Lucid Diagnostics Inc. (LUCD) Earnings Call Transcript

Good morning, ladies and gentlemen, and welcome to the Lucid Diagnostics second quarter 2026 business update conference call. [Operator Instructions] The call is being recorded on Thursday, August 13, 2026. I would now like to turn the conference over to Matt Riley, Lucid Diagnostics Vice President of Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. Thank you for participating in today's business update call. Joining me today on the call are Dr. Lishan Aklog, Chairman and Chief Executive Officer of Lucid Diagnostics, along with Dennis McGrath, Chief Financial Officer. The press release announcing our business update and financial results is available on Lucid's website. Please take a moment to read the disclaimers about forward-looking statements in the press release. The business update, press release, and conference call all include forward-looking statements, and these forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from statements made. Factors that could cause actual results to differ are described in the disclaimer and in our filings to the SEC. The list and the description of these and other important risks and uncertainties that may affect future operations, see Part 1, Item 1A, entitled Risk Factors, and the most recent annual report on Form 10-K, filed with the SEC, and any subsequent updates filed in quarterly reports on Form 10-Q and subsequent Forms 8-K. As required by law, Lucid disclaims any intentions or obligations to publicly update or revise any forward-looking statements to reflect changes in expectations or in events, conditions or circumstances on which expectations may be based or that may affect the likelihood that actual results will differ from those contained in the forward-looking statements. I would now like to turn the call over to Dr. Lishan Aklog.

Thank you, Matt, and good morning, everyone. Thank you for joining us today and for your continued engagement and support. We continue to make progress across key commercialization initiatives as we await Medicare draft LCD publications, and we're eager to discuss these today. Let's begin with some key highlights from the second quarter and recently. This quarter, our laboratory performed 2,770 EsoGuard tests, and we recognized $1.5 million in revenue. Revenue is up about 17% from the prior quarter, and our volume remains within our target range of approximately 2,500 to 3,000 tests. This reflects increased commercial focus on testing opportunities that are likely to drive revenue. In addition, we secured our first laboratory benefit manager commercial coverage policy from Concert. The Concert policy has already been adopted by multiple client health plans. This is a major commercial coverage milestone and represents third-party review of EsoGuard's clinical evidence. Concert concluded that EsoGuard is medically necessary for patients meeting established screening criteria and that the evidence definitively demonstrates improved health outcomes. We'll talk more about Concert and the significance of this policy shortly. Now let's turn to key updates related to market access and commercialization. With regards to Medicare, we continue to wait for publication of our draft LCD, but we remain confident that we will secure a positive draft policy. We do note that there's been a broad backlog at CMS with regard to LCD output, however, there does seem to be a sign that that backlog may be loosening. Several long-awaited LCDs have been published. In regard to the VA, this remains a very large opportunity for us, and the process is progressing very well. Our team has built a robust, high-quality pipeline of VA centers across the U.S., and most notably, our clinical engagement has been extremely positive. We're essentially getting no pushback from the clinicians. The team is making progress in translating those clinical engagements into contracts. A key focus is securing contracts for the new federal fiscal year, which begins on October 1. Next, let's try to provide some additional context on Concert and our commercial coverage updates. So as anticipated last week, Concert issued a positive coverage policy for EsoGuard, representing our first laboratory benefit manager, LBM, coverage policy. They specifically covered our test, but noted that other esophageal precancer tests that were evaluated were considered investigational due to insufficient evidence. Let's talk a little bit about how laboratory benefit managers work. Laboratory benefit managers concentrate the technical assessment of molecular diagnostic tests into single entities, and client health plans contract with them in order to ensure a coverage policy. Three of Concert's client plans have adopted our policy with several more expected to do so in the coming months. Not all plans permit public announcements, so we won't necessarily be presenting that publicly. The plans that have adopted the policy are somewhat concentrated in certain geographic areas, which is helpful in securing these regional commercial plans. It enhances our ability to allocate resources accordingly. We continue to be actively engaged with all the other laboratory benefit managers, and we do feel confident that the Concert policy will set a precedent for others. Moving on to healthcare economic research, unlike with Medicare, an important tool for commercial coverage is demonstrating cost-effectiveness. We have partnered with the lead author of the American College of Gastroenterology guidelines and have developed a sophisticated cost-effectiveness model, working alongside HEOR experts and international key opinion leaders in Barrett's esophagus and esophageal cancer. This model compares the long-term clinical and economic impact of EsoGuard screening versus current care across the at-risk population. It's very important to take a long-term view of these cost-effectiveness models, particularly in screening where the benefit of early detection can take years to emerge. The model assessed the impact on BE detection, on esophageal cancer state shifting, esophageal cancer avoidance, and esophageal cancer-related mortality. This information helps payers assess whether the clinical benefits of EsoGuard justify the cost. The model is expected to be completed this summer, but the preliminary results are actually very encouraging and show positive clinical impact, with EsoGuard appearing as cost-effective compared to current care. Another key area of focus is our engagement with health systems. There's extensive health system work underway, a major part of our commercialization strategy. We're translating those initial conversations into active implementation work. This process can take a long time. The lead time of this can take a bit of time, but we're starting to see results from it. Part of the work involves tailoring the clinical workflow, supporting patient identification, ordering, and results. The EHR plays a particularly important role in health systems with regard to automated patient identification, streamlining patients within the health systems toward EsoGuard testing as appropriate. So, in summary, we really are getting meaningful traction across market access in our commercialization efforts, and we haven't been idle as we await Medicare coverage. Obviously, Medicare coverage remains our most important near-term milestone, and we remain confident we will successfully secure a positive draft policy. Our VA work, as I noted, is progressing well, and we expect that success to build in the new budget cycle and contribute to future revenue growth. Commercial coverage, economic evidence, and health system infrastructure are all advancing extremely well. Collectively, this progress is increasing Lucid's visibility and creating interesting opportunities for broader strategic engagement. So with that, I'll turn it over to Dennis for the financial update.

