Greetings. Welcome to the Lucid Diagnostics Fourth Quarter 2021 Earnings 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] Please note, this conference is being recorded. I will now turn the conference over to your host, Adrian Miller, Vice President of Investor Relations at Lucid Diagnostics. You may begin.

Thank you, operator. Good afternoon, everyone. This is Adrian Miller, Vice President of Investor Relations at Lucid Diagnostics. Thank you for participating in today's business update. Joining me today on the call are Dr. Lishan Aklog, Chairman and Chief Executive Officer of Lucid Diagnostics; and Dennis McGrath, Chief Financial Officer of Lucas Diagnostics. The press release announcing our business update and financial results will be available shortly on Lucid's website. Please take a moment to read the disclaimer about the forward-looking statements in the press release, the business update press release and the 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 cause actual results to differ are described in the disclaimer and 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 Item 1A entitled Risk Factors in Lucid's most recent annual report on Form 10-K filed with the Securities and Exchange Commission and any subsequent updates filed on the quarterly reports on Form 10-Q and any subsequent Form 8-K filings. Except as required by law, Lucid disclaims any intention or obligation 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 of the actual results will differ from those contained in the forward-looking statements. With that said, I would like to turn the call over to Lishan Aklog. Dr. Aklog.

Thank you, Adrian. Good afternoon, everyone. Thank you for joining us on our Lucid Diagnostics quarterly update call. You noticed that we've decided moving forward to hold a separate quarterly call focused entirely on Lucid. Really looking forward to having the time to tell the full Lucid Diagnostics story each quarter. Happy to report that Lucid Diagnostics is firing on all cylinders. Our rapidly growing team is making excellent progress on all fronts and is laying a solid foundation for us to continue driving our long-term growth strategy. Our strong balance sheet provides us with the resources to execute on this strategy. Before proceeding, I'd like to thank our long-term shareholders for your ongoing support and commitment. Every day, each member of our team is singularly focused on growing Lucid while enhancing long-term shareholder value. I'll start by providing a brief -- by providing an overview of our business, and I'll then pass the baton over to Dennis, who will provide our financial update before opening it up to questions. First, 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 leased esophagealcancer. Unlike other common cancers, esophageal cancer mortality rates are high, even in its early stages. So preventing death requires us to detect esophageal precancer, which occurs in approximately 5% to 15% of the at-risk chronic heartburn patients. The good news is that esophageal precancer can be monitored in its early phase and cured with an endoscopic procedure in its late phase, which reliably halts progression of esophagealcancer. Although esophageal precancer screening is already recommended in millions of chronic heartburn patients, fewer than 10% undergo traditional invasive endoscopic screen. The profound tragedy of nearly every…

Thanks, Lishan, and good afternoon, everyone. Our preliminary and summary financial results for the fourth quarter and for the full year ended December 31, 2021, were reported in our press release that was published just earlier today. We plan to file our annual report for Lucid Diagnostics in Form 10-K with the SEC in the coming days. And at that time, it will 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 are recognized as GAAP revenue when cash is collected by the company. Also as previously mentioned, this is more than likely -- it more than likely will be true during this transition period of negotiating third-party private payer reimbursement contracts and related coverage policies. As reported to you last quarter, for 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 concurrently with the opening of our own laboratory at the end of February 2022. We recognized $500,000 of revenue as part of the EsoGuard commercial agreement with ResearchDx for the year ended December 31, 2021. Now that we are operating our own laboratory following the February 2022 agreement, where Lucid Dx Labs, purchase certain assets from ResearchDx, Lucid will have the ability to directly invoice CMS and private payers. Future revenues will be recognized based upon actual collections until such times that coverage policies are in place with CMS and payment contracts with the private payers. This obviously can result in the timing of revenues recognized versus the timing they are submitted for…

[Operator Instructions] Our first question is from Kyle Mikson with Canaccord Genuity. Please proceed with your question.

Congrats on the quarter, and thanks for the questions. So great updates, obviously. I just -- I hate to be kind of myopic here, but I just wanted to talk about the COVID impact in early first quarter. Clearly, there were headwinds that affected the diagnostics industry during January and February due to Omicron. Just was wondering what the impact on Lucid was kind of early in the first quarter. And could there be any like systemic impact that lasted throughout the quarter rather than just kind of the transient impact kind of early on?

