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DATE

Thursday, May 14, 2026 at 8:30 a.m. ET

CALL PARTICIPANTS

  • Chairman and Chief Executive Officer — Lishan Aklog, M.D.
  • Chief Financial Officer — Dennis McGrath
  • Vice President, Investor Relations — Matthew Riley

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TAKEAWAYS

  • EsoGuard Test Volume -- 3,177 tests performed, above the targeted range of 2,500 to 3,000.
  • Revenue -- $1.3 million recognized, with 72% of this from insurance claims submitted in prior quarters.
  • Average Sales Price (ASP) for Paid Claims -- $1,646 per test for permitted insurance claims, "which bumps up against the Medicare rate."
  • Test Volume Sequential Change -- Volume declined from 3,664 tests in the fourth quarter, which included unusually high one-time firefighter testing events.
  • Government Segment Volume -- Medicare and Medicare Advantage comprised 13% of first quarter test volume, down from 15% in the fourth quarter, a change of approximately 60 tests.
  • Cash Position -- $27.9 million at quarter end, increasing to $44.8 million pro forma following a $16.8 million underwritten stock offering in April.
  • Average Quarterly Cash Burn -- $11.3 million for the last four quarters; first quarter at $12.1 million due to commercial team investments.
  • Convertible Note Refinancing -- $22 million, 5-year note at 12% interest, with a $1 conversion price, held by long-term shareholders.
  • Shares Outstanding -- 203 million (including unvested restricted stock and conversion of preferred shares); GAAP shares at 164.9 million as of March 31; an additional 22.3 million shares are held back due to 4.99% ownership blockers.
  • Operating Expenses (Non-GAAP) -- $11.7 million, in line with an average of $12 million for the previous five quarters.
  • Non-GAAP Net Loss Per Share -- $0.07, representing a $0.03 improvement versus each of the prior three quarters.
  • Insurance Claims Adjudication -- Of claims submitted in the quarter, 77% adjudicated, 23% pending; 31% of adjudicated resulted in an allowable amount.
  • VA Federal Supply Schedule Participation -- First purchase order secured with payment rate at the Medicare rate of $1,938 per test; VA represents 9 million addressable patients.
  • Commercial Coverage Developments -- First laboratory benefit manager coverage policy secured; not yet public, but expected to catalyze commercial payer policies upon announcement.
  • Guidelines Recognition -- The American Gastroenterological Association's draft guidelines highlight EsoGuard and EsoCheck individually and rate their clinical evidence certainty for accuracy as high.

SUMMARY

Lucid Diagnostics (LUCD +0.00%) emphasized the commercial and strategic significance of its above-target test volumes despite reduced quarterly revenue, framing Medicare approval as transformative for addressable markets and future revenue recognition. The company drew attention to an enhanced balance sheet through a $16.8 million equity raise, with pro forma cash projected to extend its runway into 2027. Presence on the VA Federal Supply Schedule and first purchase orders were cited as immediate opportunities, given the VA's 9 million covered lives and direct reimbursement structure at the Medicare rate. Management also detailed early traction in commercial payer engagement, highlighting coverage progress with a leading laboratory benefit manager. The conference call clarified that recognized revenue remains limited due to continued revenue deferrals from claims adjudication uncertainties, with 77% of claims processed and a consistent portion generating payment close to Medicare rates.

  • Management stated, "all focus is on Medicare," designating it as the principal catalyst for both commercial and revenue expansion strategies.
  • Company leadership described ongoing "logistical delays" with the Medicare LCD process, reiterating that "nothing in our conversations has raised any concerns with regard to the substantive nature of our expectations" for a positive Medicare coverage decision.
  • The company reported "a very, very deep pipeline" of VA engagement activities, supported by the formal inclusion on the federal supply schedule for 2026.
  • Draft updates to major clinical guidelines were previewed at a key industry conference, with EsoGuard and EsoCheck named and identified as having high certainty of clinical accuracy, a development expected to influence payer coverage and physician adoption upon finalization.