Thanks, Lishan, and good morning, everyone. The summary financial results for the second quarter were reported in our press release that has been distributed. On the next three slides, I'll emphasize a few key financial highlights from the second quarter, but I encourage you to consider these remarks in the context of the full disclosures covered in our quarterly report on Form 10-Q. With regard to the balance sheet, cash at quarter end June 30 was $33.4 million, which is essentially flat with the year-end balance. We completed a common stock offering during the quarter with net proceeds of about $16.8 million. The average burn rate for the last four quarters, including cash interest on the debt, was $11.6 million per quarter, with the second quarter a little bit lower at $11.3 million. Our $22 million secured convertible debt is a five-year note, interest only at 12%, with a dollar conversion price, which is held by long-term shareholders. The fair value of the convertible notes in the amount of $23.5 million at quarter end is really the only other substantive change from the previously reported balances at the end of the year and also at the end of the first quarter. The fair value decrease of $1.7 million in the quarter reflects a mark-to-market quarterly adjustment in parallel with the common stock price changes between the periods. The fair value decrease also is a substantial part of the second quarter income pickup of $1 million reflected in other income in the P&L. Shares outstanding, including unvested restricted stock awards and the earlier conversion of the remainder of the preferred shares, are approximately 203 million. After the conversion of the Series B1 preferred shares on May 6, there were approximately 22 million common shares held in abeyance due to the 4.99% ownership blockers in the former Series B and B1 certificate of designation. If these abeyance shares had been issued, common shares outstanding would be around 225 million. The GAAP outstanding shares as of June 30 of 190.8 million are reflected on the slide as well as on the face of the balance sheet in the 10-Q. GAAP shares do not reflect unvested RSA amounts, and there are no longer any preferred shares outstanding. At present, PAVmed continues to be the single largest common shareholder of Lucid Diagnostics with ownership of approximately 15% of the common shares outstanding. Although PAVmed no longer has voting control of Lucid, together with the board and management, still have a considerable influence over Lucid with approximately 25% voting interest. With regard to the P&L, this slide compares this year's second quarter to last year's second quarter and year over year on certain key items. I trust you'll review the information in my comments in the light of the cautionary disclosure at the bottom of the slide about supplemental information, particularly non-GAAP information. Our sales team sold 2,770 tests for the second quarter with a billable value over $7.5 million, resulting in recognized revenue of $1.5 million. The test volume is within the range we have been targeting in this pre-Medicare time period. With new investors once again joining us for this call, it's worth repeating what we've communicated in past quarters about revenue recognition. The key determinant in how revenue is recognized at this point in our reimbursement journey is the probability of collection. Therefore, due to the fact that we are in the transitional stages of our reimbursement process, means revenue recognition for the majority of our claims submitted to traditional government or private health insurance will be recognized when the claim is actually collected. For tests that have a definitive coverage arrangement, revenue will be recognized when the patient's report is delivered, invoiced, and submitted for reimbursement. As you'll see in our 10-Q, this is called variable consideration in the jargon of GAAP's ASC 606 revenue recognition guidelines, and presently there is insufficient predictive data to reflect revenue from all of our quarterly test volume at the point where the test is delivered to the referring physician. For billable amounts contracted directly with employers, including the VA, and that are fixed and determinable, will be recognized as revenue when our contracted service is delivered. Generally, that means when the report is delivered to the referring physician. It's important to note that a pending Medicare approval decision impacts 40% to 50% of our addressable patient population, and therefore will have a significant impact on our future revenue recognition analysis. Furthermore, for tests performed on Medicare patients with dates of service within 12 months of a final positive Medicare policy, we'll also get paid within a reasonable timeframe after the final policy is issued. With regard to the remainder of the P&L, the second quarter's total OPEX on both a GAAP and a non-GAAP basis is slightly higher than the first quarter by about 5%, reflecting expected increases in commercial activities, including headcount and sales personnel, clinical service staff, and market access. The non-GAAP net loss per share of $0.06 in the second quarter is better by about a penny sequentially and about $0.04 versus each of the previous three quarters prior to that. With regard to our operating expenses, this slide is a graphic illustration of our operating expenses after eliminating non-cash expenses for the period is reflected. Non-GAAP operating expenses of $12.3 million are basically in line with the average non-GAAP OPEX for the previous five quarters. That is 12.3 versus an average of $12.2 million for those five quarters. Let me close with a few reimbursement highlights for the second quarter. In the second quarter, as mentioned, we sold almost 2,800 tests, reflecting about $7.6 million in pro forma revenue at our list price of $2,749. During the second quarter, we recognized revenue of about 19% of that amount, or $1.5 million. Recognized revenue included about $5.5 million in pro forma revenue. 35% from insurance claims submitted in the prior quarters with the longest dated item over two years ago. Of the claims submitted in the second quarter, about 65% have been adjudicated and 35% are pending. Out of the 65% that have been adjudicated, about 28% resulted in an allowable amount by the insurance company with an average of $1,424 per test. Of those denied, most fit into one of three buckets. A, medically not necessary, deemed to be medically not necessary or investigational. Or B, require a prior authorization. Or C, require additional medical records. The balance are deemed to be non-covered. With that, operator, let's open it up for questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. [Operator Instructions] Your first question comes from Kyle.

