Q3 2023 Lucid Diagnostics Inc Earnings Call and Business Update
[music].
Good morning, and welcome to the lucid diagnostics third quarter 'twenty twenty-three business update conference call.
Vince will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two.
Note that this event is being recorded.
I'd now like to turn the conference over to Michael Parks VP Investor Relations. Please go ahead.
Thank you operator, good morning, everyone. Thank you for participating in today's third quarter 2023 business update call.
The press release announcing our business update for the company and financial results for the three and nine months ended September 32023 is available on the website.
Please take a moment to read the disclaimer about forward looking statements in this press release does.
Business update press release and this conference call include forward looking statements and these forward looking statements are subject to known and unknown risks and uncertainties that may cause the actual results to differ materially from statements made.
That could cause actual results to differ subscriber are described in the disclaimer and then our filings with the U S. The U S Securities and Exchange Commission.
For a list and description of these and other important risk factors and uncertainties that may affect future operations see part one item one a entitled risk factors and loose. Its most recent annual report on Form 10-Q filed with the SEC and subsequent updates filed in quarterly reports on Form 10-Q, and any subsequent form 8-K.
Except as required by law lucid disclaims any intention or obligation to publicly update or revise any forward looking statements to reflect changes in expectations or in events conditions or circumstances on which the expectations may be based or that may affect the likelihood that actual results will differ from those contained in the forward looking statements.
I would now like to turn the call over to Dr. Lisa Laube, Chairman and CEO of lucid diagnostics, Dr. <unk> o'clock.
Thanks, Mike and thanks, everyone for joining us this morning, I look forward to offering an update on it looses business as well as its finances I.
I don't think it's hyperbole to say that this third quarter has been the most important quarter in the company's history. We cross several critical milestones in translating test volume growth into revenue and revenue growth. We've got eight consecutive quarters of steady growth in test volume. We performed 20 575 commercial user guard task, which is 17% quarterly.
Growth in 137% air growth, even more importantly, we recognized revenue of $783000, which is a nearly 400% increase quarter on quarter and.
Nearly half nearly 1000% increase annually, we had strong contributions from our lucid test centers to satellite with the test centers that are high volume check your food testing events, which are gaining traction.
As well as traction.
Traction with our strategic accounts, which I'll discuss further these include health systems and academic centers.
Strategic accomplishments include.
All right well, we upgraded our revenue cycle management infrastructure and processes as we discussed in our last call last call and we've been delivering solid results.
Each of our claims processing and payments.
Strong boost to our clinical utility data to support in network payer coverage engagement and we've reported near perfect results in over 1500 patients across three studies that had been released.
The clue study that prevented registries and our San Antonio Fire departments studies two of these have been accepted for peer review publication of one that's pending we're accelerating our activities in direct contracting with employers to offer he's the guy does it benefit our first contract was signed and testing has begun this quarter, we hired a VP of more I've employer markets.
Unfortunately this initiative forward.
As we announced recently, we also launched the 2.0 version of our Eastern Guard assay, which has demonstrated significant improved performance and lower costs.
First a couple of background slides here a bit about our Isa guard esophageal DNA test Easter Guard is the first and only commercially available test that's capable of serving as a widespread.
It's a tool to prevent esophageal cancer deaths through early detection of esophageal precancer.
Yeah.
16000 annual esophageal cancer deaths are preventable.
Early pre cancer detection, however, if necessary to prevent cancer, we often talk about cancer prevention, rather loosely but it's important to emphasize that our target. Our goal here is to prevent cancer. While most initiatives. Most screening tests are just detecting cancer early which would be insufficient and this particular cancer.
Less than 5% of those who are recommended for screening undergone dov could be and we know how big of an opportunity with this test to improve that number and to potentially save lives.
The test is recommended and major professional society for clinical practice guidelines.
Just a quick overview about Easter guards performance, we've used the term that the performance is really unprecedented with regard to cancer and pre cancer detection you can see here in the blue the Isa card results for cancer and pre cancer early stage pre cancer very competitive to other comparable.
Detection tests, whether it be cologuard colorectal stool test a garden she holds that colorectal blood test.
But the key differentiating factor here that makes us unprecedented as its performance and the critical pre cancer phase, which as I mentioned it is necessary to have an impact on this disease you can see that our overall precancer detection rate is nearly 90%, which is again unprecedented and substantially better than other early detection tests.
And if you move earlier onto the early pre cancerous ages, we continue to maintain excellent detection to those levels and other screenings has really have no ability to detect this early pre cancer.
This is this are these results are really critical for our ability to detect early pre cancer going to have an impact on a soft gel cancer deaths.
Okay.
The use of our commercial opportunity is quite large and they're at least 30 million patients who are by existing professional society guidelines are at risk chronic heartburn or patients who are recommended for pre cancer screening Medicare has established a payment rate of 19, <unk> hundred $38 and that rate has held up.