Yes. As I've said before, our team has done a good job of insulating ourselves. We're [indiscernible] ourselves a bit, no pun intended from some of these COVID related effects. And that's primarily because our engagement with physicians is entirely outpatient based. And our test centers are entirely under our control, and we control how we handle precautions at our test centers. So generally, we have not seen with this or even with the previous -- the summer store, for example, the Delta surge, any meaningful impact compared -- certainly compared to companies that call on hospitals where elective procedures and those things could be cared. So we do get a bit here and there of centers at the absolute peak, which slowed down the ability of our reps to get into offices. But that's been relatively modest. As I've said before, the main issue, frankly, was around travel, cancellation of flights and so forth. And that was a very sort of narrow window during this last Omicron spike. So bottom line is that hasn't had a hasn't had a major impact that we -- so far and that we expect moving forward.

Great. And maybe just one on the CLIA lab. So when do the benefits from that in-house lab -- internally owned lab really fully take shape or maybe have they already? And I guess, why did it make sense to acquire that capability kind of relatively early into the launch before Medicare reimbursement was secured?

So the benefits are accruing immediately. So the key -- we have planned and if you recall during the S-1, we talked quite a bit about the need to have this infrastructure in place moving forward. But the thing that's really dominates our thinking to move more quickly, as we described previously, has been the complexities around using a third-party laboratory for billing and collection and invoicing of procedures as of test submitted to payers when you marry that to our test centers. So there are a lot of hurdles that come with that relate to federal and other regulations. And we're getting quite sort of onerous and complex to do so. So by having our own laboratories, it provides us with the ability, as Dennis mentioned, to invoice payers directly to really enter into direct negotiations with private payers and so forth, and they really are somewhat linked. There's a bit of a chicken or egg chicken and egg process with regard to secure private payer payment and coverage. The impact beyond the initial price to get these licenses in place on the sort of marginal aspects and Dennis could to elaborate on this are really not significant since we did continue we do continue to use ResearchDx to help us run the assay through a management services agreement. So the big difference has been that it's allowed us to be the official laboratory of record, not have to go through various convoluted mechanisms to allow us to do so under a third-party arrangement. And Dennis, would you like to add anything more to that?

Yes. If we were to -- eventually, we would have our own lab anyway to -- in the thrust of your question. The timing of it certainly made sense. If we were to start our own lab from scratch, the delay could be upwards of a year to get the appropriate licensing by buying certain assets and funding that. We get it in place now. We said we would do it in the registration agreement. And as we're in this process of putting and negotiating payer contracts, it made sense to have those contracts in the name of our own laboratory rather than have them in ResearchDx and then have to go through the administrative process of transferring over. Given this year is a transition year, given it was part of the funding and used proceeds, the opportunity presented itself, it shortened the game to get it in place. It’s in advance of the negotiations we’re having with private payer side and where the coverage policy will put in place for all those factors that made sense to pull the trigger now.

If I could just add one thing, Kyle, in terms of immediate benefits, we actually are able to secure our own revenue cycle manager. And that's been challenged because prior to this, we've been sort of at the mercy of the one with the laboratory use. So we kind of hold all the cards now with regard to sort of really efficient submission of claims, proper submission of claims, efficient processes for appeals and processing claims across the board. So it's super critical, and we're really happy we have to sort of all teed up and ready to go for our future expansion.

Yes, that was great. The benefits are clear. I just was kind of wondering about the timing, but I think that all was great color. That all makes a lot of sense now. And just moving to, I guess, denials of cash collections. Could you help us think about the denial rate during the quarter and where that kind of stands today? I heard the number, I think it was $11.50 from private payers. That's great. Obviously, a large portion of the target patient population is Medicare patients, and so it's obviously really not getting reimbursed right now. So could you help us think about maybe denial rate right now as well as is the flow of patients, the 300 or so tests during the quarter, I mean is that mostly private payer, patients or Medicare as well?

So the balance between -- let me answer your last question first, that the payer mix is a bit more skewed towards private payers than you would -- we would expect from the overall through epidemiology of this, which would -- should be about 60% Medicare. But that's just various factors were related to geography and local and so forth. So that's -- in terms of we don't really -- the cycle between submissions and claims is so long. It can be three months or longer. We don't really have good numbers with regard to denial rates because the vast majority of claims are still being just being adjudicated. We haven't -- we've submitted them and we haven't gotten the response. We haven't got a payment or a denial. So we have had some denials and those are actually fairly important to get to denial so that you can go through the appeals process and engage with the payers on that front. But I don't -- I'm not yet able -- we're not yet able to give you sort of a percentage with regard to denials just that we're getting some amount of network payments are coming through, but the vast majority of the claims are still sort of in the hopper waiting to get processed.