INDUSTRY GLOSSARY

  • LCD (Local Coverage Determination): A decision by a Medicare Administrative Contractor regarding whether a particular service or item is covered within its jurisdiction.
  • VA Federal Supply Schedule (FSS): A government procurement program allowing federal agencies, like the VA, to purchase medical products at negotiated rates.
  • Laboratory Benefit Manager (LBM): A third-party administrator that manages laboratory benefit programs for health insurers, often responsible for coverage assessments and payment policies for diagnostic tests.
  • EGD (Esophagogastroduodenoscopy): An invasive endoscopic procedure used to examine the esophagus, stomach, and upper duodenum.

Full Conference Call Transcript

Operator: Good morning, and welcome to the Lucid Diagnostics First Quarter 2026 Business Update Conference Call. Please note that this event is being recorded. I would now like to turn the conference over to Matt Reilly, Lucid Diagnostics Vice President of Investor Relations. Please go ahead.

Matthew Riley: 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 of Lucid Diagnostics. The press release announcing our business update and financial results is available on Lucid's website. Please take a moment to read the disclaimers and forward-looking statements in the press release. The business update press release and the 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 with the SEC. For a list and description of these and other important risks and uncertainties that may affect future operations, see Part 1, Item 1A entitled Risk Factors in Lucid's most recent annual report on Form 10-K filed with the SEC and any subsequent updates filed in the quarterly reports on Forms 10-Q and subsequent Forms 8-K.

Except 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 the expectations may be based or that may affect the likelihood that actual results would differ from those contained in the forward-looking statements. I would now like to turn the call over to Dr. Lishan Aklog, Chairman and CEO of Lucid Diagnostics.

Lishan Aklog: Thank you, Matt, and good morning, everyone. Thank you for joining us today and for your continued engagement and support. Let's begin with some key highlights from the first quarter and recently. We performed 3,177 EsoGuard tests in the first quarter of this year and generated revenue of $1.3 million. The revenue was down slightly, but proportional to volume, which received a bit but remained above our target range of 2,500 to 3,000 tests and preserving our average sale price. We also importantly strengthened our balance sheet with an underwritten public offering of common stock that had approximately $16.8 million in proceeds.

This significantly bolstered our balance sheet, as Dennis will describe in more detail, to approximately $45 million in pro forma cash at the end of Q1. This extends our runway well into 2027, where we're encouraged by the participation of long-term institutional investors exhibiting confidence in our strategic opportunities. This also mitigated the financing overhang and provides us with the resources that we'll need to accelerate commercial efforts after we receive Medicare approval. At each of these individual test patients to endoscopy, those outcome of this will be a peer-reviewed publications that demonstrate the health care economic value of EsoGuard. So overall, in summary, a lots going on, particularly on the market access and the commercial side.

Obviously, all focus is on Medicare, and we acknowledge joint frustration of some of the delays within the Medicare LCD process. Overall, we believe this is really at the end of the day, systematic, and we continue to have our confidence that this is the near-term results really hasn't wavered at all. But as we've discussed before, we're not idle as we're awaiting Medicare. The commercial team continues to drive its activities to drive patients to increase the proportion of our patients that are Medicare.

The VA activities are really off to a good start, strong engagements with our early targets of the VA centers, and we hope to be starting testing and generating revenue from that in the very near future. And in addition, as I already outlined, lots of activity that allows us to aggressively build the infrastructure necessary to accelerate our health care system adoption, EHR, coding, health care economics and such and our direct engagements with multiple health systems across the country continues to accelerate, and we think will accelerate further once we secure Medicare coverage. So with that, I'll let Dennis take over and provide an update on our financials.

EGD only upon a positive EsoGuard test is very attractive to both the clinical team as well as the centers as a whole. And many VAs operate rural satellite VAs that are quite removed from the main centers and EsoGuard is a very attractive option to avoid patients having to travel for EGD if they have a negative EsoGuard test. So overall, lots of activity here. We're seeing progress. We really look forward to further engagement across the entire VA system. GI meeting, major annual meeting of gastroenterologists under the auspices of the American Pastroenterologic Association, the AGA we had multiple abstracts in the near term following the successful public meeting that was held in September of last year.

We continue to have ongoing engagement with leadership and other folks who are engaged in this space, and there clearly remain logistical delays with regard to putting out local coverage determinations remain, and we have expectations that will pick up in the near future and statements in the press release. The business update press release and the conference call all include forward-looking statements, and these forward-looking statements are subject to...

