Welcome to the Lucid Diagnostics Business Update and First Quarter 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. As a reminder this conference is being recorded.

I would now like to turn the call over to your host, Michael Parks, Vice President, Investor Relations. Mr. Parks, you may begin..

Thank you, Betsy. Good morning, everyone. Thank you for participating in today’s first quarter 2023 business and financial update call. Joining me today on the call are Dr. Lishan Aklog, Chairman and Chief Executive Officer of Lucid Diagnostics along with Dennis McGrath, Chief Financial Officer of Lucid Diagnostics.

The press release announcing the business update and first quarter results is available on the Lucid website. Please take a moment to read the disclaimer about forward-looking statements in the press release.

The first quarter 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 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 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-Q filed with the SEC and subsequent updates filed in quarterly reports on Form 10-Q and any subsequent Form 8-K fillings.

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.

I would now like to turn the call over to Dr. Lishan Aklog, Chairman and CEO of Lucid Diagnostics. Dr.

Aklog?.

Thanks Mike, and good morning, everyone. It’s good to be here. Thank you for taking the time. Look forward to giving you an update of our business in the first quarter of this year 2023. Let’s just start with some highlights. These were highlighted in the press release as well. We performed 1,841 commercially EsoGuard tests in the first quarter.

That’s a 57% increase on a quarterly basis over the fourth quarter of 2022 and a 245% annual increase. We’ve seen substantial increases in the satellite Lucid Test Center activity, now they represent about 50% of the samples collected for testing in the first quarter. We’ll dive into that a little bit further, later.

Our CheckYourFoodTube Precancer Detection Event that were launched earlier this year. That program is now in full gear and is expanding across the country. And we had a very -- we had an excellent DDW or Digestive Disease Week meeting in Chicago this week. That’s the premier gastroenterology meeting.

Two studies with compelling data were presented for EsoGuard and EsoCheck. I’m going to start with some background for those of you who are new to the story, before diving into our results.

So, Lucid Diagnostics, we’re a commercial stage cancer prevention medical diagnostics company and we’re focused on early precancer detection, specifically in patients with chronic heartburn or gastroesophageal disease, GERD, who are at risk for a highly lethal form of esophageal cancer, called esophageal adenocarcinoma.

Our mission is very straightforward, which is to prevent deaths from this awful cancer in at-risk patients. Just a couple of facts about esophageal cancer.

It is highly lethal, it’s really bad actor and it has become quite prevalent with an increase of over 500% over the last 400 decades -- for the last 4 decades, in contrast to all the other common cancers, which have remained flat or gone down, and this makes it the second most lethal cancer, approximately 80% five-year mortality rate and accounts for about 16,000 deaths per year.

The key statistic is really right there in the middle of the slide there, which is that even stage one disease carries over 40% mortality rate, unlike other common cancers, which have -- or picking up the cancer at stage one gives you an opportunity, excellent opportunity for a cure. That’s not the case with this cancer.

It’s one of the rare examples of that. And the consequence of that is that early precancer detection is necessary to prevent deaths. And although screening is recommended, and a well defined target population, less than 5% of those patients who are recommended for screening with endoscopy undergo endoscopy.

Our lead products are EsoGuard and EsoCheck, and they form collectively the first and only commercially available test that’s capable of serving as a widespread tool -- screening tool to prevent esophageal cancer deaths through the early detection of esophageal precancer.

Both major gastroenterology societies, the American College of Gastroenterology and the American Gastroenterological Association, recently updated their guidelines and now support non-endoscopic biomarker testing such as EsoGuard and EsoCheck as an equivalent -- acceptable alternative to endoscopy for early detection of esophageal cancer.

The market opportunity here is extremely large, based on the fact that there’s a large population that is recommended for screening. So, approximately 30 million patients are -- with chronic heartburn are well established by guidelines that are being at risk and are recommended for screening. That number is actually somewhat conservative.

One of the two guidelines actually expanded the target population to include patients who don’t have symptomatic heartburn. So, that number actually is under those guidelines is moderately higher. Medicare has established a nationwide Medicare payment of $1,930. And as you’ll see, that has been reflected in our engagements with private payers as well.