Pricing and payments from commercial payers that leads to a very large multibillion dollar total addressable market and our.
Gross margin of the test is over 90% at even at current volumes right now.
So we're really proud to report that we continue to show.
Our growth in E. Cigar testing volume this is our eighth consecutive quarter of meaningful a quarter on quarter growth.
Two consecutive years, and we performed a 20 575 tests in the third quarter, which is a 17% increase from the prior quarter and 137% increase from the prior year. This is still well below our near term laboratory and manufacturing capacity, which is over 10000 tests per quarter I shouldn't.
Note that this this result has been a with our sales team our head count remaining flat.
We've used the term mid throttle approach, which is exactly what we're doing here, we're trying to drive test volume to support claims history and clinical utility and this is at these volume levels, where we have sufficient volume to do that or we won't push to a full throttle until we got continued progress on payments and we plan at least for the coming.
Coming quarters to keep our sales reps that sell head count flat, which may at some point in the coming quarters reached the limits of our per rep productivity, but we'll watch that those numbers over the coming quarters.
This slide shows a continuing trends.
With regard to the referral sources for testing and the operator, we continue to have about a two to one ratio between referrals from primary care physicians and referrals from specialists or institutions. One trend that continues to increase as the percentage of <unk>.
I saw collection procedures that are performed by lucid personnel either in physical Lisa test centers or on the satellite missile test centers continue to rise and now represent over 80% of the total volume.
So a few comments on several aspects of our commercial execution, our field team as I mentioned.
<unk> been able to drive steady volume growth. Despite a flat sales head count and continuing improvements in productivity as I mentioned, our satellite looser test centers, where our clinicians.
Go to physician practices on a regular cadence and perform Easter checks all collections.
Sadly it hasn't center model remains a trough a top driver of our test volume and does it really expanded our geographic reach and our ability to be front and center with physician practices.
Check your phone to pre cancer detection events, which we started early earlier this year continued to grow and we've had dozens of events. We are expanding beyond firefighters about our first event with our policemen.
And we're also engaged earlier with the group leadership, whether it would be a union or other entity regarding contracting as opposed to just simply submitting the claims for those those events.
Another important update is that we're transitioning to use our longtime telehealth partner up script has the physician prescriber fall events, which will.
Greatly enhanced the efficiency of these testing events in the processing of these.
Ah patients.
As I mentioned, we're making a major push into direct contracting is an area. It's been an area of focus for us for a couple of quarters.
We've had our first contract with employer and spirit in which we've announced and the testing at multiple sites for that employer has become and will continue through this quarter and we're very excited that we've hired a new VP of employer markets with 30 plus years of experience in the employer benefit sales and he starts this weekend.
We're look we're really looking forward to a significant productivity farhan.
As I've mentioned on prior calls we've been pushing harder on strategic accounts. These have longer lead times would have the opportunity for a significant yield and we are gaining traction with our health systems with academic medical centers.
And we have active testing now at the advent health.
Center in Florida at Northwestern Medicine, Chicago, and even Mayo Scottsdale.
We are we've been pushing quite hard as we've talked about on prior on prior calls on market access and market access just to remind folks really has two pillars. One is revenue cycle management, which is the processing of claims submission vacations.
Pierre.
Peels and prior authorization I'll talk about that in some detail and also the payer relation side, which is.
Getting positive medical policy and coverage are legislative advocacy work working with managed care plans and the veterans administration as well as lab benefit management, and we're pushing hard with persistence and creativity, we have a new VP of market access is working hard on.
Payer pilots were quite active in the biomarker states, which I'll touch on in a bit and other initiatives to drive payers to provide coverage for the use of our tests. So we can continue to convert them.
Test volume growth into revenue.
Yeah.
So a few more details on this on the revenue cycle management side, we announced last quarter that we had transitioned to an upgraded our revenue cycle manager to Quad X and we have seen some initial very promising results with regard to claims processing and payments I'm happy to report that that initial spike in initial positive news.
<unk> has held up that's the allowed claims percentages, which is the percentage of claims submitted that are where the payer allowed us payment that has remained really solid and steady as has the average allowed payment which approaches our Medicare payment. So we're really excited about that and that's.
It's been driving the revenue and we expect to be revenue growth moving forward, but we also have had meaningful activity on the appeal side, we have a robust and active pipeline of claims that are going through appeals and we are seeing successful appeals based on medical necessity versus guidelines something that once we get to confront our medical directors through the appeals.
Process, we are able to have.
Very strong conversations, particularly when the appeal is based on medical necessity by explaining the support of existing clinical practice guidelines for our test.
As I mentioned on the payer relation side were pushing quite hard as I mentioned also argue VP of market access is now actively engaged with multiple commercial payors and we're pursuing multiple pathways to commercial coverage. These include active discussions with pilot programs such as C. E. D programs, which are coverage with evidence development programs that we can look to.