Dennis McGrath: Good morning, everyone. Obviously, we had a glitch in the prerecorded prepared remarks, but the transition in the -- was at the appropriate time. So I'll pick up from there. So the summary financial results for the first quarter were reported in our press release that has been distributed. On the next 3 slides, I'll emphasize a few key financial highlights from the first quarter. I'd 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 March 31 was $27.9 million. On a pro forma basis, including the recent April 24 financing, pro forma cash equals $44.8 million.

The average burn rate for the last 4 quarters included cash interest on the debt was $11.3 million per quarter with the first quarter a bit higher at $12.1 million as we made investments in our commercial teams, including sales, clinical services and market access. You'll recall at the end of 2024, we refinanced our convertible debt into a $22 million 5-year note, interest only at 12% with a $1 conversion price, which is held by long-term shareholders. The fair value of the convertible notes in the amount of $25.2 million at quarter end is really the only other substantive change from the previously reported balances at the end of the fourth quarter.

The fair value increase of $1.2 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 increase is also a substantial part of the first quarter expense charge of $1.9 million reflected in other income in the P&L. Shares outstanding, including unvested restricted stock awards and conversion of the remainder of the preferred shares as of last week are approximately $203 million. After the conversion of the preferred Series B1 on May 6, there is approximately 22.3 million common shares held in advance due to the 4.99% blockers -- ownership blockers in the Series B and B1 certificate of designation.

If these advance shares had been issued, common shares outstanding would be around 225 million. The GAAP outstanding shares as of March 31 of 164.9 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, PAVmed together with the Board and management still have considerable influence over Lucid with approximately 25% voting interest. Next slide.

With regards to the P&L, this slide compares this year's first quarter to last year's first quarter. I trust you'll review the information in my comments in light of the cautionary disclosure at the bottom of the slide about supplemental information, particularly non-GAAP information. Our sales team sold almost 3,200 tests, 3,177 to be exact for the first quarter with a billable value over $8.7 million, resulting in recognized revenue of $1.3 million. The test volume for the quarter is above the upper end of the range that we've been targeting in this pre-Medicare time period.

The fourth quarter sequential comparative period of 3,664 tests had an unusually high number of onetime firefighter testing events towards the end of the period, which pushed last quarter's target range well above the norm. With new investors once again joining us for this call, it's worth repeating what we've communicated in the past quarters about revenue recognition. A key determinant how revenue is recognized at this point in the reimbursement journey is the probability of collection.

And therefore, due to the fact that we are in this transitional stages of our reimbursement process means revenue recognition for the majority of our claims submitted to traditional government or private health insurers will be recognized when the claim is actually collected versus when the patient report is delivered, invoiced and submitted for reimbursement. As you'll see in our 10-Q, this is called variable consideration in Jargonance GAAP 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 report 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 is 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 the final Medicare policy will also get paid within a reasonable time frame after the policy is issued.

With regard to the remainder of the P&L, the first quarter's total OpEx on both a GAAP and a non-GAAP basis is generally flat year-over-year, but as expected, there will be increases in sales team costs, which are substantially offset by decreases in G&A expenses. The sequential decrease in total OpEx expense from the fourth quarter of about $2 million is mostly in G&A costs and onetime expenses in last quarter. The non-GAAP net loss per share of $0.07 in the first quarter is better by about $0.03 versus each of the previous 3 quarters. Next slide.

With regard to the operating expenses, this slide is a graphic illustration of the operating expenses after eliminating noncash expenses for the periods reflected. Non-GAAP operating expenses of $11.7 million are basically in line with the average non-GAAP OpEx for the previous 5 quarters, $11.7 million versus an average of $12 million. Let me close with a few reimbursement highlights for the first quarter. In the first quarter, we sold almost 3,200 tests, reflecting about just under $9 million in pro forma revenue at our list price of $27.49. During the first quarter, we recognized revenue of about 14% of that another $1.3 million.

