Q3 2021 PAVmed Inc Earnings Call
[music].
Hello, and welcome to the past met and lucid diagnostics joint 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. As a reminder, this conference is being recorded its now my pleasure to turn the call over to.
We used to just center Vice President of integrated Communications at the White House Sciences. Please go ahead Lisa.
Thank you operator, good afternoon, everyone, Let's just Lisa did center supporting Tasman and lucid Investor Relations.
You for participating in today's business update call joining me today on the call our Doctor leash on AD cloud, Chairman and Chief Executive Officer, Catherine and Chairman and Chief Executive Officer of Lucid diagnostics, along with Dennis Mcgrath, President and Chief Financial Officer of Cabinet and Chi.
Financial officer of Lucid diagnostics, the press release announcing our business updates and financial results is available on tablet and lucid websites. 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 four.
We're 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 can.
Michigan for a list and description of these and the other important risks and uncertainties that may affect future operations see part one item one a entitled risk factors in Paas. That's most recent annual report on Form 10-K filed with the Securities and Exchange Commission and any subsequent updates.
And quarterly reports on Form 10-Q, as well as lucid U S. One registration statement and any subsequent 8-K filings, except as required by law Paas and lucid disclaims any intention or obligation to publicly update or revise any forward looking statements to reflect.
And 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 can change in the forward looking statements with that said I'd like to turn the call over to leash on accolade Doctor I can.
Bob.
Yeah.
Thank you Lisa and good afternoon, everyone. Thank you for joining us on this first joined quarterly update call for Avnet and its major subsidiary lucid diagnostics.
I'll of course comes at a very exciting time for us almost certainly the most important crossroads in cabinets corporate history, just over one month ago Lucid became a NASDAQ listed public company and netted over $60 million of growth capital, providing us with sufficient runway to execute on its growth strategy and drive commercialization and a 25 billion.
<unk> addressable market.
Oh, I haven't been in lucid or no longer pre revenue.
For the first time formally recognize modest revenue consistent with projections in the third quarter.
Before diving into the update on the important developments in our business over the past quarter in recent weeks I'd like to.
First bank, having that long term shareholders for your ongoing support and commitment and I would also like to welcome our new lucid shareholders to their families.
Everyday our rapidly growing team is intensely focused on growing these companies and enhancing long term shareholder value.
I will start by providing some high level comments of certain corporate and strategic matters.
And things over to Dennis who will provide a financial update after that I will proceed with a systematic business update before opening it up to questions.
So let me start by talking a bit of detail about the relationship between Avnet.
Pre IPO now now immediately post IPO and in the future.
Based on inquiries, we and others were seeing but I think it's important that I clarify something by recounting the history of lucid as a company.
Lucid was founded as a separate corporate entity and privately held subsidiary had met in May 2018.
License the groundbreaking technologies underlying lucid Curt products that use the garden soft gel DNA test and the ease or check the soccer Jill cell collection device from a major academic medical center.
Lucid received the worldwide exclusive rights to commercialize these valuable technologies in exchange for an 18% minority equity interest in the newly created subsidiary.
<unk> does not provide any consideration in cash or stock. Despite retaining an 82% is taken lucid and these license technologies.
During the three and a half years I've met has spent approximately $30 million on lucid and manage its operations through a management services agreement advancing what was a research laboratory assay and device prototypes into commercial products, securing Medicare payment of nearly $2000 per test and launching loosens the own network.
It's too early.
Early this year.
Many of you know, we decided that lucid had progressed sufficiently.
And that it made strategic sense to take lucid public. So we can raise and spend its own capital to drive our growth strategy focused on one expanded commercialization, including by expanding lucid network test centers and two expanding the clinical evidence of lucid product efficacy to support loosens up.
Ongoing regulatory reimbursement and commercialization efforts as well as recommendations of these products in clinical practice guidelines.
We also decided that although lucid would have its own capital and not depend on patent at finding the financing its operations, but Padma would continue to manage the lucid through a management services agreement for the foreseeable future.
Prior to the effective date of the lucid IPO prospectus have been retained and approximately 73% equities taken lucid.
Lucid issued 5 million shares of common stock in the IPO at $14, a share yielding $70 million in gross proceeds.
Despite the issuance of these additional shares having an equity stake in lucid actually increased post IPO to approximately 76% as a result of pad met converting debt into equity at an attractive price immediately prior to the consummation of the IPO.
As a 76% majority shareholder Pat led will continue to consolidate lucid financial into its own and recognized lucid revenue as itself.
The value of have mistaken lucid will grow as lucid value grows.
I bet. They already mentioned well also continue to manage lucid through an updated management services agreement.
I'll also note that half of lucid directors are also backed structures. So with all this remaining unchanged what has changed for patterns. Following the recent IPO.
The only notable change for patent and its shareholders is that <unk> no longer has to raise and spend capital and diluted shareholders to finance its operations as it has for the past three and a half years.
Tears and would've had to do at a rate of tens of millions of dollars per year over the coming years at lucid had remains a private subsidiary.
We sit now has access to $60 million of its own growth capital from the public markets and collectively admittedly subsidiaries now hold approximately $90 million in cash and no debt.
Our strongest financial position patent that had been in since its inception.
So that's pretty much it in terms of change same or higher payment equity stake and lucid.
Management structure same massive lucid commercial opportunity, but much more cash available to create value within both pad.
Yeah.
Based on some of the communications, we've received I thought it would be helpful to clarify what pattern, but did not quite explicit public I've met did not stop some or all or at least the.
Lucid IPO shares were newly issued primary shares and despite the new issuances at met holds a larger stake lucid and it did before the IPO.
Similarly, admin did not split itself into two companies or spin lucid.
Listen diagnose lucid diagnostics, Inc was always a separate corporate entity a majority owned subsidiary of its parent company before the IPO and that relationship remains unchanged post IPO.
Finally, as I will describe in more detail next patent is not merely a holding company for lucid or it's the other subsidiaries, but remains the hub of innovation and value creation for the subsidiaries and its overall enterprise.
On that note a couple of questions I frequently.
What is happening now that lucid is public or and what is patent much long term strategy.
Before I asked me those questions. Let me describe what I believe have met has become over the past few years in many ways. Thanks to loosen because during these periods have met a greatly expanded infrastructure to support a lucid rapid growth.
As a result of you have met now with <unk>.
Innovation and value creation engine with scalable capacity across the spectrum of functionality necessary to advance and commercialize internal innovation or those licensed or acquired from outside parties.
Have met in the subsidiaries to share these functionalities and services across an expanding portfolio.
Yeah.
Excuse me patent that shareholders benefit from this diversified portfolio with multiple shots on goal and nonbinary success, which mitigates long term.
<unk> and lucid shareholders benefit from the obviously economies of scale, which this shared services model per box.
<unk> long term strategy can be so simply state of that create more lucid.
What do I mean by create more visits I mean patent had lunch with strategy is to use its expanding resources and infrastructure to rapidly and efficiently advance and commercialize innovative technologies to create and enhance shareholder value as we have done with lucid over the past two years.
We're doing that with our entry into the dynamic digital health space with the acquisition of anchor desk and the launch of our digital health subsidiary various health earlier this year and we expect to do that with our commercial or near commercial products <unk> and extra.