All right. Great. That makes sense. It's fair. And for a final question just for kind of met thought processes come together here, and it's kind of around the -- basically the announcements that you made towards the end of the call regarding EsoCure and EsophaCap. Those are very positive, obviously. I guess first on EsoCure, I believe that PAVmed planned to conduct additional development work and animal testing of EsoCure to support like a planned 510(k) submission in early '22? Just wondering if that still stands. And then on EsophaCap, I mean, what does that mean for your competitive positioning -- for Lucid's competitive positioning? Does the company basically think that it could essentially control like certain players from entering the market that you use that EsophaCap as a cell collection device?

So the answer to the first one is, no. That early '22 is not going to -- the completion of these studies, completion of verification and validation testing will get us further into this year. So we don't expect that to happen early. But the progress has been really solid and great, and we look forward to getting to design freeze and getting the verification and validation testing to allow us to submit to the FDA, and we think we have a very good regulatory strategy to do so and to get it cleared to be able to offer that commercially. So the time just seems right, right now to formalize the engagement with Lucid, as it relates to licensing of the technology when it's ready for commercialization. With regard to EsophaCap, I'll just be kind of somewhat brief about that response. There are two 510(k) cleared sponge-based devices in the U.S., three noninvasive collection devices, if we include EsoCheck. The other sponge-based device is the Medtronic [indiscernible] device, which has been off the market for a couple of years. And so the answer -- the indirect answer to your question is right now, we do control the only 510(k) cleared, a sponge device for use in screening third patients with biomarkers. So I'll just leave it at that.

Okay, perfect. Thanks again, guys. Appreciate it, congrats on quarter.

Thanks, Kyle.

Our next question is from Mike Matson with Needham & Company. Please proceed with your question.

Hey, Mike. Good afternoon.

Hey, good afternoon. So for the 300 [ph] roughly, tests that were performed in the fourth quarter, can you just remind us how many test centers those were kind of going through? I can't remember where you were at as of the end of the year. And then were they pretty evenly spread out? Or were they concentrated in one versus another?

So, I'll give you some color on that without -- the numbers are too small to really give you a lot of kind of granular numerical data on that. But the -- if you remember, the first test center was launched and really didn't get rolling until September. So for most of the fourth quarter, we had just Phoenix test centers, the three, but just in the Phoenix area, and we didn't launch the Salt Lake, Vegas and Denver centers until the mid-portion of that year. So the actual -- the majority of those cases were actually not test center cases because the cost centers were just getting up and running, and we're actually cases performed by physician practices. And as I said, the geography is really spreading out nicely across the country. The largest -- the busiest geography has actually been in the East, which is not -- which doesn't actually have any test centers. So we expect, as we continue to grow that an increasing portion of the volume won't be cases that pass through our test centers. But to be honest, we've been quite encouraged by the -- as I mentioned in my prepared remarks and the expansion of non-Lucid test center activity at community hospitals and integrated health networks at academic medical centers and GI practices including very large private equity-backed, GI gastronomy networks. So we expect that volume to continue to grow. But I would say, over time, particularly as we get into this next stage and enter into larger states across the country that an increasing portion of the volume will be represented by Lucid customer cases that get referred by primary care physicians or eventually self-referrals.

Okay. And just wondering if you could give us an update on the DTC campaign? I know you made some comments on it, but I think that the sales was really still limited only to the Phoenix area. Is that right? And...

Yes. I mean our philosophy, I think I've articulated this before, with the direct-to-consumer aspect of this is we're really doing it in a very sort of controlled fashion. We don't think it makes sense to really blow it out until two things happen. One, we have a clear understanding of which modalities work and what the yield on each advertising dollars will be, but also until we get more traction with regard to reimbursement. So we're taking a careful approach with regard to deploying dollars into advertising and have limited it to the Phoenix area where we do have billboards and TV and radio advertising, and we're continuing to do that. We don't really have enough data to understand -- we were definitely getting responses, and we are -- and as I said, we are having patients who are passing through the telemedicine program and we've gotten tested and have completed the process and that appears to be growing. And we're getting -- we believe we're getting good traction with that. Typically, with direct-to-consumer work, you really need kind of three to six months of data to really understand which modalities are giving you the best bang for your buck, and so we'll continue to collect that data. And we'll likely continue the DTC work to keep it limited to Phoenix or perhaps one or two other states, for the foreseeable future. Dennis, do you have anything you want to add to that?

