Q1 2022 Lucid Diagnostics Inc Earnings Call
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Yes.
Okay.
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Greetings and welcome to the lucid diagnostics business update conference call.
At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.
And please note that this conference is being recorded.
I'll now turn the conference over to Adrian Miller, Vice President of Investor Relations. Thank you Sir you may begin.
Thanks, Bob.
This is Adrian Miller, Vice President Investor Relations at Lucid diagnostics. Thank you for participating in today's business update call. Joining me today on the call are Dr. Lesean, Eclogue, Chairman and CEO of lucid diagnostics, along with Dennis Mcgrath, Chief Financial Officer of Lucid diagnostics.
Press release announcing our business update and financial results is available on <unk> website. Please take a moment to read the disclaimer about forward looking statements in the press release the business update press release and this conference call. Both include forward looking statements and these forward looking statements are subject to known and unknown risks and uncertainties that may cause actual.
<unk> to differ materially from the statements made factors that could cause actual results to differ are described in the disclaimer and in our filings with the Securities and Exchange Commission.
A list and description of these and other important risks and uncertainties that may affect future operations see part one item one eight entitled risk factors and loosen. Its most recent annual report on Form 10-K filed the SEC.
And the subsequent update filed quarterly reports on Form 10-Q, and any subsequent form 8-K filings.
As required by law lucid this claims.
Any intentions or obligations to publicly update or revise any forward looking statements to reflect changes in expectations or the events conditions or circumstances on which those expectations may be based or that may affect the likelihood that actual results will differ from those contained in the forward looking statements.
So with that I'd like to turn the call over to Sean Eclogue DUC backlog.
Thank you Adrian and good afternoon, everyone.
I'm happy to report that lucid diagnostics is making excellent progress on all fronts and that we're laying a solid foundation for driving our long term growth strategy. We continue to drive east regard commercialization expand our sales infrastructure execute the second stage of our lucid test center rollout transition to our own fully staffed laboratory and update.
Our clinical trial strategy to best serve our growth strategy, our balance sheet remains strong providing us with the resources to execute this growth strategy.
Before proceeding I would like to thank our long term shareholders for your ongoing support and commitment we are singularly focused on growing lucid, while enhancing long term shareholder value.
I'll start with by providing an overview of our business and then we'll pass the baton over to Dennis who will provide a financial update before opening it up to questions.
Let me first provide some background on our company and its mission lucid diagnostics as a commercial stage cancer prevention diagnostics company focused on the millions of chronic heartburn patients who are at risk of developing highly lethal esophageal cancer.
Unlike other common cancers mortality rates are high even in their earlier stages, so preventing thats required.
Detect esophageal cancer, which occurs in approximately 5% to 15% of at risk chronic heartburn patients.
<unk> pre cancer can be monitored in its early phase and cured with an endoscopic ablation procedure and its late phase ablation reliably hearts halt the progression to esophageal cancer.
Although it's off to a pre cancer screening is already recommended millions of chronic heartburn patients fewer than 10% undergo traditional invasive endoscopic screening.
Found tragedy of nearly every esophageal cancer diagnosis is that likely that could have been prevented if the patient had been screened.
Missing element for a viable early detection program to prevent this.
A tragic deaths has been the lack of a widespread screening tool. We believe our Isa Guard Ngf's methylated DNA test performed on samples collected in a brief noninvasive.
Office procedure using our Easter check collection device is the first and only commercially available diagnostic test capable of serving as such a widespread screening tool. We believe E. Cigarette has the potential to become the standard of care to detect the softgel pre cancer in at risk chronic heartburn patients with a total addressable market greater than $25 billion.
As we previously announced the American College of Gastroenterology recently updated its clinical guideline on the diagnosis and management of esophageal pre cancer. The first such update since 2016.
<unk> reiterated the longstanding recommendation that chronic heartburn patients should undergo esophageal and pre cancer screening if they have at least three of six defined risk factors, which include male sex age over 50, obesity smoking and a family history.
I would like to highlight two key updates that greatly enhance the commercial potential of lucid products contained in this timeline first the guideline no longer hedges on recommending screening for women. This.