So, that results in a very large approximately $60 billion total addressable U.S. market. The gross margin at volume is over 90%. Just one quick slide on our commercial strategy. We target a two groups separately, the primary care physicians, and specialists and institutions. And they have very different approaches to these two stakeholders.

The primary care physicians, the goal is just to get them to order EsoGuard test as we would -- as others would ask to order other tests, bringing tests or otherwise.

And the actual performance of the cell collection procedure that results in the performance of EsoGuard tests in those situations is performed by a Lucid nurse practitioner, either at a Lucid facility, Lucid test center, or in the physician’s office in the form of satellite Lucid Test Center, as I mentioned.

And I’ll show you the data reflects this, the satellite test center model is actually rapidly expanding. So, just to flesh that out a little bit, what happens is that we have a nurse practitioner, have a scheduled day on a regular basis at the physician’s office and they schedule patients for testing in the office by our nurse practitioner.

They can perform up to 30 each day. With the specialty -- excuse me. Sorry, I forgot to advance the slide. I apologize. With the specialty and institutions, that’s a somewhat different approach where we’re looking to work with the specialists or the institutions to go an EsoGuard program.

And that is -- the purpose there is to -- for the specialists or the institutions to garner the downstream opportunities for growing such [ph] practice, increased endoscopy, surgeries, other testing within their facility.

And in that model, the procedure can be formed either by their own clinician, a nurse practitioner, a nurse or physician assistant or using a satellite Lucid Test Center model as well. Down to our commercial results, we had an excellent quarter. The first quarter, our total number of tests, you can see here, continues to increase in a steady fashion.

We increased 57% over the prior quarter and 245% compared to a year ago. Two pie charts here reflecting some of the distribution of this testing volume. The referral source is now about two thirds. It’s been stable actually in recent quarters, two thirds primary care physicians and about a third specialists and institutions.

And as you could see on the right slide there, that 60% of the EsoCheck subcollection procedures are being performed by Lucid personnel. But the number -- the proportion of the total number that are being performed at a satellite test center in conjunction with a physician’s office is now over 50%.

And about 40% of these remain -- are being performed by the physician practice itself and their own personnel. So last time we announced that we had launched our CheckYourFoodTube Precancer Detection Events.

These events are geared towards holding high volume testing events, where our nurse practitioners arrive at a location with a group that’s scheduled for testing. The first event was with the San Antonio firefighters earlier this year, and approximately 400 firefighters were tested over two weekends. That program as we have announced is expanding.

We’ve completed -- you can see there the orange pies of these events across the country. And we have a robust pipeline, nine of the remaining, the others in blue are already scheduled for the coming weeks and months. Few comments about contracts and payments.

On the right side, you can see that the proportion of patients that are Medicare-Medicaid remains stable at around 10%. And the other aspects are actually relatively stable as well. We continue to maintain an average contracted price above the Medicare rate.

Excuse me, all the contracts are above the Medicaid rate -- Medicare rate and the average contracted price for the in-network contracts that we have is over $2,000. And we continue to get out-of-network payments and that respects our charges with an average payment of about $1,400. That’s based on a typical 50% to 60% out-of-network benefit.

We’re working hard to continue to drive future in-network commercial payer contracting. And the key drivers of this are generating a claims history and we continue to do so. We have almost 200 insurers that have -- to whom we’ve submitted claims so far. And really the critical element of this is clinical utility, generating clinical utility data.

That is a critical part of entering into in-network commercial payers and I’ll talk about that in the next slide. We’re also transitioning to a new revenue cycle management provider.

We’re excited that that’s going to happen in the next month or so, where we will have significantly more data and actionable data to facilitate our engagement with private payers. Last time, we also announced that we’ve launched a Direct Contracting Strategic Initiative.

And the goal of this initiative is to engage, as others have done in the diagnostic space with ASO, self-insured, employers, unions and other entities directly, as opposed to the insurers. We think there’s a meaningful revenue opportunity outside of traditional commercial payer contracts. As I said, others have had some success with this.

We are hiring a dedicated person to lead this program. And I’ll also note, the -- events are actually part of this and we have that internal person who is going to be -- who is going to be leading the event planning side.