With lucid no longer dependent on patent that to finance its operations had been that with plenty of cash to advance. These existing technologies. We also expect Pat med will accelerate its pursuit of new opportunities to expand its portfolio through the licensing and acquisition of new innovative technologies, including for the first time later stage pre commercial and revenue.
Generating commercial Cogs.
To support this growth, we're expanding both our human and for the first time, our physical infrastructure to meet the needs of the shared services model.
<unk> and lucid have added dozens of employees over the past couple of quarters and expect to accelerate that growth in headcount in 2022.
This quarter, we will launch patent its own dedicated product research and development facility in Foxborough, Massachusetts adjacent to our long term contract engineering manufacturing partner change product development.
Early next quarter, we expect to launch lucid own CLIA certified diagnostic laboratory facility in Irvine, California, a few minutes away from our longtime CLIA Laboratory partner Research Dx.
Finally, some time mid next year, we expect to launch patent its own dedicated low to medium volume medical device manufacturing facility in Salt Lake City, and we are in the process of securing space for that as we speak.
Finally, before handing the reigns over to Dennis I'd like to touch on the ongoing COVID-19 pandemic, although the late summer surge of highly transmissible Delta Varian did have some impact on our commercial operations. We continue to remain fortunate compared to many other health care companies, especially those who operate within hospitals are lucid commercial and clinical activities.
Almost exclusively in an outpatient setting and we continue to have mostly unfettered access to physicians and offices.
Concern of course is that cases have stopped declining.
It's a rise again in many parts of the country raising the specter of a major winter surge similar to the one currently underway in Europe, we are closely monitoring the situation and its potential impact on our commercial and clinical trial.
<unk>.
With that I'll hand, the reins over to Dennis to provide an update on our financials before proceeding with a more comprehensive update on our business.
Thanks, Alicia and good afternoon, everyone.
Our preliminary in summary financial results for the third quarter ended September 32021, and we reported in our press release that was published earlier this afternoon.
And we plan to file our quarterly reports for each of <unk> and lucid diagnostics on the Form 10-Q with the SEC in the coming days and at that time. These reports will be available at SEC Gov.
On the path that and lucid websites respectively.
Avnet has elected the automatic five day extension for filing its Form 10-Q for the third quarter.
The filed on or before November 22021.
Yes, we see report will be considered timely filed.
The lucid diagnostics Form 10-Q was do 45 days from the effective date of the IPO registration.
For November 29th.
We intend to file both 10 Qs concurrently during the path that extension period.
The extension for <unk> was unavoidable given the IPO occurred directly in the middle of a closing and reporting period.
So with regard to test performed in revenue recognition.
As you already know from our previous quarterly corporate update calls.
As a general rule visa guard tests performed so far will be recognized as GAAP revenue when cash is actually collected by the company.
Also as previously mentioned this will more than likely 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 the reimbursement transition period.
We've negotiated short term month to month fixed payment arrangement with the laboratory.
Which is processing Isa guard assay.
And is performing the insurance company billing and collections function the.
The fixed payment arrangement can be updated monthly to reflect estimated collections.
This commercial agreement became effective on August 1st 2021, and therefore, we recognized $200000 of revenue.
As part of the Isa Guard commercial agreement with research Dx.
Once we acquire own laboratory.
Lucid will be able to directly invoice CMS and private payers without relying upon a third party to perform those functions.
Once this occurs.
The short term agreement with research Dx will be terminated.
And future revenues will be recognized based upon actual collections until such times that time that the coverage policies are in place with CMS and payment contracts with private payers.
It's obviously can result in timing of revenues recognized versus the timing. They are submitted to third party reimbursement.
Until these future conditions are met.
The number of visa guard tests performed and submitted for payment are provided in the press release and will be discussed by Lee Shaun.
And following.
Obviously, we're at the very 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 of our lucid test centers and the upcoming launch of our Isa Guard Telemedicine program.
Presently there are now four banking analysts so efficient coverage on Paas and four that are issued coverage on lucid diagnostics and others that are doing their diligence the.
The 2021 and 'twenty two revenue estimates provided by the analysts are achievable, but quantity and collections are highly dependent upon the evolving reimbursement landscape.
As you are likely aware from our last corporate update the local coverage decision or LCD for.
CMS related reimbursement has not yet been published but as least Jon will describe in more detail. We have reason to expect action on this front in the coming months.
With regard to financial results for the quarter.
Provide some summary comments on patented and then follow with similar comments on lucid diagnostics as a Standalone company.
First a couple of clarifying comments related to help habits consolidated financials are impacted by the recent IPO.
Which is the question both Lisa and I are frequently received paas.
<unk> will remain lucid control controlling shareholder holding approximately 76% of its voting interest.
Alicia noticed noted.
Slightly greater than patented voting interest prior to the IPO, which was around 73%.
Lucid operating results will continue to be consolidated into tablets financial results.
The statement of operations will reflect a line item to show the noncontrolling interest of profits or losses to non path that shareholders of its majority owned subsidiaries.
As well there will be a corresponding offset in the equity section of the balance sheet for amounts attributable to minority interest equity.
This methodology is unchanged as a result of the IPO and we will continue to be applicable as long as paas med remains to be the controlling shareholder.
Pat led revenue.
Pat led recognized 200000 of revenues related to Easter guard with a margin of 28%.
I think everyone understands that this is not reflective of future margin expectations, given the minimum fixed costs. During this early ramp at moderate volumes, we are expecting approximately 90% gross margins.
Pat beds operating expenses.
Okay.
The press release, we added a new table.
Each of the past dead.
Egypt happening in lucid the details each of three components of Opex, namely commercial operations G&A and R&D.
And it reflects both gross amounts and net amounts after deducting stock based compensation costs.
By comparison.
The $9 7 million for net operating costs in third quarter.
It's about $2 million higher than previous in the previous quarter in <unk>.
This increase.
This increase was attributable to increases in commercial head count and activities.
As well as the expansion of clinical operations and the various health acquisition of Aimco disk.
With regard to tablets loss and per share amounts.
<unk> reported a third quarter net loss attributable to common shareholders of $12 3 million.
Or a loss of <unk> 15 per common share.
Versus a loss of $5 5 million and 11 cents per share for the same periods in 2020.
Our press release provides substantially more detail related to the noncash charges occurring in the current prior periods.
Also the press release provides a table entitled non-GAAP measures.
Which highlights these amounts.
Along with interest expense and other noncash charges.
Namely depreciation.
Stock based compensation.
Financing related costs to enable better understanding of the company's financial performance.
You will notice from the table that after adjusting the third quarter GAAP loss by approximately $4 million for noncash or financing related charges.
The company reported non-GAAP adjusted loss for the third quarter of 2021 of $8 2 million or 10 cents per common share.
I have met had cash of $37 3 million.
As of September 30th and is debt free.
During the third quarter. The company received additional net proceeds of approximately $2 7 million from the issuance of common stock in connection with the exercise of the warrants and stock options.
Lucid revenue.
Lucid recognized 200000 of revenues related to Easter guard with a margin of 28% as previously mentioned.
At moderate volumes, we're expecting margins greater than 90% leased.
These lower volume amounts of a minimum level of fixed costs associated with just being operational.
Lucid research and development costs.
Okay.
Third quarter 2021.