More than doubles the target population for use of our testing to an estimated 30 million Americans.
Second and most importantly for the first time, the guideline endorses non endoscopic biomarker screening has an acceptable alternatives to costly and invasive endoscopy.
So guard and Easter check, which are described in the guidelines are currently the only such non endoscopic biomarker screening test.
This is an exciting development for lucid and I can't overemphasize, it's important in supporting our efforts to eradicate esophageal cancer. We look we look and expect other perfect. We look forward for.
For other professional society guidelines to follow suit.
Let's now review, how east regard commercialization has been going.
We continue to see excellent traction with robust growth in each of our testing volume we processed 533 commercial use of our test in the first quarter of 2022.
That represents a 76% sequential increase from the fourth quarter of 2021, and a nearly 500% increase annually from the first quarter of 2021.
Testing volume growth was strong in both the sales channels primary care physician referrals to our Elisa test centers as well as test performed by Gastroenterology and forgot.
Surgeon specialty practices and institutions.
Now that our sales process and sales training as well honed and increasingly predictable our near term growth strategy is clearly defined we are investing in sales infrastructure training and supporting resources sufficient to drive steady testing volume growth to demonstrate clinical utility and generate claims history to support our reimbursement efforts one reimbursement.
Once reimbursement is more fully established we will transition to a pull through to full throttle efforts to drive testing volume and revenue growth.
Our sales team consist of market development managers, who focus on establishing Ethernet testing gastro neurology forgot surgeon large primary care and multi specialty practices as well as large academic medical centers and integrated health networks. Our sales reps are focused on engaging with primary care physicians, including those within the referral networks of our gastroenterology.
And <unk> practices.
<unk> led by our National VP of sales now consists of three area directors coming in the east Central and West respectively. Six market development managers 17 sales reps and several sales operation staff, we are hitting our hiring targets and are actually a bit ahead of schedule to hit our end of year goals.
Our sales training process.
He is continuing to be developed and is a well honed and quite intense.
Our goal is to have new reps operating effectively within about four months of higher.
Some of our growth strategy remains our expanding network of lucid test centers to test centers operate and lease medical office suites. Each staff by lucid employee piece of check trained nurse practitioner medical assistant the center support a primary care physician sales channel by providing a facility where a patient preferred freezer guard testing can undergo the Easter check cell collection.
Procedure.
The reps work to educate the primary care physicians on the relationship between chronic heartburn in esophageal cancer and on East regards availability I think new noninvasive alternative to screen at risk patients.
The physician just then just orders a test which has performed at one of our centers.
Single nurse practitioner can reasonably performed 20 Easter check procedures in a moment workday. Each test center covers thats personal and medical office lease cost with only a couple of reimbursed tests per week.
The Elisa Test Center program completed its first stage during the first quarter of 2022, having an advanced having advanced from a pilot program in Phoenix launched in the third quarter of 2021.
Program has developed into a regional program covering seven metropolitan areas in the Western States.
We recently launched stage two of our Lucid Test Center program, we plan to open test centers at nine additional states this year.
And last month, we hired a director of clinical services with extensive experience operating dialysis facilities for Fresenius and Davita to oversee this expansion.
We continue to pilot are you took our telemedicine program, which we launched in December patients, who learn about <unk> testing can request an online visit with a telemedicine physician, who can send the patient if appropriate to Elisa test center for use in testing.
Although patients at any looser test center city can access to telemedicine program. We continue to only actively pursue direct to consumer advertising unlimited pilot basis in Phoenix consistent with the near term strategy I previously described.
We're just over four months into the program and we will soon have sufficient numbers to assess the efficacy of various modes of direct to consumer engagement.
I'd like to now discuss our laboratory operations the first quarter in recent months.
I have been full of important developments in our laboratory operations, which are critical to the future success of the company.
At the end of February Lucid Dx labs, a wholly owned subsidiary of lucid diagnostics acquired the assets necessary to operate its own.
Our own CLIA certified cap accredited clinical laboratory <unk>.