Our secure in the coming quarter or two.
And I can't overstate, how important the burst.
Positive clinical utility data that we've seen over the past quarter, how important that is in support of our payer engagement as I finally, as I hinted at there is biomarker legislation that is now in over a dozen states at which mandate coverage of certain biomarker tests in those states and it offers us a very promise.
Past two coverage and that's something that we're actively engaged with them.
Here are a few more details on our clinical utility studies that we've announced we have four studies.
One of them retrospective three of them perspective that we've previously reported the San Antonio a firefighter study has been accepted for publication with 385 patients.
The <unk> study, which is our prospective multicenter observational study we had interim data on just under 300 patients that was submitted for peer review and is currently undergoing a review since that data was released we've.
Increase the total number of enrolled and data that's been collected to 535, which gets us within our Harris whisker of being able to complete enrollment and close out that study and submit the full dataset for peer review.
The heart registries, which we've either prevent registry in a subset of that which is to prevent firefighters registry.
As a prospective multicenter observational registry that we run and we've announced.
Announced interim data that's been accepted for publication and we will continue recruiting really for the foreseeable future. As this data is useful not only for clinical utility, but also clinical validity.
Also to enhance the before the research and development efforts in our laboratory. We've had 641 patients to date. So a total of over 500 patients, which is a substantial amount of clinical utility data that will serve us well and our near term engagements and discussions with commercial payers finally, the ASP.
The study, which is a prospective virtual patient randomized control study is still recruiting we're at just under 80 patients and looking for a couple of thousand more patients before we close that out and do the final analysis, I'll I'll point out and remind.
You bet as we've noted in our press releases the data from the three studies, where we've released data has been outstanding with really near perfect results in near perfect Concordance, but that means. This is the critical thing from a payer perspective is that.
100% of positive patients are being referred for them.
For confirmatory endoscopy and that.
Nearly 100% of patients who are E cigarette negative are not being referred force for endoscopy with the occasional one or two patients who are referred for indications other than screening for pre cancer. So those are outstanding results, which demonstrate the ability of Isa guard to serve as a triage test and have it.
Substantial impact on medical decision, making which is really the definition of clinical utility in this setting.
Finally, as we reported earlier this week, we launched our E. Cigar 2.0, a version of the assay, which we're very excited about this improves on the already unprecedented cancer and pre cancer detection results that we've already shown that are based on our east to guard one point out at this breakthrough was result of.
Implementation of a.
A technique called multiplexing, which allows all of the genes. The two genes to be assessed in one sample and it allows us to run the assay three times and do a consensus call a positive and negative results, which has a significant which can significantly improve the performance of the assay near its cutoffs that the analytical validation studies are.
A V studies that we're used to get this <unk> to launch that data is being presented at this week's association of electric pathology annual meeting or <unk> and <unk>.
Twenty-three in Salt Lake City, because we also reported we are upgrading our NGF sequencing platform to a higher throughput alumina in Mexico 1002 accomplished to accommodate excuse me the increase he forgot testing volume that we've demonstrated both of these updates the two.
As you pointed out version of the assay as well as moving to the next week well have.
Signet well will allow us to have significantly lower per sample sequencing.
Also as we announced we're having a very excited where we're holding an investor day in New York City on December 13th from 10 a M.
Two P M, where we and other.
Key opinion leaders and other experts will be providing really an in depth edgy.
<unk> event on all things lucid and all things Isa Guard and further details of this will be provided on our investor website when they're available.
With that I'd like to pass the baton off to Dennis will provide us with her financial update.
Thanks, Lee and good morning, everyone.
The summary financial results for the third quarter report in our press release that was published last night.
On the next three slides I'll emphasize a few key highlights from the quarter, but I encourage you to consider those remarks in the context of the full disclosures covenant in our quarterly report on Form 10-Q.
Which was filed with the SEC last night and is available on our website.
With regard to cash at $24 1 million. This does not include the $5 million additional funding shortly after the end of the quarter.
And the funding occurred two weeks earlier pro.
Pro forma cash would've been $29 1 million the.
The sequential change in the cash balance reflects the third quarter burn rate of a half million include.
Including a reimbursement that Pat made up approximately $2 2 million.
Absent this payment the burn rate would've been $6 3 million, which is slightly less than the average burn rate for the first three quarters of $6 6 million.
Given the pro forma cash of just over 29 million in a steady state for the burn rate.
So $7 million the simple math suggests.
This rate is sustained it puts our runway to more than a year.
The burn rate for most of the year has been softened by Padma deferring most of its quarterly management service payments since October of last year.
This pad optionality for paying the outstanding intercompany obligation in stock or cash at pad meds election.
Serves to increase pad meds ownership, while strengthening loose its balance sheet.
This flexibility payment in stock or cash that's created some breathing room for lucid to allow cash collections to catch up to the submitted reimbursement claims, which we will talk about in a second.