I think that summarizes well. The two gating factors are optimization and reimbursement. And as both of those start to evolve, we'll have more of the DTC expansion and investment so that every dollar spent has a direct relationship to the yield of adoption and revenue.

Okay, got it. And then just as far as MolDx goes, I mean you're confident that this is going to happen. It's just a matter of time and just sort of a backlog at CMS.

Yes. It's a little -- I wish I could have more details. I mean the fact that they held a CAC meeting, which covered our -- our test along with others, is a strong indication that they're working on and as opposed to prior to that, where we had no real evidence that they had actually tested off our files. So we clearly feel they're working on it. We do have -- we do -- our team does engage with them. We have discussions with that. We check in regularly. And so all of that together, these LCDs, I think we've talked about this, Mike, have increasingly common batches sort of centered around certain disease processes, or other organizing factors. And obviously, we just expect that, that's in fact what's going on is there's a group of tests that fall under similar umbrella that are all being evaluated and that we would expect to get a batch of LCD draft LCDs sometimes still, we hope.

Okay, got it. Thank you.

Thanks, Mike.

Our next question is from Ross Osborn with Cantor Fitzgerald. Please proceed with your question.

Hey, Ross, good afternoon.

Congrats on the progress. Thanks for taking my questions. I guess, maybe starting off with test centers. Can you walk through the time line on the next set of locations? And then I guess as a follow-up, has the company developed any solutions and addressing states with the stricter regulations you've seriously discussed?

Yes. So the time lines are -- we're definitely accelerating things. So the first group, we did one city, Phoenix, then we did three in three [ph]. And now we're moving towards doing them in larger batches and in larger cities. So we've identified nine states where we're going to target, including most of the large states across the country, and we're going to we're identifying our first target location in each of those, and we're looking to do a bigger launch across multiple states as opposed to doing them in smaller bite sizes as we've done to date. In terms of the solutions, we actually have -- yes, we're all set with regard to the compliance infrastructure around replicating the test centers in states that have more complex laboratory regulations. There are a variety of factors there. One, really fall into two buckets. One bucket is on nurse practitioner, practice regulations and need for supervising physicians. We've been able to establish a straightforward mechanism for dealing with that. There are some states where we have to deal with corporate practice and medicine statutes, which we've been able to establish a program on how to deal with that as well. And then there are some where the kind of the relationship between the laboratory and the test centers are important. So yes, we're good to go. We've got really outstanding compliance council and all of those docs are in our own right just about ready to go.

Okay, great to hear. And then maybe just in terms of education, I think we've previously discussed some pushback that nurses has given a new offering, which is kind of the basic workflow -- have you guys made any progress and maybe some more efficient education programs? Or is it really just kind of knocking on doors. Just curious to hear all that.

Yes. I think so what you're referring to, of course, are not the primary care targets, right, where there is no workflow issue, it's just purely engaging them on the -- educating them on the disease and risk factors for cancer and the availability of the test, right? So that doesn't require any change in workflow. That's just sort of standard engagement with primary care physicians. On the gastroenterology front as well as larger primary practices, it's actually gone pretty well. I mean we're not really getting that pushback. We're getting centers. What's changed over the past couple of quarters is that we've been able to really have these centers, whether they be large practices, community hospitals, academic medical centers or integrated health care networks or these large PE-backed gastroenterology practices to really see this as a program, as I mentioned in my prepared remarks, as a comprehensive program, either part of a broader program for gastroesophageal reflux disease or a chronic heartburn clinics or just specifically around EsoGuard around screening for esophageal precancer. And there is now a better understanding, and I think perhaps we've learned how to articulate the downstream benefits to these larger entities around referrals, consults, endoscopy, surgical referrals, ablations and so forth. And so really going quite well. I mean, as I kind of gave -- tried to give a variety of diverse examples of the types of venues where we're getting -- we're starting to get traction. And now it's completely about expanding the team and getting them out there and having these conversations. The time it takes to convert, let's say, a small GI practice compared to a large academic medical center, as you might imagine, it's quite different, right? You have a large center, there's technology committees and other hurdles that you have to go through and that the time to get traction there can be many, many months and six months or longer at times. But the payoffs obviously is greater once you and you have access to the entire facility improvement.