The laboratory operates in a freestanding 20000 square foot building in Orange County, California, and last month, we hired a new VP of laboratory operations with nearly two decades of clinical laboratory experience, including that lab core Abbott and Rosetta genomics.
There is at our Chief Scientific Officer leadership, we plan to accelerate the transition from the current management services agreement to the lab.
To being fully staffed by lucid employees.
In parallel with the acquisition, we upgraded our revenue cycle management provider to synergy solutions synergy will be up and running this month and will begin billing and processing claims on behalf of lucid Dx labs. This will be the first time, a lucid entity will be billing directly for Isa Greg test.
Claims held since the lab transition in February will be submitted once synergy in this active later this month the transition from fixed monthly payments from our former laboratory partner to direct the lingual resulted in a temporary pause about a network receipts and recognize revenue as Denis will describe in more detail.
Now a brief update on where we stand with reimbursement.
On the private payer side, we were pleased to announce earlier this week that we executed our first commercial payer agreement.
<unk> Dx labs to entered into a participating provider agreement with met increase health plans LLC and national directly contracted multi specialty PPA provider network with over 8 million lives covered through its claims and payors.
Person is covered by Medicare Bye Bye met increase clients and payers will have in network access to <unk> testing. The agreement provides rates of reimbursement as a percent of charges for services rendered including performance of the Ethernet test. We are pleased that the effective payment for Isa Guard under this agreement, which is based on a list price.
There are approximately $2500 is consistent with our goal of protecting the effective Medicare payment of just over $90 million.
We will work continue to work tirelessly to secure many more such participating provider agreements covering.
Millions more lives in the coming quarters.
In parallel we continue to collect critical clinical utility data demonstrating that Isa guard positively impact patient care, such data will be necessary for us to secure direct isn't there more coverage for a major regional and national health plans.
We've also seen progress on the Medicare reimbursement front.
Last month Medicare contractor Palmetto GBA is multi X program published a proposed local coverage determination or LCD for test test designed to detect upper gastrointestinal pre cancer and cancer <unk>.
Consistent with its practice over the past couple of years. The proposed LCD is a foundational LCD that means that provides criteria for a category of testing that a specific test.
Proposed LCD or by definition works in progress for public review.
We have been patiently waiting this important next step in the process. Since we completed Cms's clinical lab laboratory fee schedule or <unk> process, culminating in the important first step, namely final Medicare payment determination, which became effective on January one 2021.
The proposed LCD outlines criteria that multi <unk> expect upper gastrointestinal pre cancer and cancer molecular diagnostic test to meet.
These criteria include active <unk> with at least two risk factors as well as evidence of analytical validity clinical validity and clinical utility although it found that no currently existing tests is fulfilled these criteria.
Indicated that it will monitor the evidence and will provide coverage based on the pertinent literature and society recommendations.
Important to emphasize that the provisional LCD was published prior to the publication of the updated ACG guidelines and as such does not take into consideration the recommendation supporting non endoscopic biomarker testing such as Isa guard as an acceptable alternative to endoscopy for esophageal pre cancer screening.
The publication of the proposed LCD triggered a written common period that extends until this Saturday, we along with multiple other stakeholders will be submitting comments, suggesting important modifications to the proposed LCD.
<unk> also held a substantive open meeting yesterday during which we along with other stakeholders in interest interested parties had the opportunity to address the proposed LCD. We previewed our suggested modifications to the proposed LCD.
Subsequently, Dr. David Poppers of NYU, who has performed hundreds of each of our test discussed the clinical utility of Isa <unk> testing in his practice.
And finally, Mindy Mordecai founder of the esophageal cancer action network and a window open esophageal cancer victim offered a moving and passion statement and how critical non endoscopic biomarker testing is to prevent.
It is to prevent the softgel cancer deaths.
In addition, we recently learned that Meridian health care solutions, the Medicare contractor, which covers lucid Dx labs in California and participates in the multi X program has scheduled its own open meeting on May 26th and a written comment period that extends through June 11.
We look forward to the opportunity to address the proposal DCD directly within the reading and as well a final LCD will not be issued until the Medicare administrative contractors.