As I mentioned, collecting clinical utility data is really a critical part of our efforts to secure predictable reimbursement and secure in-network contracts. Just briefly, a clinical utility data is a very specific type of data. It’s basically demonstrating to those entities that our test has an impact on medical decision making.

More specifically, it means that if a physician -- physician orders a test, they actually act upon the result. So, a positive test results in a confirmatory endoscopy and a negative test does not. And so, that’s the specific data that we’re documenting here.

We know what the result is just based on our experience broadly across thousands of tests that have been performed so far. These are the four active studies that we’re pursuing, and to document this retrospective and prospective.

The firefighter events have had -- given us a great opportunity for some retrospective analysis of prospectively collected data. That’s approximately 390 patients. That study is actually -- the data collection has been completed, the manuscript is written and it’s currently being submitted for peer review, that we’re looking forward to that.

We have two prospective studies, that Lucid Registry and a multicenter study called the CLUE study. Our target enrollment in each of those is approximately 200 each by midyear. And those are going well. We’re at or above our target enrollment in both of those, and the firefighter events have actually been a nice boost to the registry in particular.

And then, we have a virtual randomized controlled study where physicians are given clinical scenarios and asked to document what their decision-making would be. That’s a well established modality used for submitting clinical utility data to payers and that study is also ongoing and is actually at our target.

So, very excited about this, we expect that we should have our first batch of data that can be submitted -- the prospective data that can be submitted on top of the retrospective data that’s coming from the firefighter events.

We expect that to happen by mid-year and then that will get submitted for peer review and that subsequently will be available to us for our in-network engagements with the commercial payers. Just a couple of highlights from the Digestive Diseases Week meeting. As I mentioned, we had two excellent presentations.

This one is by the faculty at the VA in Cleveland, where they performed EsoCheck with follow-up endoscopy -- confirmatory endoscopy on 69 veterans. They reported a 99% technical success rate, which is equivalent to the technical success rate that our own NPs have, which was excellent.

The overall sensitivity was 100% which, at picking up conditions along the spectrum from precancer to cancer, that translates into of course 100% estimated negative predictive value and a 37% estimated positive predictive value, which are both really -- write down exactly where you’d want it to be for a screening test.

There were seven positive patients detected who had either precancer or cancer. Notably, four of the seven were short segments, so less than 3 centimeters of abnormality.

That’s the most important category, but also the most difficult to pickup because the amount of abnormal lining of the esophagus is so short, and we’re gratified that they were able to pick up all of those. Two of them have longer segments of this earlier precancer non-dysplastic BE.

And we’re very excited about the fact that we picked up one patient who had silent Stage III esophageal cancer and had them enter treatment with chemo and -- chemotherapy and radiation. So, really excellent results from the VA.

We also reported on an expanded cohort of patients real world data using the EsoCheck device for sampling of the esophageal cells. This was approximately with under 1,500 patients and the technical success rate that we’ve previously reported at the American Association of Cancer Research of 98% helped.

And the average procedure time of less than 3 minutes also helped. The DNA quantity or the DNA yields continued to improve, the quantity not sufficient rate, which is what portion of patients who undergo small collection do not have enough DNA to lead the use of that assay.

That number was already quite good at 6%, but in the interval between the last report and the current report, that number is down to 2%, which is outstanding. And we’re quite proud of the poster presentation at DDW. We have forgot to push the slides. The poster presentation at the DDW was in the top 10%, excellent distinction.

Finally, a summary of our lab operations, here you can see the quantity not sufficient rates have plummeted since we took over the laboratory operations in the early part of last year. They’re now solidly under 5%. Turnaround times have held -- also have got down quite significantly, held at approximately [indiscernible].

I’m going to hand things over to Dennis to give financial update..

Thanks Lishan. In first quarter, the Board authorized $20 million preferred offering at an $11 million senior convertible debt as seen on slide 18. Previously mentioned, we completed the initial closing of the preferred in the amount of $13.6 million.

After exploring a variety of alternatives, this preferred structure created a mutual win for the Company and the investors by matching an attractive dividend with a strong incentive to hold the stock for more than two years.

Additionally, in the first quarter, we issued $11 million in convertible debt securities with an accredited investor that has provided the same type of structures with PAVmed over the years and currently holds PAVmed’s existing debt with similar terms.