With regard to H P.
Stable since the beginning of the year, if you examine the trend with a key current asset accounts, namely prepaid expenses in vendor deposits and you compare that some.
Against the quarterly changes in the summer vendor payables and accrued expenses. There is no sudden volatility just mostly timing differences, hence the burn rate is not substantially influenced by changes in the net working capital balances.
With regard to the intercompany debt patented it's flat sequentially and the reflected balances largely pegged to the set the to be settled in stock issued to pass it.
Shares outstanding, including Unvested restricted stock awards as of today is $44 7 million shares which includes 276 276000 shares purchased by employees during the quarter as part of their participation in the company's employee stock purchase plan as well as 100000.
14000 shares issued during the quarter in connection with conversion notices received from the convertible debt holder.
The GAAP outstanding shares of $42 3 million are reflected on the slide as well as on the face of the balance sheet in the 10-Q.
With regard to slide 17.
Slide 17 compares this year's third quarter to last year's third quarter and similarly for the nine months totals on key certain key items I Trust you will review the information on my comments in light of the cautionary disclosure bottom of slide about.
The supplemental information, particularly non-GAAP information.
Revenue of 783000 for the third quarter reflects actual cash collections for the quarter plus a small amount of Invoiced Easter Guard test delivered to the veterans administration.
As you can see that as about a 10 X increase over the prior year quarter and about five fold increase over the second quarter of this year.
Test volume at just under 2600 tests for the quarter.
Represents just about $5 million in submitted claims for the third quarter.
You will recall from our discussion in the last quarterly call that we made a major change and upgrade to our revenue cycle management company. So far for the first six weeks of fourth quarter weekly collections have been averaging about 33% higher than the third quarter with a weekly high so far up $95000 in a particular week.
With regard to revenue recognition are.
The key determinant is the probability of collection and therefore due to the fact that we are in the early stages of the reimbursement process means revenue recognition occurs when the claim is actually collected first when the patient report is invoice and submitted for reimbursement.
As you'll see in our 10-Q this.
This is called variable consideration in the jargon of gaps ASC 606 revenue recognition guidelines and presently there is insufficient predictive data to reflect revenue when the test report is delivered to the referring physician.
Our non-GAAP loss for the second quarter of $9 3 million reflects a three 1% sequential decrease compared to the second quarter loss and approximately a nine 4% decrease year over year as a result of the cost control initiatives, we put in place the beginning of the year.
Slide 18.
Slide 18 is a graphic illustration of our operating expenses for the periods reflect it.
Total non-GAAP operating expenses $10 million for the third quarter 2023, and is a fairly flat sequentially, it's fairly flat sequentially and year over year.
Except for G&A that included some increased IP filing fees all operating expense categories were in line or lower.
Cost of revenue primarily consists of easily check devices lab supplies and <unk>.
Fixed lab facility costs.
This increase in cost of revenue of about 85000 is directly tied to the sequential increase in test volume.
Sequential test volume increases of about 375 tests at about $200, a variable cost controls cost.
Counts for the slight increase between the second and third quarters.
Secondly, and 11% marginal cost of sales for the increased test volume quarter versus quarter.
The non-GAAP losses, slightly better sequentially by a penny per share and <unk> per share year over year.
On a GAAP EPS basis noncash charges accounted for approximately 12 cents per share in the quarter, including approximately <unk> <unk> per share related to the change in fair value of the convertible debt.
If you normalize the loss by adding back the effect of the change in fair value of the convertible debt. The GAAP EPS improved by seven cents year over year for the quarter and approximately 26% year over year for the year to date comparison.
Some reimbursement details.
Since the new revenue cycle manager was put in place cortex took over in mid June.
5000 claims representing approximately $10 million in pro forma revenue had been submitted for reimbursement.
About 70% have been adjudicated, 30% are pending.
Out of the 70% that had been adjudicated.
Approximately 39% have resulted in allowable amount by the insurance company with a mean average of.
$1863 per test essentially right at the Medicare rate.
Of those denied about 58% require either additional information.
Were deemed not medically necessary will require a prior authorization.
About 36% were deemed to be non covered.
With that operator, let's turn it open for questions.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.
We're using a speakerphone please pick up your handset before pressing the keys.
Your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question comes from Kyle Nixon with Canaccord. Please go ahead.
Morning, Kyle.
Got it.
Hey, Shawn Hey, Dennis there'll be that Youre doing well good morning.
First question on the RCM.
Situation that you said that weekly collections, where I think I think targeting like 30% higher just wondering how that kind of flows into the P&L. You did 700 K in revenue this quarter or I guess last quarter and <unk> could you approach based on that masked with the 30% higher questions everything could you approach or exceed $1 million, maybe in the fourth quarter based on the higher collections or just kind of thinking.
The run rate or the kind of inflection point in volume.
Volume and revenue going forward.
Yes.
First of all.