Had the opportunity to assess and consider the comments written comments during the public meetings.
Let's now wrap up with our clinical studies.
I have said on many occasions, expanding the clinical evidence for each of our testing is a pillar of our growth strategy and where the key impetus for us raising capital in the fall.
Over the past couple of months, our management team along with our board have been reviewing our clinical trial strategy to make sure that the substantial capital. We are investing in clinical trials is being deployed in an optimal fashion consistent with our short and long term strategic goals.
And situation on the ground.
There are numerous factors we are considering in addition to optimal in addition to optimal capital utilization. These include our current understanding from the trenches on what drives clinical adoption the rapidly evolving reimbursement landscape I. Just described promising research data on that kind of a next generation version of the <unk> assay and the.
<unk> confirmed the clinical trial processes to current clinical practice.
We expect this updated clinical strategy to be finalized in the coming months.
One key aspect of our updated strategy is already underway, we are doubling down on our efforts to generate clinical utility data to support commercial and Medicare reimbursement clinical utility trials are designed to demonstrate that Isa guard impacts medical decisions.
We have multiple such studies, which we expect to launch in the coming weeks, including a retrospective review of Dr. Pepper's NYU experienced focused on the impact of visa card on medical decision, making additionally, multiple prospective clinical utility studies, including a lucid sponsored registry at existing commercial sites our perspective lucid sponsored.
Clinical utility study named <unk> and prospective clinical utility studies that are institutionally sponsored at north well health at Sanchez, St. Joseph Health in New Jersey.
With that I'll pass the baton onto Dennis to provide an update on our financials before opening up for questions.
Thanks, John and good afternoon, everyone. Our preliminary in summary financial results for the first quarter ended March 31, 2022 were reported in our press release that was published earlier today.
We plan to file our annual or quarterly report for lucid diagnostics.
On Form 10-Q with the SEC on May 16th the due date at that time will be available at SEC Gov and on our lucid website.
As you already know from our previous quarterly corporate update calls that as a rule <unk> test performed are recognized as GAAP revenue when cash is collected by the company.
Also as previously mentioned this is more than likely will be true. During this transition period of negotiating third party private payer reimbursement contracts and related coverage policies.
As I reported to you in previous quarters, the compliance purposes. During this reimbursement trends.
Transition period, we negotiate it.
Short term month to month fixed payment arrangement with the contract laboratory that was processing the east to guard assay and was performing the insurance company billing and collections function.
This commercial agreement became effective on August one 2021, and terminate it concurrently with the opening of our own lab.
On February 25.
A couple of weeks back we recognized 189000 of revenue as part of the Eastern Guard commercial agreement with research Dx with a partial period from January one 2022 through the end of the agreement.
On February 25.
Now that we are operating our own laboratory during following the February <unk>.
Asset purchase agreement.
We will be able to directly bill payers as Lisa described direct billing will occur in the second quarter once our new revenue cycle provider comes online.
Future revenues will be recognized based upon actual collections until such time as the coverage policies are in place with CMS and payment contracts with the private payers.
This obviously can result in timing of revenues recognized versus timing. They are submitted for third party reimbursement until these future conditions are met.
The gap in claims submission from this transition will impact near term GAAP revenue recognized until the system catches up with claims for test performed during the transition.
The number of <unk> tests performed and submitted for payment are provided in the press release and was discussed earlier by Alicia obviously.
Obviously, we're in the early stages of our commercial launch, particularly with our test centers will continue to evolve our reporting metrics as various sales and marketing efforts further influence adoption, particularly with the ramp up of our lucid test centers and are easily guard telemedicine program in cooperation with up script.
Presently there are five banking analysts who have issued coverage on lucid and others doing their diligence the.
The quantity of ECR tests payable at the CMS payment rate required to meet the 2022 revenue estimates provided by the analysts are achievable.
Quantity and collections.
Collections are highly dependent upon the evolving reimbursement landscape.
With regard to revenue lucid recognized approximately 200000 of revenues related to the two e's. The garden for the quarter ended March 31st despite the negative gross profit for this period, which reflects the initial test centers startup related costs at modest volumes incremental gross margins continue to be around 90%.