Research and development costs were approximately $2 2 million as compared to $1 2 million for the corresponding period in the prior year with the 1 million increase principally related to the increase in clinical trial costs.
With regard to lucid G&A.
Expenses, not including sales and marketing expenses, which are now presented separately as commercial operations.
$3 4 million for the third quarter 2021.
Compared with half a million for 2020.
The approximate $2 9 million increase.
Principally related to 2.7 stock based compensation for grants new hires new directors and.
And other incentive grants from the from the board approved equity programs.
Lucid commercial operation.
The expense was approximately 1 million for the third quarter compared to <unk> 3 million for the corresponding prior year period with a $700000 increase principally related to increase in head count.
Increase in marketing programs.
Related to the commercial activities.
With regards to the loss and per share amounts.
Lucid diagnostics reported a third quarter net loss attributable to common shareholders of $70 million or a loss of 49 per common share versus a loss of $2 million.
14th per common share in the same period in 2020.
Press release also provides a table entitled non-GAAP measures for lucid as well.
You'll notice from the table that after adjusting the GAAP loss by approximately $3 2 million for noncash.
And interest costs on Pat that convertible debt.
The company reported a non-GAAP adjusted loss for the third quarter of 2021 of $3 7 million or <unk> 26 cents per common share.
Lucid had cash of 21000 as of September 30th and a $22 4 million convertible debt due to the parent company.
Subsequent to the end of the quarter.
They have been converted to debt to equity and in lucid and on October 14th Lucid completed its IPO and raised $70 million, including 8 million from patented.
On a pro forma basis had the lucid diagnostics IPO occurred on September 32021.
Cash would've been approximately $93 7 million after giving effect to underwriting commissions and financial advisory fees.
So with that I'll turn it back to Alicia Vishal.
Thanks Dennis.
So let me now run through some key updates from across our business for the past quarter in recent weeks as well as plans for the upcoming months, so as always lets start with lucid.
Just as a quick intro lucid diagnostics as a commercial stage cancer prevention diagnostics company focused on the millions of chronic heartburn patients who were at risk of developing highly lethal esophageal cancer. Unlike.
Other common cancer mortality rates are high in this cancer, even in its earliest stages. So preventing deaths requires us to detect esophageal precancer, which occurs in approximately 5% to 15% of at risk chronic heartburn patients esophageal pre cancer can be monitored in its early phase and cured with an endoscopic procedures.
Late phase, which reliably halt progression to esophageal cancer.
Although it was topical <unk>.
Cancer screening is already recommended in millions of chronic heartburn patients fewer than 10% undergo traditional invasive endoscopic screen. The profound tragedy of an esophageal cancer diagnosis is that likely that could have been prevented that the patients have been screened and then undergone monitoring and curative treatment.
Domestic elements for a viable esophageal cancer prevention program has been the lack of widespread widespread screening tool that can detect esophageal pre cancer, we believe that Lisa visa card test performed on samples collected with its Isa check device constitute the first and only commercially available diagnostic test capable of serving a such a widespread screen.
Tool to prevent esophageal cancer death through the early detection of esophageal pre cancer in these at risk chronic heart for patients.
On the commercial front lucid now flush with the proceeds of the IPO is in the process of rapidly rapidly expand against commercial sales infrastructure.
And moving from a hybrid sales model utilizing independent sales rep to a full time dedicated direct sales force lucid hired 17 for health and clinical support personnel in the recent months and expects to increase its commercial head count several fold in 2022.
Lucid is also in the midst of expanding its lucid test centers in cities across the Western U S.
Chronic heartburn patients in Missouri, who are referred.
By their primary care physician for PCP or herself reefer.
Can now undergo a rapid noninvasive office based test to detect the softgel pre cancer before it progresses to deadly esophageal cancer. Each test center is staffed by a lucid employed nurse practitioner in medical assistant who uses <unk> to collect surface cells from esophagus from from the patient, which are then sent for user growth.
Testing lucid estimates that estimates that a single nurse practitioner can perform up to 'twenty, you said check procedures per day and expect each center to cover its personnel and medical office lease cost with only a couple of tests per week.
The lucid test program has now advanced from a pilot program in Phoenix launched just this past August to original program covering the major cities of the southwest with the launch of test centers in Denver, Salt Lake City, and Las Vegas last week, we look forward to the next phase in the program's growth, which will focus on the Pacific Northwest and then steady.
Expansion nationwide thereafter.
Our Phoenix experience over the past three months have demonstrated that each test center can again be operated modest fixed cost and attractive margins. We also learned that the key to driving primary care physician Easter guard referrals is to recruit.
Experienced highly driven sales representatives, who exclusively call on these primary care physicians, most commonly from the diagnostics for pharmaceutical sectors and have them in place at the launch of the test centers just as we did in the premium series, we launched last week.
Lucid has also been working closely with our independent telemedicine partner.
Our script is finalizing the lucid branded telemedicine platform, which will accommodate self referrals for Ethernet testing from direct to consumer marketing. So this ESO guard telemedicine program with direct to consumer marketing will launch a pilot program in Phoenix in the coming weeks.
Lucid continues to drive these regard commercialization, while growing training in fundamentally transforming itself infrastructure to a direct sales force increasingly focused on primary care physician referrals can lucid test centers, the third quarter with somewhat of a transitional quarter as we move to a direct sales force.
Increasingly focused on these primary care physicians and we dedicated human resources to the expansion of our sales infrastructure, including implementing Salesforce Dot Com show pad another critical sales too.
We also established a very robust and intensive sales training process and graduates of the most recent five day program completed last month are now in the field calling on physicians.
Volume during this transition during this transitional quarter was flat at 213, 203 tests relative to the prior quarter, but up over 300% on an annual basis.
We continue to see slow, but steady progress on the reimbursement front Easter guard has already.
I've mentioned previously secured a national Medicare payment rate of 90, $138, which became effective last January our current efforts are focused on securing Medicare coverage as well as private payer payment and coverage.
We have been engaged with the multi X program of the Medicare administrative contractor Palmetto, GBA and Medicare payment and coverage since early 2020, although we secured final and effective payment determination coverage determination has been slowed by significant pandemic related backlog of coverage reviews. We do however have.
The reason to believe that things are beginning to stir on the on the coverage front last month to multi X program called a public contractor Advisory Committee or CAC meeting on the top on the topic of molecular testing for certain gastrointestinal cancers, which included discussion of Ethernet testing.
We are very encouraged that the expert gastro neurologist panel voiced strong support for esophageal cancer screening and high risk chronic heartburn patients.
Our market access and reimbursement team along with our expert reimbursement consultants are now in the process of re engaging with multi X to reinforce this message and we are.
Hopeful that we might see a draft coverage determination on the cover in the coming months.
The private payer side. The laboratory continues to receive some standard 50% out of network payments from private payers, averaging over $1000 per test, which is encouraging.
Sharing network private payment coverage.
As of course, however in longer term process that requires negotiating contracts with local regional and increasingly national private payer programs, a prerequisite for initiating such engagements with the critical volume of tests performed and claims submitted to each payer.
Close to reaching such volumes in certain locales and have initiated some context with major payors in Arizona.
In the interim we've had we have we have our two successful advisory board meetings, including one this past September with medical directors of major insurers, which indicated good alignment with our strategic approach.