Hi, this is Alex Cicchese and I'm on for Kyle Mikson. The test volume remains essentially within the bounds of the guidance you've given us previously, so that comes to no surprise really. How did the VA factor the test volume during the quarter?

The VA has not yet contributed meaningfully to the test volume. We're still in the process of engaging with the centers and working through budgets and contracting, and we're really in that phase. So that's going well. We're starting to secure contracts, and we'll start to see the VA contribute to our volume moving forward.

And so, looking at operating expenses, you noted there was an uptick during the quarter reflecting increasing commercial activities. Given the potential timing of the draft and final LCDs, can you just discuss plans to potentially accelerate SG&A in the next few quarters?

Yes, let me just start. As we've discussed before, as we're awaiting Medicare, we have been for the past couple of quarters making some updates to our commercial infrastructure in order to be ready to accelerate our commercial activities upon securing broader reimbursement. That involves shifting some of our commercial personnel to more senior personnel so that more readily and adding a modest amount, as Dennis mentioned, to the overall commercial headcount. Dennis, did you want to add anything?

Yes, sure thing. So implicit in your question is also the implication in terms of burn and capital requirements. It's important to note when you think about that, yes, we are going to increase headcount. We are going to increase programs and take advantage of the reimbursement landscape as it improves. But because we have a roughly $2,000 test and a 90% margin for the next patient in the door, you're not going to have the incremental burn that you otherwise would have if this was a 50% margin test at a lower price point. So one of the favorable things, or tailwinds if you would, is just that, the test price, the margin. And yes, we are going to increase our OPEX, but it won't have the direct correlation to the burn that otherwise it might have.

If I could also add one other thing, Alex, which is that, you know, as you sort of said in your first question, we do expect to start seeing the impact of our efforts at the VA as well as our efforts on the commercial payer side as we start to secure coverage policies and ultimately translate those into contracts and allocate resources accordingly. Commercial activity related to the VA and the commercial side as well.