Contribution margins can be north of 60%.
These lower test volume amounts of a minimum level of fixed costs associated with just being operational.
Now a few comments about operating expenses sales and marketing to start.
For the quarter ended March 2022 sales and marketing expenses were approximately $3 3 million for the quarter.
Compared to 700000 for the corresponding prior year.
That reflects about a.
And also reflects an increase of about 12% sequentially not including stock based compensation charges.
This largely reflects head count increases and related costs.
On the G&A front.
G&A expenses were $5 7 million for the quarter ended March 31, compared with $1 2 million for the corresponding period last year and approximately a 13% increase sequentially.
The increases are largely related to compensation and other outside consulting services related to patents regulatory compliance legal costs and public company expenses.
R&D expenses for the quarter.
And it were approximately $2 9 million as compared to $1 8 billion for the corresponding period last year and.
And our slightly lower sequentially with the changes between the periods largely tied to clinical trial expenses.
Theres a table we provided in the press release published earlier that adjust each of these components of operating expenses for the embedded noncash stock based compensation expense.
Without the stock based compensation expense total operating expenses for lucid were $8 1 million.
<unk> to $2 9 million for the three months ended.
March 31st in 'twenty, one respectively with respect to the loss per share amounts.
Lucid diagnostics reported a first quarter 2022, net loss attributable to common stockholders of $12 3 million or a loss of 35 per common share versus.
Versus the same period in the prior year of a loss of $3 7 million or <unk> 26 per share.
The press release also provides a table entitled non-GAAP , which highlights these amounts along with non cash charges, namely depreciation stock based compensation compensation acquisition related costs, all to enable better understanding of the company's financial performance.
Youll notice from the table after adjusting the first quarter GAAP loss by approximately $4 million for noncash charges. The company reported a non-GAAP adjusted loss for the first quarter was $8 2 million or 23 per common share.
Lucid had cash of $47 9 million as of March 31 that compares to $53 7 million at December 31.
As you're aware from our last call lucid entered into a committed equity facility with an affiliate of Cantor Fitzgerald Mccann or committed to purchase up to $50 million of the Companys common stock from time to time at the request of the company.
Any future funding from this facility is completely at the discretion of the company and its utilized likely would extend the company's runway well into 2024.
Yeah.
Unlike patented lucid is not eligible to put a shelf registration action until after November 2022 were more than 12 months after the IPO.
Like we described about the patent that shelf the board considers having available financing options part of their governance students, even if utilization with finance as well into 2024.
So they consider it part of their duties to understand what the long term opportunities the company Arb and this gives us that vehicle short of being.
Are you able to put a shelf in place there were no issuances of stock under this vehicle so far.
With that operator, let's open it up to questions.
Thank you Sir at this time, we'll be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the queue. You May press star two if you would like to remove your question from the queue and for participants using speaker equipment. It may be necessary to pick up your handset before pressing any star keys.
One moment, please while we poll for any questions.
Our first question comes from the line of Ross Osborne with Cantor Fitzgerald. Please proceed with your question.
Ross Good afternoon, Hi, congrats on the progress thanks for taking the question.
Hi, Ross.
Well how are you all.
Okay, Great Alright.
I would like to hear what youre seeing the operating environment.
Are you seeing any lingering headwinds that are still limiting growth at this point.
I assume you're referring to kind of macro issues like COVID-19 and such.
No I think look I think with the lifting of.
Various restrictions and so forth, it's really no longer a significant issue as I've emphasized in the past because we're entirely outpatient based.
They'll go.
The challenges associated with inpatient access or just something we don't deal with so we're in good shape there.
Okay, Great and then could you provide a lot more detail of where you stand in the commercialization process with regards to the phase two of your plan.
Oh, you mean with regard to the test centers.
Yes, yes, right. So we are as we said we announced the launch of the second stage we've identified.
<unk> nine locations in Miami Metropolitan areas in the.
Across the country and these include larger states, such as California, Texas, Florida, and New York.