The note interest is only for six months, has a $5 voluntary conversion price and a 7.9% interest rate. Amortization does not begin until a six-month anniversary in October.

Both structures keep stock out of market for long periods of time, likely two years in the case of the preferred, which allows the Company to complete its work on clinical utility studies and improving reimbursement. Our runway is substantially elongated through June 2024.

When combining these financings with our cash at the beginning of the quarter results in pro forma cash of $46.1 million. With an ending quarter cash balance of $39.5 million, the pro forma burn rate for the first quarter was $6.6 million.

So, on the next couple slides, the summary financial results for the first quarter are reported in our press release that was published last night.

And on these next three slides I’ll emphasize a few key highlights from the quarter, but I encourage you to consider those remarks in the context of a full disclosure is covered in our quarterly report on Form 10-Q that was filed with the SEC last night and is available on our website. So on slide 19, balance sheet.

So, cash $17 million, sequential net increase in the first quarter. Our vendor payables were relatively flat with the sequential quarter. It’s offset by the intercompany debt to PAVmed, a $2.7 million increase, reflects largely the management services agreement but that continues to exist in that intercompany debt count.

And the shares outstanding including unvested, restricted stock awards as of today is 43.7 million shares. The GAAP outstanding shares are reflected on the slide as well as on face of balance sheet in the 10-Q.

Slide 20 compares this year’s first quarter to last year’s first quarter on certainty key items, plus review the information and my comments in light of the cautionary disclosure at the bottom of slide about supplemental information, particularly non-GAAP information. Revenue for the first quarter reflects actual cash collections for the quarter.

The prior year reflects the fixed monthly fee received from the third-party lab that we used before setting up our own lab at the end of last year’s first quarter. Revenue recognition.

Key determinant is the probability of collection, where the vast majority of patient out-of-network claim submission means revenue recognition occurs when the claim is actually collected, first when the patient report is invoiced and submitted for reimbursement.

As you will see in our 10-Q, this is called variable consideration in the jargon of GAAP’s ASC 606 revenue recognition guidelines. And presently, there is insufficient predicted data to reflect revenue when invoiced.

Our non-GAAP loss for the first quarter of $9.8 million reflects a 7.5% sequential decrease compared to the fourth quarter loss of $10.6 million. On slide 21. Slide 21 is a graphic illustration of our operating expenses for the periods reflected.

Total non-GAAP operating expense of $10.9 million for the first quarter 2023 was relatively flat sequentially.

However, the first quarter includes approximately $1.2 million of certain onetime expenses related to the reduction for severance costs, loss incurred to finalize the acquisition of ResearchDx including terminating the earnout payments and canceling the consulting agreement and close-out of the secure development and clinical work to arrive at a point to efficiently restart it later when financial resources permit bringing that back on line.

Absent these costs, the non-GAAP operating expense would have been about $9.7 million, reflecting about a 9% decrease sequentially. Cost of revenue primarily consists of EsoCheck devices, lab supplies and fixed lab facility costs.

Consistent with recent SEC filings is presented in our 10-Q as operating expense consistent with practices above the other diagnostic companies.

Sequential decreases in R&D and marketing expenses were offset by approximately the $1.2 million onetime costs already mentioned, including terminating the relationship with ResearchDx, which will avoid approximately $2.7 million in the future costs.

These onetime first quarter costs together with the highly variable quarter-to-quarter convertible debt noncash charges which are shown below the line, account for approximately $0.07 of the $0.40 GAAP loss. With that, operator, let’s turn it over to questions..

We will now begin the question-and-answer session. [Operator Instructions] Your first question today comes from Kyle Mikson with Canaccord Genuity..

This is actually Alex Vukasin, I’m on for Kyle Mikson. Good morning. So really quick question for me. Just kind of on what you’re seeing in terms of the claims process. It seems like you had a really solid quarter in terms of revenue.

I was just curious if -- it seems like the process has kind of been trending upwards towards that level that you’re expecting to reach maybe a few quarters earlier, and maybe -- others after that. Thanks..

I’ll have Dennis flesh it out. But just at a high level, just a reminder that some timing here that the first time that LucidDx Labs, our clear laboratory started submitting claims at the end of the third quarter of last year. So we’ve had two full quarters of claims submissions since that process started.