Bottom line message from these meetings is that private payers will be focused on clinical utility data demonstrating that Easter guard positively impacts clinical decision, making most notably that patients with a negative Easter Greg test don't also undergo a constantly endoscopy.
We are collecting such data from our busiest clinical sites and will soon have our own clinical registry in place, which will also provide such clinical utility data.
Next I'd like to spend some time on the substantial progress we've made in securing lucid own CLIA certified laboratory, which will allow lucid to bill payers directly for the test and eliminate the complexities of the current process involving our partner research Dx lucid.
Lucid and research Dx have recently agreed in principle to the terms by which a newly created wholly owned lucid subsidiary Lucid Dx class would acquire the CLIA certificate unrelated licenses to perform the Easter Guard test lucid Dx labs with lease a separate building in Irvine and research Dx would continue to manage the performance of the E cigarette.
First through our management services agreement with Lucid Dx labs.
We look forward to executing the definitive agreements hopefully before the end of the year and launching the lucid CLIA laboratory soon thereafter.
Creating much of the effort on lucid side had been our newly appointed Chief Scientific officer highly accomplished molecular biologist Seema Verma.
Dr. Verma has long been a part of the lucid family and her prior position as VP of genomic services that research Dx bearish played a central role in transferring the eastern got assay from the case Western Research Laboratory.
And launching is regarded as a commercially available laboratory developed test could not be more excited to have her onboard and to launch our own CLIA laboratory in the coming months.
Things are also progressing well on the clinical research and development program. We are actively enrolling patients in two international multicenter clinical trials <unk>, one and <unk> to support FDA PMA approval, a visa card use with Easter check has an in vitro diagnostic.
Indicated to detect early esophageal pre cancer.
Studies have 68 sites in the U S and Europe with 50 U S sites and not in all non European sites currently active enrolled.
Enrolment is steady despite COVID-19 and we are still targeting completion of enrollment by the end of 2022 and PMA submission to the FDA in 2023.
A couple of more of lucid highlights before moving on to the rest of the portfolio.
We're proud to see lucid products add to their list of formal accolades and honors with visa guard being awarded diagnostics innovation of the year as the biotech breakthroughs Annual award program recognizing innovation of the global life Sciences, and biotech industry. This year's program attracted more than 200 nominations from over 12 different countries throughout the world.
Also lucid related last month have met acquired North Carolina based cap Gnostics, LLC, which manufacturers esophagus and U S. FDA five 10-K cleared in European CE, Mark certified non endoscopic sponge based esophageal cell collection device, which has been used in pre commercial clinical research.
Of esophageal pre cancer Biomarkers and major.
Academic medical centers, including Mayo clinic, and Johns Hopkins, the transition to our manufacturing and quality systems is nearly complete and discussions with the academic medical centers and their commercial sponsors have commenced.
Next a brief update on <unk>, our minimally invasive device to treat carpal tunnel syndrome.
I am actually cautiously optimistic that we're starting to turn the corner after a frustrating year with repeat a challenge is building momentum with carpets are near full time <unk> National sales manager has been doing an excellent job since he started in June leveraging because relationships in the orthopedic and hand surgery space to recruit motivated early adopters and what remains limited.
Commercial launch.
In the past quarter in recent weeks, we've trained seven surgeons and have five cadaver training lab scheduled.
Surgeons performed 11 Carb X procedures during this period and have an additional eight current schedule on the books.
Hired a full time territory manager with four years of experience at another carpal tunnel.
Company, and our recruiting and clinical specialists to support training and cases. So although this is just the first step I'm encouraged by this progress and remain upbeat about the future of this groundbreaking product, including exciting progress on our next generation <unk> device.
Let's now move on to various.
I'll try to be brief since many of you participated in a virtual investor event last month, and if you didn't I'd encourage you to watch the recording.
Went really well.
There is a majority owned subsidiary <unk>.
Represents patent its entry into the dynamic and rapidly growing digital health sector, various acquired Unco desk, and digital health company with groundbreaking tools to improve personalized cancer care.
<unk> is now developing a remote cancer care platform that integrates and intelligent implantable vascular access port with physiological sensing with software with symptom reporting and telehealth functions as well as advanced data analytics.
Versus a groundbreaking basket, Texas port contains biologics sensors capable of generating continuous data on pieces geologic parameters known to predict adverse outcomes in cancer patients undergoing treatment wireless communications of the patient smartphone phone and various of cloud based digital health platform, we will seek to deliver actions.
Real time data to patients and physicians efficiently effectively.
<unk> is targeting FDA 510, a clearance of the intelligent implantable vascular access ports and launch of the remote digital health care platform in the second half of next year.
I am very proud of the remarkable progress we've made in the six months. Since this acquisition we are rapidly advancing the development of the intelligence implantable point and successfully completed our first animal lab last month.
On the software side in September <unk> was accepted into Microsoft's Global partnership program and entered into a definitive services agreement with leading full step closer to Silicon Valley and Silicon Valley based software development firm.
Okay.
Luke is now building.
Various remarks remote digital health care platform that teams are making excellent progress with <unk> now with a clickable user interface of both the smartphone and desktop apps as well as initial coating of the underlying data structures.
A major recent highlight for various was the appointment of highly accomplished Silicon Valley technology Executive Sunny web as its chief Technology Officer. She brings to our team nearly two decades of experience successfully leading technology teams and launching dozens of enterprise level software and hardware products, including for industry leaders, such as Apple Philips health.
Karen Facebook.
She has deep expertise in data science analytics machine learning and advanced sensors, all cutting edge technologies, which are central to the various device and platform.
We'll soon be announcing two key various advisory parts of medical Advisory Board of key opinion leaders in cancer care, including the major cancer centers across the country and a technology Advisory board of Silicon Valley luminaries.
Finally, we have launched a major R&D effort to apply the various technology, it's a very important and prevalent conditions beyond cancer.
This project seeks to enhance the care of patients with heart failure kidney failure, and most recently chronic lung disease or COPD.
Now onto the next one.
Including our next <unk>, which seeks to revolutionize care by eliminating the need for complex expensive and aeroplan.
Electronic infusion pumps for most of the $1 million in fusions performed in this country each day.
As a company we've been spared the brunt of the supply chain issues plaguing much of the country, we have incurred some delay in the receipt of certain at a certain excellent components from China. We were eventually able to switch to a U S supplier, but the delay cost us a couple of months on our timeline, we have not received the parts and are starting verification and validation testing.
But we've pushed our target date for FDA submission FDA submission to Q2 of 2022.
We are however already launching.
The recruitment of sales leadership personnel in anticipation of a commercial launch next year.
As many of our long term shareholders know for several years, we have and we still continue to receive strong interest in excellent next lift from leading strategic food space.
<unk> for a pre commercial product that has not been exposed to the commercial product to the commercial market excuse me can be and has in this case been painfully slow.
I should note however that some thought.
That our strategic approach. The next lot has evolved significantly over this time period back then we were positioning next low for a pre commercial acquisition to supply pad met with much needed capital. We're obviously in a very obviously a very different company today than we were than pattern that is now in a strong cash position, especially following the next little IPO and all.
We are open to continuing these engagements and entertaining offers which we well we know that in commercial and excellent product is a very valuable asset, which are which we are happy to commercialize tend to create value organically if necessary.
Finally, a few brief highlights from a few.
For the sake of time, not all of the other products in our portfolio.