In Ohio, and Illinois, and we are in the process of doing what we do to to open. These centers identifying geography looking at various factors that impact that proximity to to help facilities and primary care practices. Other demographic criteria. We are hiring in the process of hiring in <unk>.
<unk> hired sales reps in these areas I think I noted during our last call that that actually in several of these states for example in.
In Ohio, and in Southern California, we actually already have a presence with market development managers and supporting reps, who have been calling on gastroenterologists. So it's a little bit different a little bit of a lower hurdle than in some of the states, where we were coming in fresh during the during the first stage. So.
Making solid progress identifying locations and hiring nurse practitioners.
And sales reps that we look forward to start to starting to bring.
These two cities.
Cities online very soon.
Okay, Great and then last one for me regarding the Atg update I realize.
It's only been a month, but have you seen any acceleration in testing volumes.
That went out or at least interest.
Yes.
We never.
I think I've said this before so I'll reemphasize that our interactions with clinicians in the field.
Been relatively straightforward in terms of making the case based on the existing data and the actually the existing ECP guidelines. So it's not like there was this big gap that we were trying to fill it with these updated guidelines and so.
That's not too.
And any way understate the importance of.
So guard and Isa check being explicitly.
I mentioned them, but literally a photograph of the user check device and the guideline.
And the fact that the guideline really addresses.
The only existing test that for that.
It serves as another non endoscopic biomarker screening them, but the greatest impact from the from the guidelines, it's certainly going to be around reimbursement as I mentioned in my comments the.
Proposed LCD, specifically references the importance of guidelines and making making final coverage determinations and preceded.
The publication of this guideline and I'll also when a private payer.
Engagements.
Updated in a more specific guidelines are extremely important so will it have some effect as a tool in their armamentarium as we as we.
Talk to to Gis into primary care physicians sure, but it's not like we've been struggling to get that message across.
Without it with the prior guideline.
Okay got it thanks for taking my questions and congrats again.
And our next question comes from the line of Mike Matson with Needham <unk> Company. Please proceed with your question.
Okay.
Hey, guys. This is Joseph on for Mike.
Question around I guess safety I'm doing very well thank you very much.
Yes in terms of phase two for the launch of <unk>.
The nine additional sites.
Is this.
I guess a full launch in 2022, you have nine additional sites that will be up and running.
And.
Completing completing Isa guide tests I guess.
Part two to that is there a certain cadence that you guys are expecting or is this going to be.
Kind of one lump sum.
Our site additions as we saw in phase one.
Great. Thanks for the question.
This definitely is a 22 2022 plants our goal.
Our ramp up with regard to sales reps that it would be will be driving cases.
Cases to these centers is consistent with that ramp, culminating in the fourth quarter of this year and the.
The cadence as were moving forward on online simultaneously in some locations that easier too.
To add to identify and hire.
Theres practitioners and reps than others and so this is a multi theres a parallel path across all mines online.
Simultaneously.
Contrast to what we did in stage, one where we started with Phoenix than we did three of them it doesn't matter.
Okay, Great and I guess since you guys really only need a small office at the end of the day there hasnt been any trouble finding space in these metro cities correct.
I mean, we have high standards, we know when you look from my space and lease locations that are.
Convenient for patients to based on traffic patterns, and so forth, but that there are plenty of.
These these are these are not big big locations are two to three offices.
And they're not they're not hard to fund.
Yeah, Okay, great and then.
Maybe just one around.
I guess revenue per test.
A big drop off sequentially was this all based on.
Cash collection timing.
Or does this.
Have anything to do.
Whitney.
Coverage the inclusion of recoveries from the net increase health plans.
I don't know if you guys have already started yes, it hasnt been saying yes.
Yes, it has nothing to do with Carl just briefly comment on that Dennis.
Add to it has nothing to do with the reimbursement issues around.
Medicare or otherwise it is entirely timing.
With regard to the transition between the model, where we were collecting a fixed revenue fixed amount of.
Fixed payments from research Dx, which was the the.
The provider of record and the billing entity going into February .
And that transition to us billing directly it's entirely based on that it's not there's no issue with regard to sort of blips in volume or in reimbursed wondering like that Dennis do you want to maybe elaborate a little more yes sure Joseph was purely formulaic.