So, data is still early where we have positive trajectory. And I’ll let Dennis flesh out any of the detail..

Yes. The claims collection continues to be choppy. So, that’s why the predictive value in terms of collections still is uncertain. And we have to recognize revenue on a cash basis.

We also believe that we can make improvements in the process and have taken steps to do so by changing our revenue cycle management company, which comes on board in the early part of June.

And we think that will help us on many dimensions, particularly on the processing of any initial nonpayment charges and processing through the denial process, which we believe will have a benefit in the second half of the year to accelerate payments..

Got it. Thank you. Another question, kind of changing -- switching gears here. Looking at your overall commercial strategy, it seems like the satellite testing centers are taking more of a spot in the limelight here.

I was just curious, if over time if this could become possibly your one of if not the key revenue driver for the business going forward?.

Yes. I think the -- it’s important in answering that question to flesh out some of the details a little bit just to be clear.

So the key factor is that we’ve decided to build a team of clinicians, of nurse practitioners who are highly skilled at performing the cell collection procedure, who demonstrated in the published -- in the presented results that I mentioned, the really outstanding rates of success, technical success.

And the reason we’ve done that is that that is the model that’s necessary for us to actually have meaningful engagements and get a primary care physicians to order the tests because the economics as well as the logistics of individual primary care practices, performing the EsoCheck procedures is just not viable.

And so, so that is the model as you described. They locate -- that is a model by design. The evolution that I was highlighting is that we’ve steadily moved from that being exclusively being done in physical locations, basically, just office space that we lease, to increasingly happening in the physician’s office.

And that’s -- that is a trend and you’re correct to note that. The overall share of referrals from primary care physicians that were directly within this model versus specialists institutions, that appears to have stabilized and both sides of that are growing at sort of 2 to 1, which is good.

But the proportion of patients that are undergoing their cell collection procedure by one of our nurse practitioners has steadily increased, and the proportions that are being done in the physician’s office, as opposed to in one of our leased office spaces is also increasing.

And all of that we see as a very positive direction and a really important sort of horizon that we’re chasing. Because the satellite model has all sorts of opportunities and efficiencies and expanded reach. So, by having us go to the physician’s office, we’re not anchored as much to a physical location where the patient has to drive some distance.

So, the catchment area for the activities of a nurse practitioner extend over a substantially greater geography.

And that actually can include in areas where we have no physical location where if a busy practitioner comes on board, we can actually have the nurse practitioners travel to that location for those -- for the periodic Lucid testing days at the office. So, you’re absolutely right. That is the trend.

I think we will continue to have institutions and specialists play a significant role.

I think that balance is probably going to remain stable, but the model of having our own clinicians, our own nurse practitioners who are highly skilled and effective, being the primary operator for the cell collection procedure is likely going to continue to go in that direction..

One last one for there. So just looking at the LucidDx lab operations, it seems like there’s a really strong positive trend in terms of your ability to acquire sufficient DNA, as well as average turnaround time.

I was just curious, in terms of average turnaround time, do you believe that at this point, you’ve kind of reached, I guess, I wouldn’t say the apex but like more or less kind of headed towards the peak of what were you really looking out there.

And then, in terms of just improving the DNA quality of the samples, do you expect -- it’s been a pretty strong upward trend, has this also kind of popped out or do you think that efficiencies can be reached?.

Yes. Those are both great questions. Let me answer the DNA question first, because one thing I didn’t mention in my prepared comments was that that didn’t happen by accident that happened because our team, once we took over the laboratory, made substantial improvements to the DNA extraction process.

So that number, that 3% for the last quarter is a reflection of improvements in the laboratory, but also a reflection of that really high 98% technical success rates for our nurse practitioners. If you don’t do the procedure correctly, you’re not going to get a sufficient number of cells to have a sufficient amount of DNA.

So, the combination of essentially 3% or so patients who don’t have enough DNA to perform the test and 2% who are unable to perform the actual -- complete the actual procedure, those are sort of stubbornly high numbers for the type of -- for a diagnostic that requires a test.

And so yes, there’s always -- it’s never going to be 100% between those two. But if you add those two up, it’s around 95% of patients who will refer -- will not only have a technically successful cell collection procedure, but also have sufficient DNA to run the assay. That’s a very, very high number.