Progress on our import Io implantable <unk> vascular access device and remain frustratingly slow the long planned human study in Colombia, South America remains delayed due to local IRB backlogs. However, there are promising signs that will finally be able to start enrolling patients.
With long term implant support after the new year in the U S. The FDA continues to present its challenges on a U S study and we are strongly considering reverting to the classic med Tech strategy of seeking CE Mark.
And launching in Europe first.
<unk>, alright, softgel ablation devices progressing extremely install.
Installed histopathology and data from our most recent animal study, which included head to head comparisons with the Medtronic barracks device really looked great things.
Things continue to go well, we expect to be in a position to submit for five 10-K clearance in 2022.
So thank you all for your attention and with that operator, we can now open the call to questions really thank you for your attention.
Thank you another conducting a question and answer session, if you'd like to be placed in the question queue. Please press star one on your telephone keypad.
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Our first question today is coming from Kyle <unk> from Canaccord Genuity. Your line is that life.
Thanks, Hi, with Shawn and Donna.
Hi, guys congrats.
Congrats on the IPO in the quarter.
So I just wanted to start on at least one I heard you on reimbursement really helpful. I guess next few months next couple of months you think the draft LCD code.
To be polished.
Could you just walk through the steps a little with a little bit more clarity or detail and just kind of the expected timelines in.
Perhaps the scenarios and I'm just kind of curious if you.
Do you expect any additional data is going to be necessary to achieve the draft LCD.
Yes.
The short answer is no.
So you will know when we know, but we don't see that there was nothing in our <unk>.
Have discussions with the <unk> group as we were preparing the coverage tossing it back in the first half of May that.
That suggested that they were focused on traditional data and the.
The CAC meeting transcript if you read it it's a bit rambling and Theres a lot of you have to sort of pay attention.
There was fairly strong support as I mentioned from the Gastroenterology.
Expert panelists, including two from our clinic.
And one from Johns Hopkins on the fact that there is sufficient data right now to support high risk screening with these not endoscopic tests basically leveraging the existing guidelines for endoscopic screening to non endoscopic screening. So every hint we've gotten every communication we've had would seem to suggest that.
We feel that.
That there is a fairly straightforward decision to be made here. If one follows the if the risk factory profile that had been one that's been well established in endoscopic screening recommendations Medicare patients are over 65 so.
We would hope and expect that that.
That's the same risk profile basically a patient.
Medicare patients with two other risk factors would be.
Covered for screening.
That of course, you know that slowed them down there, where we're encouraged that that does pay period of dusted off our dossier and are looking at it in conjunction with other.
Other tests in the Gi area and in the <unk> area.
We're getting as I said, we're hoping that that will translate in the draft.
In the.
In the coming months.
What happens from there very really impossible to predict right. It depends on what on what they say if we certainly if we get a something that approximates what I just described and what we should do quite well we think we are.
I've made a strong argument for them, we would hope that the process from a draft.
LCD to it.
Effective one would not be very long, but.
That's obviously going to be determined.
Okay. I appreciate that was Sean is that makes sense.
And also was wondering where I guess, where most easily check procedures that occurred during the third quarter and.
I guess, where theyre kind of yes.
Being performed currently what's the expectations for like early 'twenty, two and obviously you had the lucid test centers kind of launched I guess in the middle of the quarter I know theyre, not really up and running yet, but I'm just trying to understand if the volume that we saw in the third quarter could increase sequentially or just what the trends could look like going forward.
Yeah. So I think I think I have one quick answer is that the bulk of the nearly all of the tests performed in the third quarter, where through traditional our traditional target which were the Gi.
Which are the GI physicians I mean, we didn't launch the Phoenix test centers until until August by the time, we had our local sales reps are in place.
We were well into the well into September so that number reflects almost entirely.
But the same target that we had prior in prior quarters.
And as I said it reflects some sort of shifting of resources to get the test centers up and running and to train and expand our our sales force. So you know I think.
I would expect over time, including this coming quarter and beyond that.
The proportion of them.
Test performed.
From primary care referrals at our test centers relative to those being performed at Gi centers will likely shift, but it's really hard to it's really hard to know for sure.
But that's certainly where we're heading over the long term and that we fundamentally believe over the long term whether it happens in the next couple of quarters or not we'll see over the long term the path too wide adoption of.
Visa card testing is through the primary care physicians, because that's where the patients are very few patients ever see a gastroenterologist.
Alright, great.
I'll leave it there I appreciate you taking the questions, though on a little bit about there's some chump and thanks again, okay. Thanks, a lot guys.
Thank you next question today is coming from Charles Duncan from Cantor Fitzgerald. Your line is now live.
Hi, Charles I wondering yes.
Good <unk>, thanks for taking the questions. Congratulations on the recent progress if you've got a lot going on and my questions are primarily <unk>.
Along the lines of lucid I'm wondering if you could provide any feedback from physicians, who prescribe <unk>, so check and kind of.
In market experience, thus far anything newly cleaned from from that Oh.
Oh, absolutely yeah. So.
We train and we prepare our reps to do what we call objection right for.
Or both flavors of physicians for Gastroenterologist and for primary care physicians and we've had a lot of experience on that on the top trax related to Gastroenterologists and have worked through that and generally.
Those contracts have been well honed it have gone well.
Over the.
Over the prior quarters, what we have learned and we're very happy with.
With two of experience is that the contracts that we developed from the primary care side is is really.
Quite straightforward.
And the reason for that is that when we made the as you know we made the strategic decision to have a very simple ask of the primary care physicians, which is to say, let us sort of update you educate you on the relationship between chronic heartburn and esophageal cancer on the availability of this test and all we're asking is that you got you.
Understand that and you offer this test to your.
Sydney appropriate patients within your practice.
In order to test them and we will provide you with the.
Our location for that test to be performed without because the burden on them is quite low we're not asking them to utilize their own resources to do the test.
A quick anecdote you know one of our Vice Chairman scan Lapidus was in was in Phoenix.
Our test center in an engaging with some of our folks and he actually did a sales call. It.
A quite impressive.
With one of our local PCP focus reps and he really came back in a pretty pretty good grizzly veteran and he came back with very positive reviews of the of how the story was told and how the entire folks in this thing what was an office in Mesa.
Physicians nurse practitioners et cetera, just got it from the from the very beginning and it didn't require.
Now there is there is obviously an art to this to sales and that's mostly around sort of repeated contact so messaging has been fine but to get people to actually you know to remember to think about it and to have it be front and center. That's just classic sales one on one and requires multiple points of contact and the team is really good.
Down to almost a mathematical exercise right now in terms of how to how to do that so.
As I really said could not be happier with how the.
Interactions or go into primary care physicians, which is sort of what's new in the last quarter.
Eric Good end.
As I guess as a key investor with your time and money in this business and these initiatives marketing initiatives.
Over the course of say, even the next quarter, what will you be looking to to gauge success.
Sure.
A corner may be short, but yeah, well, obviously you know.
That will that will start Sue Carter good morning, Eric.
Yeah, we clearly are looking our metric right now is just test volume right and you know.
As I said, we it took some time to kind of it took them not just time, but sort of.
Allocation of resources to do this transition to direct sales force.