The collections are directly related to the future revenue that will be recognized the only small piece. We do have this study with the VA to the extent.
We have additional test with them in that last clinical study is nearing conclusion, although it'll be another upcoming one and that is recognized when the invoice takes there's only a handful of revenue last quarter and into my comments collections are increasing increasing it at increasing rates.
The average so far for the quarter.
It puts us over a $1 million in recognized revenue.
For the fourth quarter. So your assumption is correct.
Okay. Thanks for that Dennis and then.
Actually you know what just on this note about the financials just looking at the slide with the EBITDA and net income and everything it's pretty similar year to year and even the nine month data is pretty I mean, it hasn't hasn't really contracted much I guess like you're still kind of probably burning off somewhere about cash.
What's your guys thoughts on.
Getting cash burn down over time or is that a priority for you as you think about the path of profitability. As you said are kind of like gets out there in the field more broadly and like I, just said lucky influx and everything out there in terms of adoption is that like what levers can you pull I think you mentioned something about like reps stabilizing and everything and maybe possibly increasing.
The long term, but how do you think about all these things kind of converging into.
And cash burn.
Let me give some high level comments and then Dennis like then unfold.
I think some of your assessment of the members who might might tweak a bit. So look this is the balancing act I think we've said it before we'll say it again that what we're.
Balancing here is driving test volume growth to now a level that is sufficient for us to really have sufficient claims history to engage with the medical directors of payers and so on and so forth while trying to keep our burn rate down in this particular environment and that involves keeping our our sales head count flat for the for the entire year.
So that we've been really happy with how that's worked and that the test volume growth has been steady we've been able to do that with a flat head count.
While.
Making the progress that we need on the revenue cycle management side claim processing claims payment.
So forth so.
Do think that Dennis maybe you can sort of dive a little bit more into the into the impact of the reduction in force in the.
The restructuring early this year with regard to or with regard to our burn rate over the past year as well as moving into the future.
Yes. So if you look at that EBIT number of 9251.
On slide 17.
The inclusive of that is about 22, 50, and inter company obligations from lucid to.
<unk> patented and as I indicated in my comments ideally.
The pad that would accept that in stock.
And therefore, and which has been the case.
Where the majority of time since last October.
You back that out that gets you right to around that burn rate.
And on that sub $7 million.
And we believe the levels of Opex that we're seeing right now we can maintain until we see the acceleration.
Collections to a higher degree of which will then definitely accelerated or go to market strategy, and we know exactly where.
Those initiatives.
Wood wood gear up.
And so if you look at how that burn rate can change over the next.
Four quarters, let's say over through 2024.
Collections as a key part of that.
Even if they are.
The submitted.
Submitted claims of 5 million a quarter stayed relatively flat.
The demand side of this equation is still pretty strong.
Then as you increase the amount of collections you Didnt calculations based upon the information I gave you for the first six weeks and you're over a million.
Continues to increase as a percentage of that five data submitted claims the burn rate will go down.
And we're expecting based upon the initiatives drove our market access team and and now having published data.
On clinical utility that certain that trend certainly should be realized so we think that we've hit the right tone with the level of Opex.
Obviously, if those assumptions on the revenue collections.
They are not hit and we see that as a only a remote possibility, but if it's true then we would seek to reduce our opex, even further but as Lisa indicated we're trying to strike that balance claims history is important to get reimbursement.
And and it's just important because you need to have the attention of the chief medical officers for the MCU.
Youll deal with.
What our market access team are presenting to them. So.
We think that the Opex will remain flat or collections will increase the burn rate will go down because of all those.
Some of those factors.
Okay. Thanks, Dennis Vishal for the earlier comments Sean.
Sean on the guard 2.0 assay.
A question about that I guess first like why why is that why is now the right time for the assay launch I mean, I feel like one point that was put on the market for a couple of years its not.
No it's not fully penetrated just yet it's still kind of like on that upper trajectory.
How are you thinking about FDA approval for the new assay you don't have much data has been generated and like you know how much will be generally going forward in publications and that sort of thing and then how much lower in cost of goods sold with this lower.
To your point, no assay half compared to the former.
And also the turnaround time I feel like that's something that might improve or actually may may expand or increase with this newer assay as well. So some of those factors. If you could just touch on those a great. So it's great to know.
Look it's the same asset the same games, it's the same.
CPG islands, the whole methylation site. So there's nothing fundamental at the core with regard to how we're interrogating the biologic process that's going on here. So this is really incremental improvement that has a.
That does have a.
Meaningful.
Incorporation of really cutting edge technology with regard to doing this in a multiplex fashion. So.
Yeah, just to just to be clear, we're not we're not introducing an entirely new active we're just taking the same underlying biology of the same gene Hussein methylation and performing the assay in a more efficient way.
That.