And so, to be sure, I mean, could we can we extract another percent or two, but that is absolutely sort of at our goal and our targets. And for a test of this type, it’s really outstanding. The turnaround time of approximately a week is actually probably where it needs to be.

There is a limit in terms of how -- what -- getting to turnaround time much shorter than that. There is the assay, that use of that assay has a variety of steps in it, some of which require hours and multiple -- and over multiple days. So getting it down to five or six days maybe possible, but seven is just fine.

And the reason it’s fine is that this is an elective test. This is not an urgent test that requires some that -- where some immediate action is awaiting the result of that test like other tests.

So because it’s an elective test where the action is going to be -- starting a surveillance, sort of getting an endoscopy to confirm this and then putting them in a surveillance regimen and all that, there’s actually plenty of time. So a week is absolutely fine from a clinical adoption and acceptance point of view.

And sure, there might be an opportunity to shave a day off of that, or more, but we’re really at sort of at our target.

And our goal is to maintain it -- the goal is to maintain it at seven with the escalating volume, particularly, not just the overall volume but the spikes in volume that happen when we do these high volume testing events where the lab can get sort of 200 samples in a day, which had not been used to and the lab has done a great job of absorbing not just general increase in volume, but also the peaks..

The next question comes from Mike Matson with Needham. Please go ahead..

So, I want to ask about the -- so, the test volume obviously very strong in the quarter.

Can you just tell us how much of that was from the CheckYourFoodTube event with the firefighters in the quarter?.

Yes. So, we had just -- so the first quarter reflected just that one, that we had previously announced, the San Antonio event, which was just under 400 tests. So, we saw growth both in our organic numbers as well as our -- obviously, the testing events, to CYFT events. And I just -- maybe I’ll use this as an opportunity to comment on this.

We see this -- these testing events, as well as the other direct contracting efforts are just part of our -- of sort of all of the above strategies. I just want to keep emphasizing I did this last time, as well, that we’re not sort of tacking or swapping one strategy for another.

We’re just adding new horizons where we can identify ways to get patients who are out there into the channel and ultimately test it. So, we have been very careful in how we manage our sales team to make sure that the organic growth by directly engaging with primary care physician, specialists and otherwise continues to move forward strongly.

But we obviously expect to see a meaningful volume from the testing events as well. And they’ll both be contributing to what we believe will be ongoing, solid growth..

Okay.

And then just following up on that -- at those events, I mean, what’s the expectation for getting paid for those tests? Is it more likelihood of getting paid versus your other distribution channels or is it kind of similar or…?.

It’s a little bit early to -- it’s quite early to predict, right? We just had our first one, I think, about two months ago. Purely speculating and purely on a theoretical basis, you might -- we would expect that it might be easier to engage in network conversations with these entities. They tend to be self insured entities, unions, and otherwise.

And having an audience with them in conjunction with these events has the potential, although we don’t know for sure, we don’t have any direct evidence of this yet, to enter more quickly into discussions, as opposed to the standard model with a traditional payer, where you really have to wait until you get a sufficient number of claims just from that kind of the random in the wild activity that goes on.

So, there is an opportunity there, we’re quite cognizant of it, we’re focused on it where we are tailoring the way we engage with the entities that are sponsoring these events in a way to effectuate what you’re suggesting, but way too early to say whether that’ll actually materialize in terms of how it translates into payment -- into payment as well as into in-network contracting..

Okay. And then, as far as the tests that you’ve done to date, I know you’re trying to go through insurance companies and collect payment.

But, when do you sort of give up on trying to get paid for a test? And has any portion of that -- the volume done to date, have you given up on any of those, written them off, or are you just continuing to try to collect payment?.

I’ll let Dennis flesh out some of the details. But the answer, I think -- I’ve taken your question to mean on an individual claim, right, and the process by which an individual claim gets adjudicated is actually quite long. So, you get submitted, there’s all these back and forth about all the I’s being dotted and T’s crossed.

And then, often, in the absence of a -- there’s two possible ways that can proceed. One is that if you don’t have an in-network contract, you can still get paid out-of-network. And there’s some payers that pay out-of-network at a reasonable clip and others that don’t. And that just depends on the individual insurer.