The training program is now about five to eight sort of intensive five day all day program that we exposed 16, new salespeople to just last month and so now that that's all in place and a lot of the infrastructure with Salesforce incentives in place, we really expect them they're out of the field that they're out in the field banging on towards <unk>.
Making their case and so we would certainly expect to see some.
Nice increase in testing volume over the couple of over the coming quarters.
Okay, and then last question Andy.
Yeah, one other thing.
Well certainly know by the next quarter, which is that as I mentioned, we're in very close no more than a couple of weeks away from launching the pilot DTC program with a script in Phoenix and we'll have a lot of information by the time, we have our next call as to how effective that direct to consumer marketing and is how effective we are at capturing.
The interest of patients with chronic heartburn and driving them into our telemedicine program. So that obviously could very well have a big impact in the coming quarters as well.
Okay that should be helpful. Last question on the marketing initiatives and then just one quick strategy question on Chi cannot sticks.
I guess relative to the testing center model, which he views in Arizona you mentioned, perhaps.
Expanding that to Denver, Las Vegas, and Salt Lake City does the math still work are you having to adjust that at least with these three new.
Thiago piece and that's the thing I mean, you know obviously at some point, we will get to.
We'll get to New York, and Chicago, and other and then potentially some other higher real estate.
Areas, where the medical office leases will be somewhat higher but honestly even than the math is still pretty insane.
At attractive and that it still ends up being a marginal cost business. So.
So no nothing has changed in that.
In the cities that we're not we just launched and the ones, we expect to launch and in the Pacific Northwest and we really don't expect that to change meaningfully even in higher cost.
On the operation side, obviously, the marketing side and the media cost side will increase dramatically and that's why we're testing the media model and lower cost.
Fittings before we would even contemplate doing it in.
And merger cost media markets.
Got it last question strategy. Thanks for taking all my questions regarding E. So esophagus cap and the CAG Gnostics acquisition I guess I'm wondering if you could give us a little bit of information what you would like to do with that and really what drove you to.
Consider that acquisition by Tabbing. Thanks, So let me answer the second question for some probably not really going be able to say much on the first question. So let's start with your second question. So the reason we acquired <unk>.
Alphacat from cat mouth, because there's really fundamentally that lucid intends to be the Salford Royal disease company. So we have obviously E cigarette visa check for Softgel Precancer branch topic is screening we have <unk>.
We've entered into.
Option license agreements and we continue to seek more out with regard to progression markers that can detect the difference between non.
Non dysplastic dysplastic, how we have a we have an ablation technology that is currently housed in perm.
<unk>, a new secure that we expect.
When and if it's successful we'll move into mental lucid. So we want to do we want to be the company for all things are soft all this off Joseph because I forgot to mention we're also.
Launched a medical advisory board and have started some clinical trial work on its use in eosinophilic esophagitis, which isn't on clamatorial very common.
Laboratory food mediated biology.
Additionally, these topics so with that as a baseline.
We wanted to make sure that we have all the tools available to us to pursue all of the things that I, just mentioned and although we firmly believe that that he so check for the screening application that we're using today as well as and we will continue to be the best choice because of the way it doesn't anatomic targeting a protected sampling we just wanted to make sure that we have.
We had access to the other technology out there, which was a sponge based technology, which could be beneficial for let's say a soft gel.
Physical softer detritus aren't potentially for progression markers or other areas that we're pursuing.
We were frankly somewhat surprised that kind of kept optics was available and when it became clear that it was available.
We acquired.
Now in terms of the strategy I'm going to have to get back to you because you know obviously there is a.
As I mentioned in my prepared remarks, we have initiated conversations with Mayo clinic, and Johns Hopkins, who who have been doing.
Clinical research using the on their own Biomarkers using.
Using theyre using.
Using the esophagus half device.
And with.
Frankly with commercial partners that they work with so.
Commercial sponsors partners. They work with so stay tuned on that and we'll let you know once we have a little bit more but we just wanted to get it into our portfolio to make sure. We had all the tools available so that we could pursue or broader aspirations in this space.
Our next question today is coming from Frank.
From Lake Street Capital markets. Your line is now live.
Hey, Frank Good afternoon, Shawn Denison.
Good afternoon, Thanks for taking my questions.
I think this was slightly or partly answered in tiles line of questions, but I just wanted to come back to can you talk to the sequentially flat quarter over quarter from a volume perspective, what were some of the moving pieces that happened.
It happened in the quarter, I guess I was expecting a little bit of growth, but I understand a lot of moving pieces. So maybe just yes I mean.
I think the best way Im sorry, Im sorry, Frank but that's the way I'd describe it as bad as that.
As I said, a transitional quarter. So in the second quarter everything was sort of full steam calling on Gastroenterologists, we did not have.
We had not sort of expanded our team it was mostly our business model with sales management utilizing.
Utilizing independent sales reps, and we really kind of tackle pretty rapidly.
In the third quarter in anticipation of the lucid a IPO.
Access to significantly more growth capital to a direct sales model. So most of that most of that is a result of us shifting some personnel to getting the test centers up and running to getting the primary care.
Folks trained to getting some of the infrastructure as I mentioned, they go online and other infrastructure in place. So we can be set up we could be set up to start really dialing things up with regard to expanding the direct sales force. So it's really that I mean was there a little bit of Covid.
Obviously COVID-19 went through the roof in August maybe at the Gi level, but I wouldnt attributed mostly to this kind of transition from from.
From the from direct sales sorry from independent reps in a hybrid model of calling primarily on <unk> to sort of laying the groundwork for the future model of direct.
Direct sales.
Got it that's helpful Crystal clear second piece I wanted to touch on was just up the revenue recognized in the quarter can you break out the contribution from <unk>.
Medicare if any versus whether or not it was commercial at the 50% level you referenced yes, let me answer that so.
Dennis why don't you go and answer that but let me just make one comment which is let's come fall so the.
The revenue we recognize is not reflective of the packing and remember the way it's set up in Venezuela.
Andrew This is not one of the same with the billings will speak.
From by the by the laboratory, but I will answer a part of your question and then I'll, let Dennis answer from a more financial perspective. So all of the all of the claims that have been paid have.
I have been.
With from private payers the claims that have been paid to the laboratory have been private payors.
Either gotten the denial for.
Medicare today, some of that was related to the fact that it took a little while to get this sort of.
Thing called the X code, which facilitates the processing of Medicare claims and that's now in place. So, but we don't have really a picture either one way or the other with regard to either the denials for claims paid for Medicare. So all of the claims that have been paid to date have been.
Out of network payments by private payers, and typically that sort of 50% range, but Dennis do you want to maybe add a little bit of color to that as it relates to sort of the actual recognized revenue and where that came from.
Yes, the recognized revenue is actually agnostic in terms of the treatments whether or not there.
Medicare or private payer side.
So.
You have both of these things going on as Lee Sean explain the laboratory, who is the billing or arm and collecting has all been private payer components they've collected on our arrangement with them is a fixed price contract. They pay us $100000 month presently there are 30 day contract. So they can renew each month.
Depending upon what we view as the likelihood of their collections it can't be tied directly to that but there isn't there isn't any.
<unk>.
Discussion understanding in terms of where the billing cycle is occurring on the laboratory side that orients.
Our arrangement in the contract for the go forward months, but presently it's 100000, a month, regardless of what they they collect we have visibility into what they're doing what their billing how they're collecting out of network payments.