Yeah, we'll give us perhaps a bit of additional edge on performance, particularly as we move toward a screening population towards where the magnitude of the positive could be closer to the cutoff. So we're just kind of picking our way and doing continuous improvement and that's that's honestly, what we should all be doing the in terms of the regulatory.
Right now as you know this is being marketed as a laboratory developed test and we have had engagement over the years, where the FDA through our multiple pre submission meetings as well as a breakthrough device and we will be re engaging with FDA over the long term to have ether guard preventative in IBD, but we have this.
The point is.
Exactly what you suggested which is we obviously want to have the best version of the assay as we enter into studies that would ultimately over the long term get us towards an IBD, which will will do and will be necessary for us to do under the current.
Proposed FDA rule. So so yeah, we're just making them better and it's getting incrementally incrementally better and.
We think it'll be that'll be beneficial and useful for the existing commercial volume and then subsequently as we advance to.
Future studies.
We look to.
To take advantage of these benefits then we may look to continue to improve at the overall cost of primary the primary impact on the cost is on.
On the sequencing costs, which is.
A meaningful portion of that I want that Dennis Pappy, if you'd like to chime in on sort of what the magnitude of that is in terms of the Cogs I mean, obviously, we're still we're operating with a substantial gross margin to begin with but but.
But we do think it'll have a meaningful reduction in cost so I'll pass that on to Dennis but before I do on the.
Let me just comment briefly on turnaround times right now our turnaround times are seven to nine days.
There is certain fundamental.
Core component to that which include the time it takes to transport the the sample to our central laboratory and certain sort of steps along the way with DNA extraction by sulphide conversion and so forth to be perfectly honest seven to nine days is perfectly fine. This is a an elective test of the decision making around how to what to do with the results of the test.
Schedule, an endoscopy and so we're quite happy at that level, there may be at higher volumes and opportunity to save a day or two off of that.
But thats not quite that would not be meaningful from a clinical point of view, it's identified and if you have any further thoughts.
On the cost of.
The improvements in cost with a two point average.
Yes look we need to prove it out but it's safe to assume that we think there's about a 10% improvement in our.
Actual costs there.
Okay, Alright that was great color. Thanks for all that guys. It sounds like like sounds a similar assay like you said at least Shawn I just fundamentally similar performance has gotten better and improved the workflow is now more efficient. So the you know the.
Cogs improvements will all 10% is pretty good I would say that that was great. Let me just have a really quick one before I hop off.
This progress with commercial and private Payors, what are they reimbursement on average I remember in the past that was like $50 to 50% of the Medicare rate like how is that looking now.
Yes Dennis.
Okay.
Maybe you can restate your question in terms of.
I'm not sure exactly which cars, we talked about allowable claims at nearly the $1900 right.
What were you trying to dissect further.
I guess the commercial payer segment in the past on average I believe that was.
So that bucket was kind of paying.
Roughly half of 1938, right. So Mike I think it was 11 or 1200 around there, but maybe that has changed in past quarters. So is it.
I think I think it's fair to say, it's gone up right Dennis.
Yes, it has gone up on them actually reaching for the number.
So I don't think we publish that.
Exactly.
So the mean average of allowable claims was 18 63 the actual.
Payment rates.
But that does actually were looking for that the actual payment rate is dependent on a few other variables in terms of like deductibles and the portion of the pain patient with responsible for that varies year to year that based on.
Enrollment periods, and so forth, but I think I think as it is a generic statement of the average payment that we're getting for commercial payers is actually higher than it was when we were when we were saying that we were getting about 50% to 60% of our build rate of the 2500 dollar Bill right. So it's.
It's definitely.
Increased if thats your if that's your question yes.
Yeah that was perfect again, thanks, so much guys for all the commentary I just wanted to emphasize one I just want to reiterate one other thing.
The test is not similar if you think that the same task just better in terms of efficiency then.
So just to be clear the underlying biology is identical to the original test just wanted to make sure that there was no confusion about that too.
To find out Okay got it got it alright again, thanks, all right. Thanks, a lot guys. Appreciate it thanks Pat.
Our next question comes from Ross Osborne with Cantor Fitzgerald. Please go ahead.
Good morning, Hey, guys. Congrats on sorry go ahead, thanks for taking my questions. Good morning.
You mentioned targeting police officers offer new Precancer detection events would you discuss the rationale for this population and if you plan to create a registry for these events the largest firefighters.
Yeah, No I think.
The expansion beyond our firefighters into other grades is really I would think of it more generically as opposed to police.
Policemen being having.
Having sort of unique risk factors associated with it. It really is a population if you look at the the risk factors for having Softgel Precancer, yes, there is a reasonably high incidence amongst them, but not because of any particular occupational exposure as opposed to an firefighters where it's really very well documented that they have.
Cancer rates in general and the second highest increase.
Increasing that cancer rate enough cancel rates amongst esophageal cancers. So.
Good opportunity for me to emphasize that we remain very focused on firefighters are they specific population that's why we.