Understood. Thanks for taking my questions.

Thanks, Ross.

Our next question is from Mark Massaro with BTIG. Please proceed with your question.

Hey, Mark. Good afternoon.

This is Jeanine, on for Mark. Hey, so on the initiation of the Cleveland BA study, could you maybe give a sense of timing for the initial readout. Just any major milestones to look out for there that could potentially help drive adapt LCD or guideline inclusion in the VA.

So, we don't have -- it's a little too early to know yet what the enrollment pace is going to be, but we expect it to be pretty quick. I mean we're -- just even since our announcement, the investigators have enrolled several patients. So we don't expect this to -- we expect it to be to complete enrollment fairly quickly. There are lots of these patients out there. And as you might imagine, the VA is -- has a lot of these patients at a pretty fertile ground for the typical GERD patients who need screening. So yes, so not too long, I can't give you a precise time lines yet. But I think I would say, certainly this year, we would hope to have it completed. And unlike other studies, there's really no follow-up, right? These are immediate reads upon enrolling the patients. They get their EsoCheck procedure. They get their EastoGuard test, they get their endoscopy. So there isn't a long follow-up period to get the readout. So I'm pretty confident we can get it done this year.

Okay, perfect. Thanks. And maybe just one quick follow-up. Could you speak to your mix of prescribing physicians between PCPs and GI specialists. You did mention an uptick in non-GI specialties. So just how you view that trending looking to '22 here?

Yes. I mean the non-GI specialties are mixed amongst large primary care centers who have decided to do their own testing, non-internal medicine family practice groups as well as of course, primary care physicians are referring to our test setting. But I don't have a hard breakdown of that, and that's rapidly changing. So the fourth quarter numbers don't necessarily reflect where we are today. About to give you a sort of a rough guess right now, I would say that if you take referrals to primary care referrals to our orders to our Lucid Test Centers, along with primary care practitioners, like our busiest practitioner, the nurse practitioner, family medicine nurse practitioner who does a large number of procedures herself in her practice. So if you take all of those together, are we sort of 50-50 GI versus primary care? Maybe not quite, but probably heading towards that.

Okay, perfect. Thanks for taking the questions.

Thank you.

Our next question is from Ed Woo with Ascendiant Capital. Please proceed with your question.

Good afternoon, Ed.

Congratulations on the rollout.

Thanks.

It looks like you guys have been adding about one city a month. And am I correct that you guys are going to be at a much faster pace over the next 12 months?

Yes, I think so. And it's going to be less sort of steady that we're going to do in larger chunks, right? So instead of doing three at a time, which we did in the last couple, and we're going to tackle nine cities in nine states that are all at once and try to get those wrapped up as soon as we can. I think we've said this before, Ed, the rate limiting factor is not the process of finding a site and identifying the best city within a state to start with and getting the physical location up and running or even hiring the nurse practitioner or the medical assistant, it's actually getting the sales infrastructure, the sales reps in place to be able to drive cases to the test centers. Although in many of the states that we're talking about, now we already actually have a presence with market development managers and even sales reps who are already working with non-Lucid test center channel. And so we are -- we will be able to place some of these test centers in places where we already have a commercial presence.

Great. Well thanks for answering my questions and good luck. Thank you.

All right, thanks Ed.

We have reached the end of the question-and-answer session, and I will now turn the call over to Dr. Lishan Aklog for closing remarks.

So again, thank you all for joining us today. And as always, for the great questions. As always, you can -- we look forward to keeping you abreast with our progress via news releases and periodic calls such as this one. Again, I'm really excited that we're -- we've been moving forward, we're going to be able to provide dedicated calls for Lucid this has been, I think, a great first crack at that. The best way to keep up with Lucid news updates and events, it's free to sign up for our e-mail alerts on the Lucid Investor Relations website and to follow us on social media, Twitter, LinkedIn, YouTube and our website and -- or you can contact us directly through Adrian, our VP of Investor Relations at akm@padmed.com. So again, everybody, thanks a lot, and have a great day.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.