Recognized revenue included about 72% from insurance claims submitted in prior quarters, the longest dated item almost 2 years ago. Of the claims submitted in the first quarter, about 77% have been adjudicated, 23% are pending. And out of that 77% that have been adjudicated, about 31% resulted in an allowable amount by the insurance company with an average of $1,646 per test, which bumps up against the Medicare rate. Of those denied, most fit into 1 of 3 buckets: a, deemed not medically necessary or investigational or require prior authorization or require additional medical records. The balance are deemed to be noncovered. So with that, operator, let's open it up for questions.

Operator: [Operator Instructions] Your first question comes from Mark with BTIG.

Mark Massaro: I figured I would start with a reimbursement question. Just curious if you would love just an update as far as what you might be hearing from MolDX. As someone who covers the industry, it was nice to see Medicare coverage decision come into the space yesterday. So we know that they're still open for business. But can you just give us a sense for what you're hearing, maybe any back and forth? Would love to hear any color on that topic.

Lishan Aklog: Thanks, Mark. So we do continue to have ongoing dialogue with leadership. There is no sort of concrete or specific information with regard to where things stand, but we remain confident based on the results of the CAC meeting, and we've had follow-up conversations with regard to the CAC meeting that this remains a logistical issue with regards to delays more broadly with LCDs coming through as you sort of hinted. I believe the LCD you're referring to is the Novitas LCD that published recently.

But our conversations with them as well as with others who are knowledgeable and follow the space, there is a sense, I think, which is what you're hinting at that some of the backlog with LCDs is likely to start clearing in the near term. But just to be very, very clear about the fact that nothing in our conversations has raised any concerns with regard to the substantive nature of our expectations with regard to the likelihood of the draft coming out in a positive direction.

And all of that confidence is anchored in the substance of the CAC meeting, which as we all know, is a public record of commentary that's very important in this process by physician experts across the country. So we continue to view this as a logistical delay and one that is -- that we still are highly confident will result in a positive outcome in the near future.

Mark Massaro: Okay. Perfect. It was nice to hear you guys talk about the VA activities off to a good start. Can you just give us a sense -- there are a lot of VA systems. So maybe can you give a little more color about what types of dialogues you're having, both either at the sort of the national level or at the local level? And then can you speak to EHR integration? I think that sometimes VAs have separate systems? Or maybe can you give us an update maybe they are starting to unify a bit in systems integration?

Lishan Aklog: Yes. Great. Great question. So let's go a little bit through a bit systematically about how the VA works, particularly as a result -- as it relates to molecular diagnostics like our. So as you know, from our previous announcement that we are now on the federal supply schedule. We have the payment rate -- contracted payment rate under that schedule is the Medicare rate of $1,938. There are a couple of hundred VA centers across the country. And by being on the FSS, we have the opportunity for our team to engage with individual centers. And generally speaking, that's the starting point with regard to getting engaged with the VA is on a center-by-health center basis.

And so our team has a very, very deep pipeline has had extensive outreach to the VA systems all across the country. I think I mentioned on our last call that our -- the internal process by which we are engaging with the VA includes our entire sales team, generating leads, generating connections with and engagements with clinical champions within their own region, but we've also centralized. We have 2 senior members of our team that are focused on nationally on sort of a strategic accounts manner with individual VAs. Those conversations, as we noted, are -- and engagements are going really well. The pipeline is robust.

We have a number that are going through the process of working with the individual VA centers to ultimately, the way this works is you ultimately generate a PO that is for a number of tests. And then we work out the logistics with the clinical team in the center as a whole with regard to the cell collection part of it. So we have -- we've received our first PO, which is great and look forward to beginning testing at our first target, and there are actually many more along the way. The VAs obviously operate within the overall federal budget, and they all have their individual budgets.

So when we work with the VAs, this is somewhat analogous to how we engage with other health systems on the -- other health systems, private or otherwise. But we do have to work in this case, within their budget. And so our opportunity between now and the end of the federal fiscal year is, in fact, to generate POs, which will be off budget. But in parallel, we're having conversations to be on the full budget for the next fiscal year as part of those parallel processes. So -- and that the federal fiscal year starts on October 1. So really, overall, again, very positive, really good engagement.

The engagements with the clinical team has been excellent -- with the clinical champions has been excellent. We've talked previously about the fact that there are some very unique aspects to the VA that enhance our ability to engage with clinicians. The VA tends to have a population that is higher risk with regard to these conditions and also is often resource constrained with regard to the number of VGT. So the value of the clinical utility and the economic value of EsoGuard as a triage test to the more expensive and more complicated invasive endoscopic procedure is very attractive. value proposition.

Another aspect is that the VAs often operate rural centers that are actually quite remote from the main center. And they -- that's another obviously very -- a classic opportunity for a noninvasive test to prevent patients from having to travel to the main center. One other aspect is that VAs, as you know, are often almost -- most VAs are engaged are partnered with academic medical centers.

So many of the same physicians that we're in discussions with the health systems underlying academic medical centers are the same physicians who -- or partners of the same physicians who operate at the VA, and that's been a very useful aspect of these relationships and obviously, ultimately will help us within the health system as well. Each integration with the VA is really not a major factor. I think you point out the fact that there's a lot of work, I believe, to integrate their systems. But in the individual health systems, it's much less of a factor than it is outside the VA system and our traditional commercial engagements, which we've discussed in our last call.

Happy to talk a bit more about that.

Mark Massaro: Okay. That makes perfect sense. One last question for me. I believe you are coming up on your 1-year anniversary of signing Highmark Blue Cross Blue Shield a year ago. And so in recent calls, you've had some really nice commentary about dialogue you're having with commercial payers. Can you just give us a sense for what that dialogue has been like the last number of weeks or so. I'd be curious if some of these commercial payers might be perhaps waiting for CMS to move first? Or do you think that you could sign some even without CMS?

Lishan Aklog: Yes. So that actually has been our stance. And frankly, our position and our expectation was that really for us to get any meaningful traction within -- on the commercial real that we would have to wait for Medicare. And there certainly are a subset and maybe even the majority of payers where that is -- we would need that as a catalyst or accelerant to advance our conversations and secure coverage. However, as we sort of introduced previously, that hasn't been the case for others.

So one very interesting and potentially productive pathway that we are pursuing is engaging with certain payers who have published on their own EGD endoscopy policies that explicitly reference EsoGuard as an appropriate triage test to that drives the indication for endoscopy. And so that activity, which we highlighted in the last couple of calls is very active. There's a whole process that you go through. This is separate from the laboratory benefit manager process, which I'll touch on in a second. But that activity involves credentialing as well as engaging in contracting.

And those are -- that's a process that we are actively pursuing with the payers that have published policies, coverage policies that include EsoGuard as a triage test for endoscopy. With regard to the laboratory benefit manager side of things, again, as we've talked about before, we continue to have positive engagements with laboratory benefit managers as we previewed last time, and we'll reiterate today, we do -- we have secured our first coverage policy with a laboratory benefit manager. It's not public yet, but it will be public in the next couple of weeks. And we expect after that's public that plans under that LBM will also publish their own positive coverage policies.

And again, I think I mentioned this last time, we've had very good conversations with one of the largest LBMs on a pathway forward for coverage.

Operator: Your next question comes from Kyle with Canaccord.

Kyle Mikson: So I wanted to start where we typically start off with and ask about the percentage of claims that are represented by the Medicare segment. So it's been like -- we think like the increasing portion of the test that you guys report, still kind of probably below 20% of the total claims, but how is that -- where does that stand now? And when you think about some of your efforts to either increase the sales team in favor of more like Medicare-focused reps or maybe train them or incentivize them a little more to kind of increase that kind of area -- that segment of the market a bit more?

How has that progress as well in light of the -- hopefully, like increased percentage like the mix as well?

Lishan Aklog: I'll let Dennis touch on the numbers, and we can fill in some of the operational side as well.

Dennis McGrath: So Kyle, the -- I'll call it the government group, which is predominantly Medicare and Medicare Advantage was 13% in the first quarter. As you recall, in the fourth quarter, it was around 15%. That 2% delta is around 60-some tests. But the compensation plans for the sales team, and Lishan will expand upon this, is focused on predominantly the revenue-generating components of the target population. That is contracted revenue as well as Medicare and VA. That's where their focus is in generating test volume. So we're in that transition phase.

Lishan Aklog: Yes. And as it relates to allocating resources, we've stated on several occasions our commitment to not add resources and not meaningfully increase our OpEx. And so what our team is really doing is a balancing act between a target of maintaining our test volume and slightly exceeding it, which is most efficiently done through these increasingly contracted health care events, while positioning ourselves so that once we get Medicare that we can aggressively drive up that percentage. So on a quarter-to-quarter basis until we get Medicare, we're not expecting that number to rise dramatically because we are -- the team is sort of in parallel focused with the same level of resources at maintaining our overall test line.

Kyle Mikson: Okay. That's interesting. That's good color, guys. And then on the -- Dennis, you provided a bunch of numbers and you do this every quarter, I think, around like the percentage of claims you're recognizing revenue line, then the -- like the percentage that's adjudicated, like what's actually paid on there, what's the ASP there. So how have some of those like metrics kind of changed over time. I don't have all that in front of me. I'm just curious if -- like to the earlier point, if -- obviously, like non-Medicare payers are getting more comfortable with this product?

Or are they almost like waiting and maybe payment or kind of -- and that is actually producing because just the waiting is kind of taking longer than maybe was like communicated maybe so just if that makes sense, if you could give a snapshot on how that's progressed.

Dennis McGrath: Yes, it's still pretty volatile, and it's difficult to make sense on those that don't have a specific program or don't have consistency in payment. And the first quarter certainly clouds or increases that volatility because you have an increased amount of deductibles and co-pays where patient burden in the first quarter is heavier than it would be in the balance of the year, which influences what we get paid from some of those insurers. So even where we see some pluses and minuses in the first quarter versus, say, the third or fourth quarter, we still have to rely upon cash collection for the revenue recognition.

And there is really not a sufficient pattern to give you an adequate answer to your question yet that those patterns are still developing.

Kyle Mikson: Okay. Fair enough. And then -- and finally, we see where R&D is coming in each quarter. It's been pretty consistent, $1 million to $2 million in expenses. But are you guys either still doing or thinking about generating clinical evidence either in a worst-case scenario with MolDX, which doesn't sound like it's happening with just obviously worst case or if you want to go for FDA or things like or just kind of like enhance the acceptance. I just curious if that line item could maybe expand over time.

Lishan Aklog: Yes. I'm glad you highlighted -- the answer is a definite yes. But I'm glad you at least highlighted and I'd like to emphasize the fact that our commitment to ongoing data generation and ongoing clinical evidence is not connected to the fact that we believe that we have sufficient evidence to secure the LCD. But we are a data-driven company. We firmly believe in expanding our clinical evidence on an ongoing basis. And there is a lot of activity. It doesn't get a lot of attention because everyone is focused on -- we're all very much focused on the reimbursement side. But there are ongoing clinical studies. There are ongoing institutional clinical studies.

There's an active NIH study going on right now. We have a registry. We've been collecting real-world evidence. And it would be a long conversation, but there is an interesting dynamic right now that we're well out from the courts vacating the FDA LDT rule as to how -- what the advantages of engaging with the FDA may be for single laboratory tests. And we're certainly aware of those, and we're crafting our longer-term strategies in relation to that -- the fact that, that landscape is settling a little bit. And certainly, our longer-term goals with regard to generating clinical evidence is fundamentally informed by that.

Kyle Mikson: Great. And if I could just like add on to that just briefly. Years ago, I think your guys' intention was to scale this test, the collection device and the test internationally globally. They're both CE marked in Europe, obviously. So would you -- I mean, how much more extra clinical evidence would be needed for some kind of an international expansion or kind of decentralized model with a partner, distributed model with a partner? Is that part of the kind of formula as you look maybe over the medium to long term?

Lishan Aklog: So just maybe we could separate the clinical evidence question from the international market question. So clinical evidence is not a limiting factor for us to and potentially expand internationally. We looked from day 1 at opportunities internationally, both in Europe. As you noted, we went ahead and got CE Mark right off the bat from the earliest days. And the challenge is the U.S. is obviously the largest market opportunity where we remain a small company. We have limited resources. And so we certainly are -- certainly would expect to focus our resources in the near term. Europe is a very difficult market for screening test because of the overall economics of their socialized health system.

And when we looked at this in the past, it just simply has not made sense. And I believe even many of the larger companies, their traction in Europe is molecular diagnostic companies is more limited. That said, we do, on a regular basis, get inbound inquiries from -- I think as you were suggesting, from commercial entities in various OUS countries for the opportunity to partner. We've had from Canada, South America, the U.K. and we engage in those conversations, and we've explored every -- each of them as whether that's something that with limited resources on our part, we could engage in activity in those markets with the help of a local partner.

None of those have really come to fruition. None of them have really -- have made sense from an overall business strategy point of view, but it's certainly something we're open to. And again, those activities are really related to the local sort of economic dynamics in these regions and countries. It's not really -- it doesn't really inform our clinical evidence plan. That's really related to our U.S.

Operator: Your next question comes from Mike with Needham.

Michael Matson: I guess just the DDW presence that you guys had, can you maybe comment on kind of interest level you're seeing from physicians, any kind of feedback, et cetera?

Lishan Aklog: Yes. Thanks for -- I'm just checking a little bit here, Mike. Thanks for bringing that up because that was the portion of our -- of the prerecord that. So I'm happy to have the opportunity to fill that. DDW went great. So for those on the call who are not aware of this, DDW is the largest gastroenterology meeting in the country, one of the one of the 2 or 3 major ones here in the U.S. And we had a very strong presence there, both from our commercial team and our clinical team, lots of engagement with clinicians.

Just overall, it was our best -- frankly, our best conference ever. just very -- there's a lot of just generalized increased attention, increased buzz around esophageal precancer screening and Barrett's esophagus in particular, on multiple fronts, and we very much benefited from that in our engagements, and they were very positive. We had a significant presence on the academic side. There were multiple abstracts that related to EsoGuard that were very well received. One of the highlights of the meeting in addition to all of that was that the American Gastroenterologic Association presented a preview of an upcoming update a draft of their updated guidelines, clinical practice guidelines for Barrett's esophagus. And we're very excited about that.

They -- for the first time, at least in this preview, they highlight individual on endoscopic testing tests, including EsoGuard and EsoCheck by name, and they evaluate the clinical evidence for accuracy, the certainty of the evidence. And EsoGuard and EsoCheck came out were presented as having high certainty of evidence, which -- it was the only one the rest of the potential future modalities were rated as well. Now this is a preview with a draft, but there was a lot of excitement and a lot of us around this. Obviously, guidelines are a very important driver, an important part of our engagement, particularly with commercial payers and having this finalized in this form will be a real.

Michael Matson: Okay. Great. And then just a few financial questions. So I guess, Dennis, the share count, what should we be modeling? I think you said post offering, it's $203 million, but there's $2 million in abance. I'm not sure if we should be including that in our share count or not for now.

Dennis McGrath: Yes. The 203 million is the number you should model your EPS on. The remaining 22 million shares will be issued once the holders 4.99% limitation is lowered either by distributing it to their members or if the share count goes up. So I think 203 million for the time being is probably the right number. But in the future, that additional $22 million that they're owed to those investors will be issued. These are long-term shareholders. So it may be a while before they get issued. But nonetheless, they're out there, but $203 is probably the right number to use for your EPS modeling.

Michael Matson: All right. And then the quarterly cash burn rate, given that you did raise some additional capital and you're getting closer to the Medicare coverage, is there any potential that, that would go up? Or are you expecting to kind of hold it around recent levels?

Dennis McGrath: I think the burn rate at where it is right now is probably the level it will stay. Yes, we will be making additional investments. We do think some of that cost, if not all of that cost will be offset by revenue opportunity, either collections or increased volume as we move forward with increased reimbursement landscape.

Operator: Your next question comes from Jeremy with Maxim.

Jeremy Pearlman: Just related to the VA, I think I inferred -- correct me if I'm wrong, that in the first quarter, there was no contribution to both volume or revenue from the VA opportunity from that contract?

Dennis McGrath: Yes. The first quarter, you remember the announcement was in late January, and the first quarter was focused on pipeline metrics and building a pipeline, converting engagement into purchase orders. So you'll see more of that as the year unfolds, but that's correct in the first quarter.

Jeremy Pearlman: Okay. Understood. And then just also, is that -- is the reimbursement from the VA contract, that's completely separate from Medicare, right? You'll get whatever the 1,900 rate for the test, you'll get reimbursed through the VA system regardless of when you get the CMS reimbursement. So you can go full steam ahead on that underneath...

Lishan Aklog: That's correct. Yes, it's direct payment through the VA. Obviously, we're appreciative that we were able to secure the same rate as Medicare, but the process is entirely separate from Medicare, and it's just directly through the VA through POs that invoice [indiscernible]

Jeremy Pearlman: Right. No, that's great. And maybe also, I don't know if you have this number, how many, let's say, we'll call it covered lives you have currently based post the VA? I think you mentioned last call that was roughly 9 million lives and then maybe the commercial payers that you have also under contract now, how many covered lives and when -- hopefully, when you get the Medicare, what would that increase to?

Lishan Aklog: Well, I mean, it's a bit of a multifaceted question there, right? The VA, as you mentioned, is 9 million patients, and we'll be able to target that we're able -- that's available to us right now. Medicare, the epidemiology of the conditions that lead to a recommendation for testing, the target population is at least approximately 50% Medicare. And as once we have Medicare coverage, there's no reason we can't, as others have done, expand beyond that number. And Medicare, I believe, represents 60 million to 80 million people overall. So that's that. On the commercial side, we're not -- we haven't yet reached the level. We're still in the early stages with contracting and with coverage and contracting.

So we have not reported on covered lives. Once this first LBM laboratory benefit manager coverage policy is publicized, and we hear from the payers that operate that work under that outsource their technical assessments to that LDM we'll be able to start discussing covered lives. But it's a little bit premature to do that on the commercial side.

Jeremy Pearlman: Okay. Understood. And then just last question. Hi, how would you -- how should we look at your sales force productivity currently versus, let's say, what it was a year ago in the sales cycle, especially considering now you said -- I think you said your entire sales team is also engaging with the VA. So they have -- there's new, I guess, job descriptions they have, they're new. So how should we look at that?

Lishan Aklog: Yes. I think productivity is solid. It's gone up over the years. We have an increasingly tenured and increasingly experienced staff. But what we're asking them to do is sort of juggle multiple things at the same time, right, to maintain their test volume to drive to find opportunities within the VA system that they can hand over to our national director on that. And so yes, productivity as a whole is great. And I think as we mentioned, we are -- we have positioned ourselves.

We have been positioning ourselves with regard to the composition of our team to have some more senior level folks so that when the time comes to expand the team that we'll be able to do so and sort of the most efficient way to maintain that productivity as we expand our team.

Operator: Your next question comes from Ed Woo with Ascendiant Capital.

Edward Woo: My question is on the Medicare reimbursement rate. Is there any opportunity to increase it over time?

Lishan Aklog: We have no plans to do so. I mean there -- the whole Medicare fee schedule process is a complex one, but we have no particular plans to pursue that. We're quite happy with that rate, and we feel we can build a very robust business under these.

Operator: There are no further questions at this time. I'll turn the call back over to Dr. Lishan Aklog.

Lishan Aklog: Great. Thanks, operator, and thank you all for taking the time and for your attention this morning. Again, apologies for the technical glitch that led to me being cut off. I appreciate the opportunity. Obviously, great questions as always, from our analysts and appreciate the opportunity to fill in some of those gaps. I hope you all found this dialogue informative. So again, just obviously, we're acknowledging and sharing some of the frustrations with regard to the logistics around the LCD process, but just continue to reiterate our confidence has not wavered that this is a near-term positive outcome. Again, as we've said repeatedly, as we await to draft LCD, we're not resting on our laurels.

We're -- we are very encouraged by our efforts on multiple fronts, our engagements with the VA, our securing of our first positive coverage policy from a laboratory benefit manager and great opportunities on the commercial payer side as well as something we didn't spend as much time on today, but is working on -- is progressing very nicely, which is our engaging with a series of major health systems. And obviously, we came out of the DDW meeting very energized and feeling very positive about the prospects of an updated guideline that enhances our position within this field. So thanks again. As always, we encourage you to keep abreast of our progress.

Please follow up -- follow our news releases, the invest calls and on our website and social media and feel free to reach out to us if you have any questions. So thanks again, everybody, and have a great day.

Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.