Split our registry to include a dedicated sub.
Upset of firefighters I would view the police that has basically just a broader expansion of our finding sort of a captive audience a group that has a.
A reasonably.
Reasonable rate of having the risk factors and being good candidates for testing and having them aggregated and entities such as the police unions.
That will give us an opportunity to target a.
A larger group at once and to improve access and so we'll continue to expand the CYP events into other groups, there's public public service employees and it really starts to kind of meld into the broader direct contracting initiatives that we're just getting off the ground with our first employer. So if you think of employers.
Self insured entities Union.
They really are sort of part of the same spectrum of just collected groups of patients where we have.
Potential for high yield events, such as Mercy life events, the firefighters are special and that they have.
Clear elevated risk of Macquarie.
Justify.
Targeting focus.
That makes sense.
Yes makes perfect cat, but going off of that and apologies. If this is addressed in our prepared remarks juggling a couple calls but could you discuss how are your conversations going with additional employers direct contracting do you think it should be a key driver for 24.
I think it should be the the conversations we've had and the conversations we had with our first lawyer.
Contracted ones that are undergoing testing right now this quarter as we speak it's really interesting, there's a sort of a sweet spot of kind of small to medium employers who are self employed where one esophageal cancer patient amongst them are one cancer or the other.
Cancer can have a really big impact both economically.
They are self insured and that may have some reinsurance and other other other opportunities to cover that but right now our esophageal cancer diagnosis will typically cost about $1 million or more once you get through all of the surgery and chemo radiation and immunotherapy and so there is a strong economic argument to be made for these particularly for the smaller to medium.
There's also the human element there, where these tend to be close knit organizations and the impact of an answer a cancer deaths within that organization is.
It is.
Really meaningful on a Friday human level and so our ability to have these conversations into.
And there's a real motivation on leadership at these employers to provide their patients with <unk>.
That they would deem to be a real benefit.
To them.
The whole the whole area of offering testing as part of a broader health and wellness.
Benefit program sort of separate from your medical insurance coverage under your medical insurance to standard claims process is it really a blue ocean, it's something that other companies. Other diagnostic companies have had good success with and there's a whole sort of untapped ecosystem out there that we are about to really dive headfirst into with.
Jim <unk>, our new VP of employer markets of.
Working within the ecosystem of brokers and others that work with employers to get their health and wellness benefit programs packaged together you'd think of that more along things like smoking cessation and nutrition and other things add on things that are benefits that players can offer their employees.
But targeted testing, particularly testing that's designed to prevent cancer falls within the same within the same rubric there so super excited.
There are there is a cyclical nature of this they tend to peak around open enrollment periods, but there is a lot a lot of opportunity there and an opportunity that that.
And in some way short short circuit some of the more traditional routes going through payers.
So yes.
People are excited about starting point into this.
Alright sounds great. Thank you guys congrats on progress thanks.
Thanks Ross.
Our next question comes from Mike Matson with Needham <unk> co. Please go ahead.
Good morning.
Good morning, Thanks for taking my questions I guess I wanted to ask about.
Tenants, just given the trends you're seeing with the revenue cycle management.
Collections and so forth you have feel for.
Our ability to predict when you could maybe start to recognize revenue when the pets are actually performed as opposed to when we get paid for them.
Yeah, Mike I think Thats still.
Several quarters out.
I would think we would be at.
We're collecting the data to be in a position to do so.
But I don't think that's going to happen until the end of 'twenty four.
Okay I understand.
And then just on the you know the checker for the tube and suddenly and it's good to see the traction there, but I'm just wondering about the scalability of that you know as.
As you grow and do more tests and was that something that you can kind of scale with the company.
Oh definitely I I think I thought you were going to ask the other question about whether it's sort of cannibalizing our corner visit but we love the check you're free to prevent their highly efficient.
The kind of the input into a.
A large number of tests that come out of these events in terms of the person hours of sales interaction as well as the.
The efficiency of having our nurse practitioners.
Or other collections performed these are check is highly efficient and very scalable I mean, you you typically will have a <unk>.
Engagement with let's say a fire department in a location.
At a typical example of that.
Our rapid maybe there are direct or working with them to get this organized we have a single person.
On the sales team that coordinates all of these in a fairly efficient fashion and then when they're when they are scheduled.
The we haven't one of our nurse practitioners or other device administrators come in and Theyre doing 50 in a day.
We'd love to have that in the more traditional environments, where we're engaged sort of more in the trenches with physicians. So it really is a.
Highly efficient and absolutely very scalable.
Way to do this but again I just want to be clear even though this wasn't your direct question that are our approach to this remains all of the above everything we can do whether it's or in the.
Traditional in the trenches, daughter, working with physicians and institutions are working through these health health events working with employers.
Unions and other self insured entities, we're attacking it on all fronts.
Anywhere we can enhance patient access so.