One last one from me. So you recently contracted with your first LBM, efforts of which you alluded to during your discussions earlier this year. Can you just elaborate a bit more on this news, as well as the potential you could bring on additional LBMs into the fold in the near term prior to Medicare coverage?

Thanks, Alex. I think the first part was just elaborating on the LBM itself and what that means and then how this may serve as a launchpad for futures. Is that correct? Yes. Okay, great. Yes, we're quite excited about this. Maybe just a bit of an additional primer on how the system works. The diagnostic industry has on the commercial coverage side has laboratory benefit managers where they concentrate the technical expertise in assessing complex molecular diagnostic tests like ours. And client health plans, regional as well as national plans, contract with these laboratory benefit managers to write coverage policies on their behalf. So this is a very big first step for us. This is our first laboratory benefit manager, and we're quite excited that the coverage policy that they wrote makes it clear that EsoGuard is medically necessary and really validates the bulk of our clinical evidence in support of that. And it did so looking at the entire landscape of potentially other products had found that only ours had sufficient evidence to justify that. So that was a big step and further validation of its importance is that three of its plans, three of the client plans for Concert, almost essentially immediately published their own coverage policies in sync with that, and we expect more to come. This gives us an opportunity, as I mentioned in my prepared remarks. Often these plans tend to be regionally concentrated. It gives us the opportunity to allocate resources in a geographic fashion consistent with that. The second part of your question is also extremely important. It's always important to get the first one under our belt in conversations with other plans and with other LBMs. Obviously, a very common question is who else is on board. So having Concert on board will certainly help us, and it's been positive, has had a positive impact on our ongoing discussions with other LBMs.

Your next question comes from Mark with BTIG. Please go ahead.

I guess the first one, just maybe asking about CMS. I completely understand there's been a long queue several years. I just wanted to maybe ask, I know there was at least one person who changed or is about to change his role at Palmetto GBA. I'm just curious if you think any of the personnel change might have any impact to your wait in front of Medicare?

We don't think so. As we've said before, we've been in close communication with the leadership at MolDX, and we obviously do our best to try to understand to the best of our ability what may be going on behind the scenes. We feel quite confident that things are in the late stages and that the work that went in to getting us this far all the way through the CAC meeting and beyond is already sort of built in, baked in. So it's our understanding, you know, to the best of our ability to ascertain that as you hinted at the beginning of your question, that there has been a bit of a prolonged backlog with the processing and the delays in processing LCDs coming out of the MACs, including MolDX at CMS. There's a sort of a broad sense within the community that this may be loosening up as a couple of long-awaited LCDs that apparently were using up a significant amount of the bureaucratic bandwidth have come to fruition over the last couple of weeks. So we're hopeful that that loosening will accelerate the process of processing our LCD.

Okay, great. And then congrats again on getting Concert over the goal line. I guess can you just remind us, it looks like three of the plans have followed their coverage. If you could remind us how many plans look to Concert and, if all of them converted, do you have a sense for how many covered lives that could mean?

Yes, under Concert, there are numerous plans under Concert leading to just under 10 million covered lives. All I can really say publicly is that we are on board. We expect a couple more in the coming quarters, and then ultimately, we have every reason to believe that all of the client plans will ultimately mimic the coverage policy of the LBM.

Okay, perfect. If I can sneak one last one in. I just want to make sure that you're still planning to move in line with your target of 2,500 to 3,000 tests per quarter. And then I wanted to get a sense for how some of the activity is going just generally with firefighters and also with some of the more typical initiatives in primary care type clinics?

So, yes, I think for now we're still targeting that range, sort of as we prep behind the scenes and kind of make the modifications behind the scenes that I had mentioned in my earlier response. I think the trigger for us to start trying to drive up that volume by increasing our resources will really depend on obviously the big trigger would be securing our draft coverage policy, but also the parallel efforts and traction of the VA and with our commercial plans will obviously influence that as well. You know, as we've talked about previously, the mix of that volume, even though we kind of report a fairly steady number quarter to quarter, we're trying to shift that, that earlier that was dominated by the health fair type event that you had described, that you were hinting at, the firefighter events, as those were the most efficient ways for us to generate the test volume that we need to direct claim submissions and drive and support our engagement with the commercial payers. So behind the scenes, as we've talked about previously, we have been making adjustments to our commercial strategy, our incentive plans, and so forth to start shifting that volume back towards more traditional engagements with primary care physicians, gastroenterologists, and as we've described, health systems as well. And that is working. We've also started to see, also have been pushing the team to shift more of our health care events towards contracted plans where we have confidence and assurance that we'll get paid for. And that progress, that's progressing as well. So as you may note that our revenue this quarter was up even though our test volume was flat, a reflection of those kind of behind-the-scenes efforts. Dennis, do you want to add anything to that?

