perfect sense. That’s all from us. Thank you guys so much and congrats on the quarter..

Thanks, Joseph..

Thank you. And our next question comes from Kyle Mikson with Canaccord Genuity. Please proceed with your question..

Kyle, good afternoon..

Hi, Kyle..

Kyle, you may be on mute..

Kyle, your line is live if you are there. Okay. I guess he is not with us at the moment. Our next question comes from Ed Woo with Ascendiant Capital. Please proceed with your question..

Ed, good afternoon..

Yes. In terms of, there’s a lot of discussion about inflation I’m sure is hitting everybody, including you guys.

How often do you guys get to change your reimbursement rate? Is this something that is revisited annually? And do you think that’s going to have any impact with rising costs, especially for personnel, nurses or whatnot for your business?.

Yes. That's a great question. I mean, I think just at a high level historically, set reimbursement from payers whether it be Medicare or private payers are really not indexed for inflation and we don't have sort of the luxury of going back to the well on an annual basis.

So fortunately – we have really healthy margins with these rates and we'll be in position as it relates to sort of our COGS, hasn't been the cost of goods – sorry, there hasn't been much in the way of an impact there. Although we do see supply chain challenges on parts and sub-assemblies and things like that.

So that's something we monitor carefully and we try really hard to order long lead time items in [indiscernible] but on the payment side, we're lucky to go and we have a healthy margin that built in..

Great. And then you talk about a little bit about like, maybe some of your medical supplies, you don't see any impact near-term because you guys been able to order early enough to, in order to get whatever you need to..

We do our best. Yes, we did – we have had some challenges with, I've talked about on PAVmed calls in the last couple of quarters, but with regard to Lucid, it's really fairly, we haven't had any issues, the EsoCheck manufacturing we have ordered plenty of long lead time items. Our team is very meticulous about that.

I didn't mention it in our call, but we are making progress towards wrapping up the transition to our high volume EsoCheck manufacturer coastline in the coming months. So hasn't been an issue and with regard to the laboratory itself, reagents and so forth, that hasn't been a challenge either yet. So fingers crossed, it'll stay that way..

Great. Well, thanks for answering my questions and I wish you guys good luck. Thank you..

Thanks Ed..

And our next question is from Kyle Mikson with Canaccord. Please proceed with your question..

Hey, Kyle, welcome back..

Hey, sorry for that. I'm just curious about the private payer coverage, like efforts in the quarter.

I mean, we saw the CMS updates and then just there was definitely some I don't want to say noise, but there was definitely some – it was kind of an exciting quarter for, I guess, like your space in particular, what did private – how did private payers kind of interact or are even having those discussions today?.

Yes, we are having those discussions and the MediNcrease contract is the fruits of that. And we have more we're working on it and we expect to steadily, as I've said before, the private side is sort of blocking and tackling door to door combat, not to over – be overly dramatic about it.

But so, we've been – again, I think that's the proof is in our first commercial payer contract, which happened after the proposed LCD was published..

Okay. And yes, apologies if you've mentioned any of this in advance obviously I was having phone issues.

Maybe just with the test center kind of expansion and then as those ramp up, I mean, any like incremental takeaways like, are you going to be making any changes to those centers going forward, I mean, are you going to accelerate efforts? I mean, just curious, like if you take a step back what you think at this point?.

I tried to point out, but this maybe is a good opportunity to reemphasize a point that I did touch on in the comments, in my prepared remarks, which is that right now we're kind of looking at sort of a mid level trajectory, right. I mean, we could, yes, as I said, we really feel like the model's well honed, the test center model works.

Our training has become really good.

We have some predictability now with regard to translating deployment of sales reps and opening of test centers to testing volume and one of the trends we've noticed we don't have enough data points to report this, but we will in the coming quarters is that we have seen a nice increase in the proportion of our cases that are coming through from primary care physicians and test centers.

And that's an important metric of how that's working. But we're trying to take a middle ground here. We want to obviously grow testing volume to generate data for clinical utility to support reimbursement, and to generally prove that the model works. But we are also cognizant of the fact that right now we don't have predictable reimbursement.

We are starting to bring some of that in, but we're not at the stage where we're getting a large proportion of these cases are getting full reimbursement.

So with an eye towards being protective of our cash and our capital, we're trying to take sort of a middle of the road approach with regard to the throttle, to use a metaphor, but once we have more predictable reimbursement and we start getting some of these – more of these private payer agreements under our belt, then we have the ability to dial these up and to increase the cadence and so forth.

But our plan really for the rest of this year is to stick with our targets with regard to the expansion of our sales force and the expansion of the test centers to give us time to start getting more predictable reimbursement. Hopefully that makes sense..

Sure. And yes, maybe if I could ask another just on the LCD and maybe fully reflecting that they do not account for those guidelines yet. I just want to ask though, it seems like the EsophaCap type device is like included in the LCD. I mean, I know the guidelines aren’t included. Maybe I can get EsoCheck in there.

When is the next kind of milestone or benchmark we should be looking for? I know there was a recent meeting just like here’s what is on the horizon..

There's a lot to clarify. So the guidelines recommend non-endoscopic biomarker testing with a capsule device that includes EsoCheck just to be clear, it's right there to the photograph of it. The results of the – from the STM paper are in there.

So although EsophaCap is there as well, EsoCheck is featured and we consider the guidelines supporting EsoGuard and EsoCheck so don't want there to be any confusion about that. That's where the guidelines, so the open meeting I thought went well, it was substantive, it was serious.

We had the plenty of opportunity us and other stakeholders to describe what we think our useful modifications to the LCD.

The goal is to have the LCD really be an operational, foundational LCD so that the criteria are a bit clearer and that when we get the sufficient clinical utility data to submit as part of a technical assessment, it doesn't require revisiting and reopening the LCD. And that was really the focus of our comments as well as others.

And the written comments are going to really push that a lot harder from us, as well as multiple other stakeholders.

As I mentioned, the open meeting occurred yesterday, the written comments period for Palmetto and on Saturday, but we were also notified that Noridian which is the Medicare contractor that covers California and covers the lab there and will be ultimately the contractor of record also scheduled an open meeting and a comment period, open meeting there is going to be on May 26 and the comment period on June 11.

So that gives us another bite at the apple to really make the case and make sure that the final LCD that it comes of this is really gives this not just us, but the field, the opportunity to get coverage for this really important and now guideline based option to perform widespread testing in these at risk patients..

Okay. Yes. I mean, we're all looking forward to seeing how the guidelines impact the LCD, hopefully. So we'll find out soon. Thanks guys. Appreciate it..

Okay. Thanks a lot. Thanks Kyle..

Thank you. At this time, we have reached the end of the question-and-answer session. And I’ll now turn the call back over to Lishan Aklog for closing remarks..

Great. Well, thank you everyone for joining us today and as always great questions.

And as always, we look forward to keeping you abreast of our progress of the press releases and these conference calls the best way to keep up with Lucid news updates and events is to sign up for our e-mail alerts on the Lucid Investor website and to follow us on social media on LinkedIn, Twitter, and YouTube as well as through our website.

So you can also contact Adrian Miller, our VP of Investor Relations at akm@PAVmed.com. So thanks again, and have a great rest of your day..

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation and have a great day..