It had been collecting 100000 per month from research Dx 189000 recognized was 100000 for January and 25 of 28 days in February Times 100000 gives you $89000.
Tests that we can bill after February 25th because of our own lab.
Have all being delayed until we have our own revenue cycle provider up and running.
So all of the tests that were done in March which were significant will be built and that will occur it's creating obviously a timing delay.
But they will be built and we will collect if it's at the out of network rates do you use the.
The past is kind of an indication of what the out of network rates somewhere between $1300 per test.
We expect to be able to collect that so purely formulaic in terms of the past arrangement.
And the transition from using a third party lab provider to our own lab.
Okay, great Yeah that makes that makes perfect sense.
That's all from US. Thank you guys, so much and congrats on the quarter.
Joe Joseph.
Thank you and our next question comes from Kyle <unk> with Canaccord Genuity. Please proceed with your question.
Good afternoon.
Yes.
Hey, Kyle.
Sure.
You may be on mute.
Your line is live if you are there.
Okay. I guess he is not with us at the moment. Our next question comes from Ed Woo with <unk> capital. Please proceed with your question.
Yes my question.
Yeah.
In terms of that there's a lot of discussions about inflation I'm sure. It's getting everybody, including you guys. How often do you guys get the change to a reimbursement rate is this something that is revisited annually and do you think that.
The impact of a rising cost, especially for personnel nurses or whatnot for your business.
Yes, that's a good great question.
Just at a high level historically.
Set reimbursement from payers, whether it would be Medicare or private payers are really not indexed for inflation.
Don't have the luxury of going back to the well on an annual basis. So.
Fortunately these.
We have really.
Healthy margins with these with these rates and.
We will be in a position as it relates to sort of our Cogs hasnt been a cost of goods sorry, there hasnt been.
Much in the way of an impact there, although we do we do we do see supply chain.
Challenges.
Parts and sub assemblies and things like that.
So that's something we monitor carefully and we try really hard to order long lead time items in a moment.
But.
But on the payment side, we were lucky to get extended.
And we have a healthy margin built into them.
Greater than two telecom a little bit about some of your medical supplies you don't see any impact near term because you guys have been able to order early enough in order to get whatever you need to do our best Yes. We did we have had some challenges I've talked about on patented calls in the last couple of quarters, but.
With regard to.
With regard to lucid, it's really it's really fairly.
We haven't had any issues.
Check and manufacturing we have ordered plenty of long lead time items that our team is very meticulous about that I didn't mentioned on a call, but we are making progress towards.
Wrapping up the transition to a high volume.
<unk> eastern.
Easter check manufacturer coastline.
In the coming months, so it hasnt been an issue and with regard to the laboratory itself reagents and so forth.
That hasnt been challenge either yet so fingers crossed it will stay that way.
Great well, thanks for the asking my questions and I wish you guys. Good luck. Thank you. Thanks Ed.
And our next question is from Tayo mixing with Canaccord. Please proceed with your question.
Hey, Ken I will come back.
Okay, sorry for that.
Just curious on the private payer coverage efforts in the quarter I mean.
We saw the CMS updates and then just there was definitely some.
I don't want to say noise, but there was I believe it was kind of an exciting quarter for I guess like your space in particular, how did private payers kind of interact or already been having those discussions today.
We are having we are having those discussions in the met increase.
Contract is.
The fruits of that and we have more we're working on and we expect.
To steadily as I've said before the private side is sort of blocking and tackling door to door totally were combat.
Over.
Be overly dramatic about it but.
So there are no.
We have been.
Again, I think thats. The proof has been this isn't our first commercial payer contract, which happened after the proposed LCD was published.
Okay, and I apologize, if you've actually I need us in advance obviously was having phone issues.
Doug maybe just with the fit test center kind of expansion and then as those ramp up I mean, any like incremental takeaways like are you going to make any changes to those centers.
Going forward I mean.
Are you going to consolidate efforts I mean, just curious like if you take a step back what do you think at this point.