And as Lisa said, so far none of them had been Medicare collections.
None of them have been Medicare denials on the private payer side their collections have been predominantly out of network.
And then traditionally out of network is paid at 50% of list price, which we view that as encouraging and it continues to be that that approach.
At roughly half of what you are.
1938 payment rate is with CMS. So all of that is good.
And for the foreseeable future until such time that we are we have our own laboratory owner who laboratory.
We'll continue with that arrangement with research Dx.
And that will go up as their volume their collections go up.
And we'll go up prospectively in terms of the financial arrangement.
But once we own. It then we will take over that same position, we will bill directly to the private payers, we will bill directly to CMS.
And we will deal with those rates that we.
Payment rate has been determined yet.
Until such time that their contracts in place with the private payer community going forward.
So hopefully that was.
I'll just add just emphasize one thing which is that we really I mean, not the eyes are not thought of the teasing across yet, but where we really see this transient we're highly motivated to to complete this transition to to lucid owning that.
CLIA laboratory and transitioning to its own billing.
And we really expect that to be near term event barring some major unexpected.
Problem.
Okay.
Perfect.
Thanks, I'm already setup, it's really temporary we really expect it to be temporary.
Got it perfect. Thanks.
Thank you. Our next question is coming from Mike Matson from Needham and company. Your line is now live.
Good afternoon.
Good how are you guys.
So I guess first on this transition to the direct sales force.
<unk>.
I know you guys kind of talked about that in the past so it's not that surprising but just.
Is it now completely done or is it still underway when do you expect it to be done and then the second part of the question would be.
Is the direct Salesforce really purely focus on <unk> have you sort of given up on the Gis are they calling on Gis as well.
Yeah, that's worth.
So the transition in terms of the structure is complete so we're not we're no longer depending on independent sales reps that that all of the sales activity right now is being done with focus lucid employees, but we're absolutely not giving up on the GI is let me just make it clear so although the expansion.
It has been.
What's new has been.
Adding aggressively adding PCP focus scripts. The reason for that is we need them to support the lucid test center. So as I mentioned in my prepared remarks, I mean, they're kind of joined at the hip and we've actually learned that one of the things.
That we learned in Phoenix is that it doesn't really matter, whether you have a test center up and running if you don't have if you don't have reps at PCP focus reps in the area that are actually bang on doors and driving referrals. There. So we're not we're not doing them simultaneously like we did in the three cities last week and looks at it the same in the northwest.
The way to understand the.
<unk> is <unk>.
We have.
In the trenches primary care sales reps. These are already as I mentioned pharma typically pharma diagnostic, perhaps who spent their careers selling diagnostics or pharmaceuticals to primary care physicians. They know how to go door to door and do that above them. We have market develop the managers who are.
Looking at the overall market.
Particular region and working with their reps as well as.
They've been on primarily right now expanding it.
PCP level, but still providing ongoing support and engagement with the gastroenterologist.
Our messaging to the gastro neurologist has changed a little bit which is that the way we see the gastroenterologists are they're just another test center there are sort of GI Test center, just like we have lucid.
Not really out there putting lucid test centers up to compete with customer not just winning when we Havent Gastroenterology group.
In an area that is busy and as active and wants to have basically onsite lucid E. Cigarette testing, that's fine and we support that we provide clinic clinical specialists to come in.
And support their the cases theyre trying to trying to be there pretty much on the re case.
And so nothing just like Kansas, they've had more more more more more strongly that nothing has changed in that part and we continue to seek out and grow through the higher level of market development managers.
Gastroenterology practices that want to embrace this and basically become a test center.
The once they've established themselves at the Tesla <unk>.
Interesting is that the primary care reps.
Our reps are calling on both on primary care physicians that are kind of de novo that are not particularly attached with a particular Gi that's working within our network or they will also be the entity or the wrap that calls on the primary care physician that refers to that GIC I think as you remember we've said this many times in the past our message to the to the.
Gastroenterologists event.
Yeah, they're going to be some patients in your practice are going to be some patients undergoing colonoscopy and there are some loan there is some low hanging fruit that you already see but our goal is to go out and find your more patients finding those 19 out of 20 patients that are not currently getting screened and to do that we have to go to your primary care network and so by having a network of primary care physician for primary care.
Our sales reps, we actually in a better position now to actually support the Gi. So it's a bit maybe complicate it and hopefully that makes sense, but it's all intertwined in this transition the transition that I described just from a hybrid model with independent reps to a direct sales model. It is not.
Transition away from <unk> towards primary care.
Okay, Great that's very clear and very helpful. Thanks, and then yeah I wanted to ask about the direct to consumer component.
What's your plan for sort of initial DTC advertising is it going to be a nice all the areas. All the areas now where you have the the test centers are you going to start in Phoenix to see how it goes.
So we're gonna start ups. So just like we did with the actual physical locations, we're going to start with Phoenix. So we have the Phoenix test centers, we actually have the media buys everything is ready we've just been waiting for the the up script lucid telemedicine platform to be up and running it looks great and it's a pretty slick.
And that'll be ready very very soon and that's really just a matter of turning on the switch with regard to the media buys in the Phoenix area across all the various modalities and we're going to do that in a deliberate way, we're going to look and see what the return on investment with billboards versus local television versus digital versus <unk>.
<unk> print versus other and start titrating that until we really kind of have a pretty good sense as to how generally the population response to our advertising before we branch out and start doing it and the other test center. So for the other test center cities, that's going to be strictly.
Primary care physician, driven peripherals until we sort of fine tune and hone the upcoming DTC program in Phoenix.
Okay got it thanks for the help.
Alright, Thanks, Mike.
Thank you next question is coming from Mark Massaro from BTG. Your line is now live.
Sure.
Hey, guys.
Thanks for taking the questions.
Congratulations on the IPO I guess my first question is on the commercial payer contracting side I know this can take a long time.
Thank you talked about clinical utility data being important.
Where are you in that process and how long do you think it would take for you to complete.
Complete building the evidence such that you could submit this to <unk>.
A large health plan yeah.
The quick answer to your question that that will have that data by the time I don't I don't believe that data actually right now is the rate limiting factor the rate limiting factors, but they won't talk to you and to you until you have sufficient claims within their within their coverage. So population right. So so we are collecting that data we have obviously high.
Volume users, where we are going to them and getting them to get the endoscopy.
The results on patients who undergo.
Alright, he said our testing so these are very straightforward.
This is about a complex clinical trial, it's actually kind of clinical utility.
Straightforward you know the patient got a test with a positive or negative if they were and did they get endoscopy and you know and what does that mean basket right.
So so yeah, we're collecting that data now and as I mentioned, we're just about ready to launch our our own registry and the goal of our registry is to try and not always easy but to try to get just about every patient who undergoes.
E subtract.
Ease of use of our testing to consent to us collecting their follow up data with her with endoscopy. If indicated so we will have a sort of a continuous stream of that data, but so it's not complex data to collect and have the collection of the thing is not going to be the rate limiting factor in our initiative.
Conversations with private payers.
Okay, and then maybe just a two parter.
Is there currently a preference between digital or TV or billboards on the DTC and then the second part is you know as I think about my model for next year, obviously the the.
Test clinic is probably the biggest driver.
To adoption.
For what it's worth I'm modeling 2014.