Those that are not paid out of -- where there is no out network payment -- or out-of-network benefit, payment of those will typically get denied. And then there’s an appeals process, and there’s multiple levels of appeal. And so, we don’t give up until we actually exhaust that entire appeals process, which can take many, many months.

So the number -- Dennis, correct me if I’m wrong, but the number of the thousands of claims that we’ve submitted where we’ve actually reached the end of an appeals process is low, so, a relatively small portion of those.

And honestly, even those are not -- look, we’d love to get paid on every test but we know from just historical precedent and others who’ve done this before, that this entire process, going through the claim submission process, getting on the radar of insurance, getting denied, getting going through an appeals process and all that is how you -- that that actually all is sort of a positive experience that gets you traction, that whole history is important to get traction to actually engage in to secure in-network contract.

So, hopefully that answered your question. Dennis, I don’t know if you have….

Yes. During the early phase that we’re in now, claims history and the denial process have real value for us in terms of getting to full reimbursement. And I always consider full reimbursement is ultimately when you get north of 80%. To your question, when you get to that point of nearly 80%, you probably give up and you return after a year of process.

But right now, that is all part of gaining value, gaining attention and getting towards contracts. So, we’re not given up on any claim just yet. But later down the road, that probably makes more sense, a good estimate would be greater than a year..

And the like work on all this stuff.

I mean, that’s basically being handled by this -- the revenue, the RCM, revenue cycle management firm that you’re working with or...?.

Correct..

In conjunction with our team..

Yes, but that is that there….

We outsource..

We outsource that and they’re obviously geared towards that. And again, we’re looking to upgrade and get some more aggressive activity in this regard, as well as just better data, better sort of visibility as to what’s happening with individual payers. So that’s the reason we’re looking to upgrade and this….

Much more sophisticated in their processes..

The next question comes from Mark Massaro with BTIG..

Hey guys. This is actually Vivian on Mark. So, why don’t you grab your thoughts of volume pacing for ‘23? It’s probably safe to say, sequential volume growth for the remainder of the year, but just wanted your thoughts around ASP traction as well. Thanks..

Yes. I’ll let Dennis handle it..

We think it will continue to grow quarter-to-quarter. Last quarter, we did give a preview of the first quarter, because we were within 17 days of the end of the quarter. This quarter is still unfolding. We’re optimistic about that and optimistic about the balance of the year.

And what that represents in terms of total claims submission, total tests delivered. We think it will be pretty strong, but we haven’t provided any guidance with a second, third or fourth quarter so far. But we’re thinking that it continues to grow sequentially..

I’m going to apologize if you covered this, maybe earlier in the call.

But could you just remind us where you stand in the technical assessment process? And just your updated thoughts around the timing around securing Medicare coverage under the umbrella LCD?.

Sure. Yes. Nothing really new to report on that as you -- as you hinted that the -- both MolDX to Palmetto MAC as well as a Noridian MAC, which is the MAC that covers our laboratory in California, published final and effective local coverage determinations.

These are foundational local coverage determinations that cover the category of tests, which EsoGuard falls within. And so, that was -- that happened end of March. Thank you, Dennis. So nothing to report on that front, there’s no ongoing activity there.

What we’re -- the process moving forward is one where we get sufficient clinical utility data whereby we believe we achieve the criteria that they’ve outlined.

As we mentioned when we talked about this -- when it first came out, the improvements to the final LCD relative to the direct LCD a year ago were entirely consistent with what we and others had requested to make it -- to make it truly operational. So the criteria are solid, they’re very much focused on the newly published guidelines.

And we believe that the clinical utility data is what we need in order to try to convert this to a coverage -- Medicare coverage for use a card. But, as is the case with -- this has been the case now, for three or four years that we’ve been working on this.

The activity with Medicare and with MolDX and with LCD is very kind of -- we hear -- we get a bunch of news, reporting activity. And then there’s sort of a waiting period while you’re collecting data or awaiting response. So, don’t expect to have any news in the near-term.

I will put up my usual reminder that that we continue -- although some of the large payers do like to see a Medicare LCD for your test, we continue to believe we’ll get -- that we will continue to get traction with the private payer side and that private payers represent 90% of our total volume. So that activity is day to day.