Now I can point out, but this maybe it's a good opportunity to reemphasize the point that I did.
I'll touch on in the comments in my prepared remarks, which is that right now we're kind of looking at sort of a mid level trajectory right I mean, we could yes.
As I said, we really feel like the model as well honed the test Center model works. Our training has become really good we have.
Some predictability now with regard to.
Translating deployment of sales reps and opening of test centers to testing volume in one of the trends. We've noticed we don't have enough data points to report this but we will in the coming quarters is that we have seen a nice increase in the proportion of our cases that are coming through from primary care physicians and test centers and Thats an important.
Metric.
How that's working.
But we were trying to take a middle of middle.
Here, we want to obviously grow testing volume to generate data for clinical utility to support reimbursement.
And generally prove that the model works, but.
But we're also cognizant of the fact that right now we don't have predictable.
Reimbursement, we're starting to bring some of that in but we're not.
At the stage where.
Where we're getting a large proportion of these cases are getting full reimbursement so.
And I towards being <unk>.
Protective of our cash and our capital we're trying to take sort of the middle middle and middle of the road approach with regard to the throttle note.
To use a metaphor them, but once we have more predictable reimbursement and we start getting some of these more of these private payer agreements under our belt and then we have the ability to dial up and to increase the cadence and so forth but.
Our plan really for the rest of this year is to stick with our targets with regard to the expansion of our sales force and the expansion of the test centers to.
Give us time to start getting more predictable reimbursement hopefully that makes sense.
Sure and maybe if I could ask another.
Just on the LCD and then maybe fully reflecting that.
They do not account for those guidelines yet I just I just wanted to ask though it seems like the soft cap type devices that concluded in the LCD I mean I know the guidelines around included maybe that can get you. Some checking there when is the next kind of milestone or a benchmark we should be looking for I know there was a recent meeting just curious what is on the horizon.
Yes.
Just wanted to clarify so the.
The guidelines recommend non endoscopic biomarker testing with a capsule device that includes these Chuck just to be clear right. There is a photograph of it.
The results of the from the ESPN and paper are in there. So although we see sulfur cap is there as well Easter check is featured and we consider the guidelines.
Supporting E Soekarna visa check so don't want there to be any confusion about that.
The.
That's where the guidelines so the.
The open meeting at that one well.
It was substantive serious we have plenty of opportunity us and other stakeholders to describe.
What we think are useful modifications to the LCD. The goal is to have the LCD really be really be an operational foundational LCD so that.
The criteria are a bit clearer and that.
That when we get the sufficient clinical utility data to submit as part of a technical assessment it doesn't require revisiting and reopening and reopening the LCD and that was really the focus of our comments as well as others. In the written comments are going to really push that a lot harder from us as well as multiple other stakeholders.
As I mentioned the.
Open meeting occurred yesterday, the written comments period for Palmetto and on Saturday, but we were also notified that meridian, which is the Medicare contractor that covers California and covers the lab, there and we'll be ultimately.
The contract or a record.
So.
<unk>.
Schedule, an open meeting.
And the comment period is open meeting there is going to be on may 26th in the comment period on June 11, So that gives us another bite at the Apple to really make the case and make sure that the final LCD that.
Come to this is really gives this not just us but the field the opportunity too.
To get coverage for this really important and now guideline guideline based.
Sure.
Option to perform more widespread testing in these at risk patients.
Okay, Yes, I mean, we're all.
Looking forward to seeing how the guidelines impact ppl's can be hopefully so.
Thanks, guys I appreciate it.
Thanks, a lot thanks Scott.
Thank you at this time, we have reached the end of the question and answer session and I will now turn the call back over to Alicia Eclogue for closing remarks.
Great well, thank you everyone for joining us today and as always great questions.
And as always we look forward to keeping you abreast of our progress.
Press releases at least these conference call.
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And to follow us on social media on Linkedin, Twitter and Youtube as well as through our website. So you can also contact Adrian Miller, our VP of Investor Relations at AKM head <unk> com. So thanks, again and have a great rest of your day.
Yeah.
This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a great day.
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Okay.
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Yeah.