Clinics launched.
A cumulative number.
Just curious if you can just give me a sense for your comfort around a number between 10 and 15 in terms of rolling out clinics across the country or at least the Pacific Northwest. So let's answer. The first question first of all I'll defer to Dennis without it mostly because he has a lot more experience in DTC, but but I think the answer is is that we're not going in with any.
Any preconceived biases as to what works and what doesn't and you just never know right. Even some of these are elderly patients where digital may not be you may not get to them through the digital so we're using Phoenix as a laboratory to understand that but Dennis do you want to talk a little bit more about that.
So obviously mark this changes over time, so it's more important to have a feedback loop and as Lisa said, we're going to launch with some initial bias.
Both.
All of those media.
Tools and the key is to make sure that we have the feedback loop to understand.
Which ones are working in a call to action is getting folks to schedule a appointment with telemedicine or.
Calling their PCP and getting a script to get tested.
And that will change over time more dollars will pour into those that are having a higher bar.
Our media expense ratio.
Revenue dollars compared to the the.
Cost of the specific media and.
You can.
All of those media even further for instance, if you're gonna do T D.
As part of our plans.
On a very limited scale initially you got to figure out what times of the day what channels. What message is it 15 seconds is it a longer commercial from a training standpoint, all of those things will take some time to optimize.
But once it's completely figured out and that's why we're using the lower media cost markets to have that figured out so that when it does launch on a national basis, we have.
Great data to give us confidence that dollar spent is going to yield dollars of revenue. So it will take time to figure out digital TV versus Billboard and other other means of approach you'll radio has been.
Very successful in the past.
Before.
Neil.
Physician based kind of models Colby.
Covid changes that are especially wouldn't drive times aren't as ready for orders they they have been.
But we expect that to come back at it.
At some point and that could be a very profitable approach for us but.
Measuring that.
Spending where it works, it's going to be important and that's what we intend to do.
Yeah.
Great and then on et cetera.
Let's talk about that a little but I can let me see if I can give you some details I'd provide some color on that.
Directly projecting so so in Phoenix.
For example, we have three test centers right and the reason we started right off the bat with three in Phoenix is because we knew we were going to launch a DTC program in Phoenix first thing we wanted to make sure we have full geographic coverage.
Across the Phoenix Metropolitan area, so that we could.
Because you can't always know where people are when they when they received in advertising. So we have been right in the three cities, we announced last week, we used we're starting with one and each because we don't anticipate doing direct to consumer.
Air until we as.
As I mentioned until we sort of get a sense of of the model in Phoenix and so those locations where basically those type of places were located.
Basically using.
The geography of hospitals, and clinics and practices and population demographics and so forth. We certainly expect to add one additional at least one additional one in Denver and Salt Lake. After we've had some time to gear up there.
And.
Maybe even a third in Denver.
The next we've as I said pretty clearly, we're going to the southwest and northwest. That's three cities you can probably guess what they are and and that model will remain will be similar to <unk>.
Two starting with one and each of them and then expanding to up to two to three depending on the.
Population of the geography at that point and that you know that.
Not too far into next year, that's fairly early next year, we will be in a position where we're laying the groundwork now to expand to.
Cities, starting to states, where the we selected these western states I think as you know because they have a low regulatory burden.
Burton for nurse practitioners to operate independently and so that's where we started but we are now with her counsel proclaimed retard portion through the processes of what we need to do to have physician oversight in states that require a traditional supervision.
And so that process will be.
Well, we'll be done by the time, we have the northwest.
Centers up and running and then it's really just a matter of aligning.
Geographies in states with where we where we have where.
Where we seem to be getting traction where we have reps I'll also just point out one really important point, which I probably should have started with which is that.
I know you're focused on the rate of growth of test centers, but I just want to emphasize one thing that I said earlier, which is that test centers and the growth of the primary care.
Targeted sales reps are integrally linked or sort of one and the same and so the rate limiting factor for for adding test centers is actually adding reps, we could we could I mean, they're getting test centers up and running so it doesn't take any effort at all you sign a lease and you hire nurse practitioner, but theres no point in doing that until you have identified where again we're doing.
We're starting with at least two in each in each city high caliber.
<unk> highly motivated highly driven reps that are going to do a good job of driving patients to those test center. So so what you're really asking is what is our what is their timeline and sort of are growing our sales team and I think as I said, maybe I'll just leave it at that point, we expect our current team to expand sales.
Going forward in 2022, and I would expect by the end of 'twenty to 'twenty. Two we have a significant number of test centers with sales were in our primary care sales were up support him multiple.
Other cities outside of the Western States that one that I've already outlined including the upcoming winter in the northwest.
That's really helpful. Thanks, so much Greg.
Great. Thanks, Mark.
Thank you. Our next question is coming from Ed Woo from a Saturday and a capital. Your line is now live.
Yes, congratulations on the IPO. My question is has there been a significant shift in your product acquisition strategy should we expect fewer but much bigger acquisition going forward.
So I did hint that that I think that through my prepared remarks on that but again all of it was already thanks for giving me the opportunity to expand on something so so the answer is yes.
Yes, I don't I think and I must say fewer but somewhat maybe maybe a different spectrum or a broader spectrum of potential targets right. So you know historically as I sort of describing with related to an excellent and so forth. We have limitations with regard to capital in terms of what we could what we could go out and pursue when we were mostly pursuing extremely.
Early stage products that we can essentially get for no cash or stock consideration like we did with lucid and virus and invest in them and build value with them organically overtime right now.
Now that lucid now that haven't been as has happened it was well finding.
Financed part of the lucid IPO, but now that it's free from having to fund lucid operations, which is which are accounted for.
Substantial portion of its.
This cash burn we have significantly more capacity to do them.
You have to do later stage deals, including those that are truly pre commercial or companies that have products that are already in the commercial realm and already revenue generating so I think you've picked up on an important point, which is so the answer to that is yes, whether you know the number book to them or it will just depend on what we see and as I think as you know and there are long term.
Shareholders know, we get a lot of deal flow, we were constantly being contacted by companies by academic centers by a physician innovators.
Two of them were just sort of out people with people reach out to us.
And to partner with US, which is really fantastic position to be and that includes.
Look the kind of company you are talking about companies that are further along but commercial products we.
We have active discussions in that room too.
Great well, congratulations and good luck in the future. Thank you. Thanks Ed.
Thank you we've reached the end of our question and answer session I would like to turn the floor back over to management for any further or closing comments.
Hey, Thank you all for joining US today. This is obviously a lot with the two companies and so thank you for your patience of going through.
All the information and for I've got another really really great round of questions. So as always we look forward to keeping you abreast of our progress with our mutual leases and periodic calls like this one.
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Weren't directly to Lisa have mad at them away.
L. A V O E H E. A L T H S I E.
<unk> dot com and I would really encourage.
Folks and really don't.
Don't feel limited to contact us by email contact us by phone and some of you learned is not always easy thing our corporate offices are still basically remote and so the time line to get back to folks with more channel it could be more challenging so quickest way to get in touch with us until impoundment, each artisan PX and we're always happy to hear from you. So thank you very much.
For your time appreciate it and everybody have a good evening.
Thank you that does conclude today's teleconference and webcast you may disconnect. Your lines at this time and have a wonderful evening. We thank you for your participation today.