Medicare is basically awaiting completion of our clinical utility or the publication thereof and subsequent steps from there..

If I can just squeeze in one more, I guess on the commercial payer front. Can you just remind us on the number of commercial pay contracts, number of covered lives at Q1? And then, could you also remind us, maybe more for Dennis, the number of tests that you’re paid on in Q1? Thanks..

Yes. I’ll let Dennis answer those, both..

So, we have just under I think it’s 15 in-network contracts, secondary PPOs, the largest of which is MultiPlan that recently entered into a contract with us. You’ll recall that they have 60 main consumers as part of their overall umbrella. And we -- the revenue collected in the quarter was $446,000.

And the average claim, as indicated in the slide deck was 1,440. And I was looking for my notes -- do the division, but I couldn’t find it quick enough, but I’m sure you can do that yourself..

The next question comes from Edward Woo with Ascendiant Capital. Please go ahead..

Congratulations on the quarter. My question is on the CheckYourFoodTube detection events? They seem to be very high-value and relatively low cost events for you to get patient outreach.

Have you considered making that your primary marketing event? And is there -- how hard or difficult would it be to expand these events -- expand eventually across the country?.

Yes. I’ll answer that by sort of reiterating what I said earlier. We have worked -- we’re going to put in -- you are correct in your assessment, they are quite efficient ways to get a targeted population. In response to Mike’s question, we have some hopes that they will also be an efficient way to get -- to accelerate the reimbursement process.

That’s TBD. And so, we are fully committed to them. And you can see just over a very short period of time, we’ve gone from one to having completed half a dozen or so and having a quite a robust profile.

And now as you can see from that map, that we’ve had multiple, multiple conversations, some with small -- smaller entities some with larger entities, and those conversations have really been consistently quite positive, there’s a lot of receptivity. Obviously, we’re starting with firefighters, but we have plans to expand that to other areas.

So, our commitment, our motivation, our determination to use this as a way to garner access to EsoGuard test to as many people as possible is solid, and we will continue to push that as hard as we can. But I won’t go as far as your question, which is to say that we want to sort of make it our primary mode.

We’re not -- that’s not the way we’re thinking about this at all. We’re looking at all of the modalities, all of the ways, all of the methodologies for doing this.

And at the end of the day, we’re going to continue sort of an all above strategy that includes the bread and butter, traditional reps going to primary physicians and garnering physician adoption. You have to garner physician adoption for the long-term traction carrier.

If you think about it as one of these events typically has a limited number of physicians, which is great, it makes it highly efficient if you only have to work with one physician or two physicians that you can end up with hundreds of tests.

But that doesn’t take away from the importance of establishing this test as the standard of care for patients who fulfill criteria and who are recommended for testing. And that’ll continue to involve us driving adoption within the broader physician community..

And maybe just one additional comment to further amplify Lishan’s analysis there. Ultimately, a good portion of the patients who are our target population are self medicating.

And as reimbursement unfolds, our test centers will continue to have a prominent position as we do direct to patient advertise that educational marketing to go after those patients will come through telemedicine. So, all of these components are important. And at this point in time, one may have a higher driver component to the number of tests.

But there’s still big patient pools in each of the categories that are go to market strategy is approaching. So, it will change over time and there is a big patient pool that we’re going after in all of those dimensions..

Yes. Just to disclose on that. I mean, the broader patient pool is large, we’ve talked about that repeatedly, it’s at least 30 million patients. And we’re not sort of segmenting that to some narrow group that we’re looking to get. I mean, at the end of the day the market opportunity here is across the board.

And if you think about it, the number of the -- we don’t know for sure, but the proportion of those 30 million, who would fall under an entity like a union or an employer that would be a lot of them would under one of these high volume testing events is not going to represent the vast majority of patients.

The vast majority of those patients are either self medicated as Dennis said and could be contacted directly or through their primary care physician or a specialist..

[Operator Instructions].

I think, operator, we can close out now. So, I’d like to thank you all for taking the time this morning. We found it informative. We encourage you to follow us on our websites, social media but also feel free to contact Michael Parks for any questions. We’re always open for business in that regard. So, his email address is mep@pavmed.com.

Thank you very much and have a great day. The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect..