Good morning, and welcome to the Lucid Diagnostics Second Quarter 2025 Business Update Conference Call. Please note that this event is being recorded. I would now like to turn the conference over to Matt Riley, Lucid Diagnostics Senior Director of Investor Relations.

Thank you, operator, and good morning, everyone, and thank you for participating in today's business update call. Joining me today on the call are Dr. Lishan Aklog, Chairman and CEO 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 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 the 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 a description of these and other important risks and uncertainties that may affect future operations, see Part I, 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 quarterly reports on Form 10-Q and subsequent Form 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 will 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. Dr. Lishan?

Thanks, Matt, and good morning, everyone. Thank you for joining our quarterly update call today. As always, I'd like to thank our long-term shareholders for your ongoing support and commitment. Our team really remains singularly focused on driving this enterprise towards its substantial commercial potential and enhancing our long-term shareholder value. Since our last update, the biggest development and near-term milestone is the upcoming LCD-CAC meeting, which will be the main focus of today's call. We're really excited about this. We see this meeting as a very strong indicator of progress towards a positive Medicare coverage policy outcome. We truly believe that we're in the final stages of this process. We're excited that we've reached this moment in time with very clear steps ahead of us to navigate and to succeed. Thanks to our financings earlier this year, we have plenty of runway, and we are well positioned to successfully navigate these final steps. I'll talk about this a little bit more later, but we've already begun to take proactive steps to ensure that once Medicare coverage is secured, we will be able to accelerate EsoGuard's commercialization and ultimately capitalize on the large market opportunity we face. Regarding our commercial execution, EsoGuard test volume for the second quarter was 2,756 tests. This is within our target range of 2,500 to 3,000 tests per quarter. We're really happy that the team continues to be successful at maintaining this level of volume while focusing on contractually guaranteed revenue opportunities, with a new emphasis on Medicare patients. Revenue was $1.2 million, a 40% increase from the first quarter, matching our previous quarterly high. We're very excited to partner with Hoag, a large health system in Orange County, California, and we've launched a comprehensive EsoGuard esophageal precancer testing program with them. What's particularly exciting about this program is that it’s system-wide across the healthcare delivery network. It includes partnerships between gastroenterologists, led by Dr. Kenneth Chang, who has become a passionate advocate for their mission to eradicate esophageal cancer in their region. It includes primary care, and there are 200 primary care physicians that we'll be engaging with, as well as the concierge medicine part of the health system. We believe this is a model for additional leading health systems, both in that region as well as elsewhere, in building comprehensive programs around the use of EsoGuard esophageal precancer testing. We continue to drive our cash pay and contracted programs that we launched earlier this year, targeting concierge medicine practices, self-insured entities, fire departments, municipalities, and employers. We're making steady progress in this area. We have a robust pipeline that continues to grow. Our team is learning how to engage these concierge medicine practices, establish contracts, and drive patients within the practice to EsoGuard testing. That’s generating good traction. The same goes for contracting with fire departments and municipalities, and we look forward to seeing some yield from these efforts in the coming quarters. This effort is designed to complement our traditional reimbursement pathways with commercial payers as well as Medicare. Now, let's discuss our recent strategic accomplishments. As I mentioned, we have a MolDX Contractor Advisory Committee or CAC meeting scheduled for September 4, and I’m really excited about this and look forward to providing you with greater context later in the call. We were thrilled to see that the Highmark Blue Cross Blue Shield positive coverage policy for EsoGuard, which we announced earlier, became effective. This is our first positive commercial coverage policy, covering Upstate New York, and it serves as a precedent for other commercial payers. We’ve been able to cite this in our ongoing engagements with other commercial payers, including other regional Blue Cross Blue Shield plans and our engagement with the broader Blue Cross Blue Shield Association. We’ve seen significant value in having this milestone, and it could potentially influence Medicare as well. We highlighted our efforts in securing commercial coverage in our discussions with MolDX leadership, validating our clinical evidence base and the healthcare economic arguments we have made. This is not just a theoretical policy; we are already billing patients in this region under this policy, and we remain actively engaged. Dennis will talk about this further. We also strengthened our balance sheet with an underwritten public offering in the past quarter, netting $16.1 million in proceeds. This significantly bolsters our balance sheet. We ended the second quarter with $30 million in proforma cash. The primary goal of this financing was to extend our runway well into 2026, past the concrete milestones we are facing, particularly regarding Medicare, and mitigate risk from external factors. This financing also provides us with sufficient resources to ramp up our commercial efforts after we secure Medicare approval. A critical strategic development in the past quarter was the publication in the American Journal of Gastroenterology of the pilot study studying EsoGuard in a population without significant GERD symptoms. If you recall from our previous call, this led to a larger ongoing 5-year, $8 million grant-funded study by the National Institute of Health. The key findings were that EsoGuard performed extremely well with no degradation in performance in patients without significant GERD symptoms, achieving a 100% negative predictive value. The prevalence in this asymptomatic population remained high at 8.4%, comparable to the traditional target population. We see this as a medium to long-term opportunity to expand our total addressable market of about $60 billion significantly if the NIH study replicates this result. I want to focus on the upcoming September 4 CAC meeting and its critical role in securing a positive Medicare coverage policy for EsoGuard. As mentioned, this meeting is a positive development, and I intend to go into detail about its significance. Securing local coverage determinations through the MolDX program is not straightforward. I would like to go through some details covering the history of how we got here, our expectations from the meeting, its motivation based on MolDX leadership discussions, and what we expect after the September 4 meeting. Our first engagement with the MolDX program was in 2020. The MolDX program is run by one of the Medicare administrative contractors, Palmetto GBA. They work with several other MACs participating in MolDX, essentially outsourcing molecular diagnostics reviews for payment and coverage. Our laboratory is under Noridian, the MAC for Orange County, California. That first engagement led to several meetings and our securing a payment rate in early 2021 at $1,938. We submitted a coverage policy request based on the availability of non-endoscopic biomarker tests. At that time, we lacked significant clinical utility data. Fortunately, our efforts triggered the LCD process, although there was a lull due to COVID. By late 2021, the initial CAC meeting occurred, leading to the drafting of a proposed LCD in the spring of 2022. Though it was a noncoverage LCD, it indicated motivation from the group to cover these tests. A year later, we got a final LCD indicating coverage was possible with the assessment of relevant data. By mid-last year, we completed much of the clinical research needed to demonstrate coverage eligibility, including clinical validity, utility, and analytical validity data. A successful pre-submission meeting with MolDX leadership kicked off close engagements over what data to gather. That culminated in our formal request for reconsideration in December. The delay we experienced stemmed from changes in administration and cuts at CMS impacting MolDX activity levels. A few weeks ago, we reengaged MolDX leadership, leading to the CAC meeting notice, confirming we're approaching the final stages. The MolDX process uses peer-reviewed data and expert opinions in public meetings. This meeting allows clinical experts to opine on the evidence for our non-endoscopic biomarker testing, and we expect positive outcomes. Our expectations for this meeting are high as we are confident not only in our clinical evidence but also in the clinical utility of our test, having performed 40,000 tests, including in diverse settings with established partnerships. We anticipate the experts—comprising gastroenterologists, primary care physicians, and other practitioners—will support the clinical validity of our test. The meeting will provide a public record for expert opinions to inform our coverage determination process. After the meeting, we expect the results to contribute to the ongoing work performed so far, culminating in the publication of a draft LCD shortly thereafter. Once drafted, a comment period follows. We have no reason to believe there will be pushback during this period, and we’re optimistic about the overall process. Remember, we’re looking forward to this just a few weeks away, and our excitement is palpable. Based on discussions with MolDX and consultants, we have strong expectations for a positive outcome. As we believe Medicare coverage is imminent, we're positioning resources to focus on increasing our Medicare population. We've proactively taken steps to accelerate commercialization once coverage is secured. Simultaneously, we're focused on driving market access efforts with commercial payers, and we've seen encouraging engagements in the past weeks. With that, I’ll hand it over to Dennis.

Thanks, Lishan, and good morning, everyone. The summary of financial results for the second quarter were reported in our press release. On the next three slides, I'll emphasize a few key financial highlights from the second quarter, which I encourage you to consider in the context of the full disclosures covered in our quarterly report on Form 10-Q. Regarding the balance sheet, cash at quarter end, June 30, was $31.1 million. During this period, we completed a CMPO with net proceeds of $16 million. The quarterly burn rate was $10.3 million, slightly better than the average burn rate of the preceding four quarters at $10.5 million. This burn includes $7.2 million from operations and $3.1 million from the quarterly MSA with PAVmed. Recall, at the end of last year, we refinanced our convertible debt into a $22 million 5-year note with a 12% interest only and a dollar conversion price, held by long-term shareholders. The fair value of the convertible notes at quarter end was $25.3 million, reflecting a decrease of $7.5 million from previous reported balances due to a mark-to-market adjustment in stock price changes during the period. This decrease also contributed to the income pickup of $6.8 million shown in the P&L. The total shares outstanding, including unvested RSAs as of last week, are approximately 108.5 million. GAAP outstanding shares as of June 30, standing at 101.8 million, are reflected on our balance sheet. Currently, PAVmed is the largest shareholder of Lucid with approximately 29% ownership of common shares. Although PAVmed no longer maintains voting control, they, along with the Board and management, have significant influence through a 27% voting interest. Additionally, Lucid's convertible preferred securities incentivize preferred shareholders to delay conversion until 2026, the second anniversary post-closing. If all outstanding preferred shares converted today, there would be an additional 49.6 million common shares. With regard to the P&L, this slide compares this year's second quarter to last year's second quarter on key items. I encourage you to review the information in my comments alongside the cautionary disclosures about supplemental information regarding non-GAAP information. With over 2,700 tests billed in the second quarter, we invoiced nearly $7 million and recognized revenue of approximately $1.2 million—a 40% sequential revenue increase and a 19% year-over-year boost. For those new investors joining us, it's worth reiterating our approach to revenue recognition. The probability of collection significantly determines how we recognize revenue, particularly since we are in early stages of reimbursement processes. Therefore, the majority of claims submitted to traditional government or private health insurers will be recognized at the point of actual collection, not the point of report delivery, invoicing, or submission for reimbursement. The 10-Q outlines that this is called variable consideration under GAAP's ASC 606 revenue recognition guidelines. Presently, insufficient predictive data exists to reflect revenue from all quarterly test volume at the report delivery point to the referring physician. However, billable amounts contracted with employers or through concierge medicine are fixed and will be recognized as revenue at the time our service is rendered. Note that pending Medicare approval impacts 40% to 50% of our addressable patient population, significantly influencing future revenue recognition. For tests performed on Medicare patients within 12 months of a positive final Medicare policy, we anticipate timely payment once the policy is issued. Our non-GAAP loss for the second quarter was $9.9 million, which improved sequentially by $1.2 million and is better than the trailing four-quarter average of $10.5 million. The non-GAAP net loss per share of $0.10 is also an improvement over each of the last four quarters with an average loss of $0.16 per share. The second quarter noncash charges accounted for approximately $0.02 income per share. This includes $0.07 income per share related to changes in fair value of the debt, offset by P&L charges of $0.05 per share from noncash charges revealed in the press release. Regarding our operating expenses, the graphic here illustrates non-GAAP operating expenses of $11.1 million, which are modestly lower than the average of $11.6 million over the last four quarters. To close with a few reimbursement highlights, in the second quarter, we billed for 2,756 tests representing around $6.9 million in proforma revenue. We recognized revenue of about 17% of this figure, or $1.2 million. Of that latter amount, about 41% arose from claims submitted in prior quarters, with the oldest dated item from around 24 months ago. Out of the claims we submitted in the second quarter, around 65% were adjudicated, while 35% remain pending. Of the 65% adjudicated, roughly 30% achieved allowable amounts from the insurance company, averaging about $1,786 per test, aligned with the Medicare rate, all on an out-of-network basis. However, approximately 40% were overturned, categorized as non-medically necessary, requiring prior authorization or additional medical records, while 49% were labeled noncovered. With that, operator, let's open the floor for questions.

And we now have our first question. This comes from Mark Massaro from BTIG.

Congrats on the quarter. I guess the first one is for Lishan. I thought it was interesting that the Medicare contractors are meeting together. I was just curious; I think your MAC is in California, that's Noridian. This appears to be almost a coordinated group effort. Can you elaborate on your perspective regarding the contractors' collaboration?

Great. Yes. Thanks, Mark. Great questions. You're correct that this is a Multi-Jurisdictional CAC meeting. All four MACs participating in MolDX, including Palmetto and Noridian, are co-hosting this event. I see this as a very positive sign, indicating they're coming together at the late stages of this process. For the MolDX program to operate efficiently across the participating MACs, they must each provide their Local Coverage Determination versions. This was evident with the previously published LCDs that remained consistent across the three participating MACs. Having a coordinated meeting signals a stronger engagement at this stage, showing a desire to gather expert opinions formally. As you pointed out, this test possesses robust clinical validity data. The published data and guidelines from major GI societies firmly recommend endoscopic biomarker testing as an acceptable alternative to endoscopy. The NCCN recently included screening for esophageal precancer in their guidelines, mirroring those established protocols. Ultimately, this reflects a substantial vote of confidence in our test's clinical utility by the expert community, and we expect that this sentiment will be echoed during the meeting.

That's really helpful. I also heard you mention that you are taking initial steps to target the Medicare population. Can you share what percentage of your business today is currently Medicare? Of the 2,756 volumes, how much was Medicare-related?

Yes, great question. Currently, our Medicare volume has been between 10% to 15%. We haven't specifically targeted Medicare patients, so that may not accurately reflect the total potential audience since around 40% to 50% of the 30 million patients recommended for screening fall within that category. Historically, we have not exceeded a 20% Medicare volume, and it's possible we could increase that quickly upon securing Medicare coverage. Our outreach efforts have previously focused on younger demographics, specifically the working population, particularly during events targeting firefighters. Once we have Medicare coverage, we can significantly elevate our outreach within that demographic. As for our steps moving forward, we're optimizing our existing sales force to concentrate on regions with higher concentrations of Medicare patients, alongside developing digital targeting strategies using data partnerships to identify optimal opportunities.

Okay. That's awesome. One last question: Regarding the timeline for the CAC meeting outcome, could you elaborate on when you expect to see the draft LCD?

The timeline is dependent on how quickly the discussions at the CAC meeting proceed. The comment period follows once a draft is published, approximately 45 days. We believe there is an urgency to complete this process; they want a clear deadline approaching. But getting from a draft to a final may take at least three months, so we're hopeful to see a draft published soon, ideally before the end of the year.

And the next question comes from Anthony Vendetti from Maxim Group.

Just to follow up on the draft timeline, can you provide any guidance on decisions post-comment period? Assuming a positive decision, how soon could this be implemented across the board?

Yes. To clarify, the comment period occurs after the draft is published. The timeline from draft to final typically takes three months, but there's a strong sense of urgency surrounding this process. We hope to get a draft out reasonably soon and our primary focus is on ensuring the quality and detail of that draft.

And the next question comes from Mike Matson from Needham & Co.

Regarding feedback from MolDX, why have they decided to hold the CAC instead of moving ahead with an LCD based on current data?

Our relationship with MolDX has been strong, and we've engaged positively with them throughout this process. The CAC meeting allows for the introduction of expert opinions to supplement the clinical evidence gathered from published studies. They want to ensure that every pertinent piece of information is available to guide their decisions. This meeting is essential to validating our services and our effectiveness in clinical practice. We anticipate it will demonstrate the necessity of our test and further solidify the path toward coverage determination.

Understood, and regarding the payment amount of $1,938, is there any discussion or potential changes resulting from the CAC meeting?

No, this meeting focuses solely on coverage. Payment discussions follow the CLFS process, which remains unchanged.

Given the projected timeline, will you enact measures to reduce your cash burn? Should we expect any decline in test volume during this time?

No, we do not intend to reduce our testing volume. We want to maintain momentum as we approach potential commercialization. If anything, we see the possibility of increasing our resources as we begin to receive approval. While looking for ways to improve efficiency, we are optimistic about future revenue growth supporting our current activities.

Starting the current quarter with $31 million in cash, our average burn is around $10 million, theoretically allowing us nine months of runway without mitigating any of our expected earnings from cash pay initiatives. We anticipate meaningful impacts in the second half of the year. Thus, it seems reasonable to continue our current trajectory while addressing existing contracted revenues. We have a backlog of $15 million in submitted claims that our teams are actively pursuing, and the time lag has diminished.

And the next question comes from Ross Osborn from Cantor Fitzgerald.

Regarding the partnership with Hoag, can you share more about the organization, who the patients are, and how you will integrate into workflow for access to Eso products?

Absolutely. This partnership is exciting given Dr. Ken Chang's leadership at Hoag. He is vocally committed to eliminating esophageal cancer. Our program spans the entirety of their system, incorporating both gastroenterology professionals and primary care physicians, totaling around 200 doctors. We aim to create a systematic approach to identify patients at risk, enhancing their accessibility to our EsoGuard tests. Moreover, we’re facilitating training on cell collection to streamline the integration process. This template should inspire other health systems beyond the Hoag network as we spread this model.

Regarding our business model, the Medicare rate benchmark for our tests is approximately $2,000, yielding a 90% contribution margin for subsequent tests. Initial costs are around $55 for the collection device and less than $125 for lab supplies, totaling less than $200 for processing. Thus, as volume increases, we achieve a high profit margin while stabilizing fixed lab costs, which total roughly $1.2 million per quarter. Our operating expenses have remained steady, and with adjustments, margins will further improve with growing test volume.

Congrats on the progress. How many tests can you conduct per quarter if Medicare approval is granted? Will you need to invest significantly to ramp this up?

Our laboratory has fivefold excess capacity, meaning we do not foresee the need for extensive investments in increased volume. We have streamlined our manufacturing processes with high-capacity manufacturers and also have the means to expand cell collection production without substantial costs. The focus will be primarily on scaling sales and marketing in tandem with revenue growth.

No further questions that came through at this time. I'll turn the call back over to Dr. Lishan Aklog for closing remarks.

Thank you for your attention today. I hope you now leave with a solid understanding of the LCD process, CAC meeting significance, and our expectations. Please stay connected with us and feel free to reach out if you need further information. We sincerely appreciate your participation, and we believe we are in a strong position to secure Medicare coverage, indicating positive momentum in our endeavors. Thank you, and have a great day.

Thank you. This concludes our conference call for today. Thank you all for participating. You may now disconnect.