Yes, sure thing. So, Mark, maybe just a little bit more granularity, just expanding on what Lishan said. Our comp plans are now more heavily weighted towards what the team's calling MVAC, Medicare, VA, and contracted revenue. The contracted revenue would include firefighters and self-insured employers. It's an emphasis on getting paid. And so when you look at the total of 2,800 tests in the quarter, just under 40% fit that category, and that's up substantially from the previous quarter. And the government insurance, which I'll include Medicare and Medicare Advantage, Medicaid, and TRICARE, and the VA is about half of that, and the direct contract needs the other half. And as Lishan said, the VA presently is not contributing to the test volume. The VA is more about obtaining purchase orders and pipeline building until the new budget year in October. Test volume from those POs from those purchase orders is forthcoming and will contribute to the mix. So that gives you a little bit more color in terms of the split on the volume, but it is increasing in terms of the concentration on the MVAC commercial efforts.

Yep, that's really helpful. Thanks guys very much.

Your next question comes from Mike with Needham. Please go ahead.

So I guess first, just on this cost-effectiveness model, I was wondering if there were any kind of metrics you could share there. I don't know if you were looking at things in terms of, you know, cost per quality-adjusted life year or something like that.

Yes, we're not publicly ready to disclose the public numbers. We're still wrapping up the final touches to the model, but it is a very sophisticated HEOR model. We have worked with Dr. Nick Shaheen, who's one of our close advisors. You guys may recall he's the lead author of the American College of Gastroenterology guidelines. And he also happens to have a lot of expertise in this type of model building. And these are quite sophisticated models, kind of analyses that incorporate numerous variables, does modeling in a variety of scenarios, and their view is towards the long-term value across multiple parameters, as I mentioned, all the way from the detection of the precancerous conditions, all the way through the patient journey and for those who develop cancer. So yes, one of the metrics will be what you mentioned, quality-adjusted life years, but there's a lot of other details that come out of it. It's really designed to be the type of model that commercial payers can sink their teeth into. If you recall, we said this before, Medicare doesn't incorporate healthcare economics, but obviously the commercial do and demonstrating long-term cost-effectiveness, not just budget impact, but long-term cost-effectiveness is important, will be important over the long term. So all I can say right now is that the initial results with regard to the cost-effectiveness of EsoGuard testing across that broad spectrum of parameters is looking quite good, and it's looking quite good across nearly all model scenarios that were modeled in this analysis. So those results will be released shortly. They'll be submitted for publication. These models need to go through the peer review process and publication for them to have their greatest impact in our conversations with commercial payers.

Okay, got it, got it. And then just on, you know, curious where you're seeing your test samples being taken, you know, has there been any kind of changes there? I mean, I guess what I'm asking about is like the PCPs versus the GIs versus your test centers.

Yes, so I sort of hit this with Mark's question, but the – and Dennis elaborated on it. Our efforts over the last couple of quarters to shift our incentive plans, so that our volume starts to shift away from being heavily dominated by these firefighter health fair type events towards engagement with primary care physicians and with GIs in our more traditional model, which in our case includes what we've referred to as our satellite Lucid test center model, where our nursing team, our clinical services team, performs testing days at private practices, primary care practices and GI practices as well as desired. So yes, behind the scenes that shift is going well. It always will include both primary care and gastroenterologists. Both of those are targets for us, but the majority of patients are at the primary care physician. However, the GIs play a very important role, as a conduit towards their primary care referral patterns, but also within their four walls, within their practice of the GIs, there are patients that they are happy to adopt our technology. I know we can discuss that further if you'd like. In addition, as I wanted to emphasize, the long-term efforts over the last couple of years for us to engage with health systems and develop models for building programs within larger health systems that include incorporating the entirety of the primary care physician group, for example, in the health system, training them, incorporating the cell collection processes and all of the integration that's involved with EHR integration and system building and all of that, that's really starting to come to fruition and we're starting to lock down implementation and actually doing volumes and having these programs be active at multiple health systems.

Okay, that's all I have.

Your next question comes from Anthony with Maxim Group. Please go ahead.