So yes, it does remain it doesn't vary.
Very attractive.
Modality.
And if it in an efficient one that is definitely scalable.
Okay got it and then just finally now that you've got or you're close to having some of that clinical utility data.
Do you have any plans to go back to the Medicare I understand that.
Focus on.
Here are some employers and things like that but when you back here. They are big opportunities. So you have any plans to go back to them and what would sort of would be the timing of that or is there. Some kind of cycle you have to wait work. Thanks.
So I think so yeah as you know we've made some substantial progress there we have two published.
Two of the three clinical utility studies are published and so we'll wait till the third but the.
The way, we engage with Medicare is somewhat different the way, we engage with payers right. The payer process, it's kind of more blocking and tackling pilot programs small small and regional plans larger plan, it's sort of a continue with the process with Medicare it's much more binary and so we will wait till we have all our ducks in a row have all of our clinical utility studies.
You know published in the peer reviewed literature I will have some initial conversations with them in the first half of next year about how to structure.
Our submission under the existing.
L C D and we May wasteful.
Later in the first half to get the results of our additional clinical validity study. The <unk> study that that's actively enrolling and so yeah, well will engage with them.
In the first half of the year too.
To plan that out and work towards a submission.
Of the full package of the clinical utility and clinical validity data sometimes until sometime late in the year. So that's an active process, but it's it's it's qualitatively different than the sort of the more incremental processes that we're working with.
With the commercial payers and as you noted just to reemphasize our key missing element there had been the clinical utility data and now that we have that.
Moving forward in locked down.
The opportunity to re engage with.
Multi excellence.
It's approaching.
Okay, great. Thank you.
Thanks, Mike.
Our next question comes from Mark Massaro with P. T. I G. Please go ahead.
Hey, Mark good morning.
He has this is maybe an answer Mike thanks for taking the question.
Okay.
Good morning.
The progress with establishing claims history and clinical utility data I guess supporting conversations with commercial pay you called out the revenue cycle management, because Wow I guess, how should we think about our remaining luggage for ASP improvement.
What kind of growth, we could see off of Q3.
Thanks.
Yeah.
Yes definitely yes.
Yes, so the ESP growth is really just a matter of the collections.
Against the submitted claims.
First off R. R.
Our price per test is just under 2500 Medicare rate is just under 1919 Hunter just at 1900.
And we think that those numbers will continue to hold for us as we go forward as the benchmark to be paid against.
We're all in and out of network and at the allowable amount of 18, just under $1900, we're kind of out of network not in.
The coverage policies by the private pay we think that's an indication that that becomes a pretty good floor for us. So in terms of actual revenue recognized divided.
Divided by number of tests delivered in the quarter, we think that ratio changes purely based upon collection and the movement in the market access from out of network to in network overtime. So I think thats, where youre aiming at in terms of Asps.
Getting to that benchmark, but we don't see that benchmark eroding it at anytime soon.
So it's sort of a qualitative response to that is that the levers are what we're doing on the coverage side, which is being utilized in the clinical utility data now, but it's coming out.
Gauging with payers on pilot programs on a variety of other ways.
Ways to leverage that data and actual get in network coverage as we are improving our collections.
With the processes that Dennis mentioned, so the levers are really focusing on medical policy coverage as the RCM. The revenue cycle management activity is improving and gearing up.
Okay perfect. That's it for me thanks, guys.
Thanks Pete.
Our next question comes from Ed Woo with <unk> capital. Please go ahead.
Congratulations on the quarter as you guys continue to have consistent high growth and scale up the testing business in the U S have you thought about international opportunities.
Yes. It is that's a great question that comes up a lot I think I might have mentioned this on previous calls we have pre.
Previously done an analysis in Europe, you know that.
Easter check it has CE mark and we have.
The ability to run the assay there Europe is very tough for our molecular diagnostic screening tests.
So some of the genomic profiling custom software and have a strong presence there, but even test like cologuard and others have struggled in Europe, because the overall reimbursement there are low we've had some discussions about Canada.
That's really been our focus at this point, so we get occasional input from other parts of the world, but that's not been a major focus right now are really laser focused on the U S market.
Great well, thanks for taking my questions and I wish you guys. Good luck. Thank you, yes, thanks a lot.
This concludes our question and answer session.
I would like to turn the conference over to Doctor Aqua for any closing remarks.
Great. Thanks, operator, and thank you all for your attention. This morning, and thanks for all the great questions, it's always enjoyable to.
Discuss.
The result, as I said, we're couldn't be happier with how.
With this quarter. It really is a result of incredibly hard work that's laid the groundwork on clinical research on our laboratory a market access team and so forth and we're looking forward to a bright future for lucid energy technologies.
We look forward to continuing to update you.
On our progress through press releases and follow up calls and as always feel free to contact us through like parks at <unk> Dot com and to follow us on social media. So thank you all and have a great day.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.