Conference Transcript - LUCD 2026-04-16

Mike Mattson, Analyst — Needham and Company LLC

Thanks for joining us again at the 25th Annual Needham Healthcare Conference. I'm Mike Mattson, and I lead the MedTech Diagnostics Equity Research Team at Needham and Company. I'm pleased to introduce Lucid Diagnostics. Presenting on behalf of Lucid, we have CEO Lishan Akwag. Instead of a senior presentation, we are going to do a Q&A session. If you have questions you'd like to ask, you can submit them electronically through the conference website, or you can email them to me at mmatson at needhamco.com, and I'll try to fit them in. So with that, we're going to go straight into the questions here. And I want to start with ESOGARD, just kind of an overview here, in case there's anyone viewing this that's newer to the company. So you've got a test called ESOGARD and a sample collection device called ESOCHECK. And I wanted to see if you could just give us a quick overview of the test, the sample collection, and esophageal cancer.

Lishan Aklog, CEO

So thanks, Mike. Thanks for the really great to be participating again with Needham Group. Yeah, let's start with the soft-stool cancer. So soft-stool cancer is a really bad actor. It's the second most deadly cancer. About 16,000 people die every year. And historically, there's been nothing to do about it. Patients, it's effectively a death sentence. About 80% of patients will die from the disease. It's mostly picked up in the late stages. The good news is that we understand the biology of esophageal cancer, so it can be picked up. If it can be picked up in the pre-cancer stage, a condition called Barrett's esophagus, it can be monitored and treated before you develop cancer. So all of the elements of an early detection program to prevent cancer, not just to detect cancer early, but to prevent cancer and prevent cancer deaths, all of that has been available, and we understand how to do that. IsoGard and IsoCheck, our technology has come into play in that they offer the first and only non-endoscopic approach to pre-cancer testing of esophageal pre-cancer. So it gives us the opportunity for really the first time to have an impact on this deadly disease. IsoCheck is a non-invasive cell collection tool that can detect, that can collect cells from the lower esophagus, which is where this cancer, this pre-cancer occurs. It takes about a minute or two in an office setting. And that sample is sent to a central laboratory where the ESAGARD molecular diagnostic assay is performed. ESAGARD is a methylation test that detects methylation signals on 31 sites on two genes, and it provides a positive or negative result, a positive or negative signal, which, if it's positive, then it detects conditions all the way along the spectrum from the earliest precancer to the later stage precancer and cancer as well. There's extensive data that's been published, both clinical validity data that shows the performance of the test and clinical utility data that demonstrates its utility in actual clinical use. And just to summarize the results of that data, the findings from all those studies, is that we really have an unprecedented ability to detect a pre-cancer. It's very unusual to be able to detect a pre-cancer at the earliest stages. IssaGard has a 99% negative predictive value at detecting conditions all across the spectrum from early pre-cancer to cancer. That means if you have a negative test, you can be highly confident that you don't have the disease. So that's basically the overview. We have the first opportunity to really have an impact on what's really become a scourge for patients, and we have the ability to eliminate esophageal cancer as we know it.

Mike Mattson, Analyst — Needham and Company LLC

Okay, great. And then can you maybe just talk about the current, prior to your test, the current approach to screening for esophageal cancer and why a lot of the patients just weren't getting screened?

Lishan Aklog, CEO

Yeah, great question. So because we understand, well, first of all, esophageal cancer screening itself, like we would do for other cancers, is really not effective. And that's because patients, even in stage one, those who present with stage one esophageal cancer have about a 50% mortality. So you really have to pick it up at the pre-cancer stage. So this is a screening of patients who are at risk for pre-cancer in an effort to detect the pre-cancer and prevent esophageal cancer. Again, the good news is we have a really good understanding of the biology here. The risk factors for patients who are at risk of having pre-cancer, the pre-cancer, are very well established. It includes the presence of heartburn, symptoms of heartburn, and six additional risk factors. So if you have three of those, those six risk factors are white, male, over 50, obese, smoker, family history. So anyone who has three of those risk factors with heartburn has about a 10% chance of having this precancerous condition. So that's been well-established in guidelines for a long time, and the prior recommendations were for endoscopy to perform the precancer screening, but that was ineffective. People were simply not getting the endoscopy procedure for screening. So that was the missing link. The missing link has been historically not any gaps in our understanding, any gaps in sort of the ability to treat these precancers once they get detected. It was just a lack of availability of a very convenient way to do this precancer screening as an alternative to endoscopy. And that's what we have today.

Mike Mattson, Analyst — Needham and Company LLC

Okay, great. And you submitted for Medicare Molde-X coverage in the fourth quarter of 2024, and there was a CAC panel in September of 2025. Can you summarize the panel and what the latest feedback's been from Molde-X?

Lishan Aklog, CEO

Now, the panel, as you mentioned, was in September of last year, was the culmination of many years of engagement with the Molde-X group, which is, as you know, but just to update others, Molde-X is a program run by one of the Medicare administrative contractors, Palmetto GBA, on behalf of four of the MACs, of the contractors, and they do the technical assessments of complex molecular diagnostic tests. So we've been engaged with the MOLDX group now for many years. As you noted, we submitted, there is a published local coverage determination that covers this area for the first time that was triggered by our engagement with them. And at the time that LCD was issued, there was no, the local coverage determination was issued. There was no, we didn't have data really at the time, we only had the one study, but that's published out there. And so what we did in the fourth quarter of 24, as you noted, was we submitted for a request for reconsideration of the local coverage determination for e-cigar to be covered under that LCD. And as part of that review process is really the culmination of that review process. A multi-jurisdictional CAC, Contractor Advisory Committee meeting, was formed and impaneled in September of last year. And that included both the, it was moderated by the head of the Multi-X group, Dr. Bien-Wilmer, and it included 11 clinicians, 11 physicians from the full spectrum of clinical specialties that are relevant here, primary care, GI, pathology, as well as a nice mix of private practitioners, but also very high-powered academic gastroenterologists, including the folks who had written the guidelines for both the two major societies. And that meeting was a home run. These meetings can be sort of a mixed bag. The purpose of these meetings is for, in the public record, for the clinical experts to answer questions related to the validity of the data and the utility of the test. And so Dr. Bean-Wolmer grilled the clinicians for several hours on every aspect of the performance of Isagard, the published data on the clinical validity, a lot of emphasis on the negative predictive value and its use as a rule-out test, and also on the utility of the test, on its ability to change the management to affect physician decision-making and affect patient compliance. and increase the, to serve in its role as a triage test so that patients can avoid an invasive test if they're negative with ESAGARD. All of those elements that all fall under the umbrella of clinical utility were discussed in detail. And the first time in my professional career, both as a physician in academic medicine and in my current role, there was just absolute unanimous support for ESAGARD across all the physicians across all the specialties for the validity and the utility of the test. So that was really a home run. After that, the steps following the CAC meeting are for the MACs, the contractors, to convene and to review the input from that. And the record and the video of the meeting was published later in the year, at the end of last year and beginning of this year. And we're now waiting. We're waiting for the MACs to confer and send their final recommendation for publication of a draft local coverage determination that includes IssaGuard under this previously published LCD that goes to Medicare and then gets published. And we have been engaged with the leadership of MoldeX and remain really confident that this is coming. It's not if, but when. It's dragged on a little bit longer than we had expected. We understand from insights that we've gotten from MoldeX leadership, as well as others, that the pipeline has been a little bit, there's been a bit of a logjam in getting, just for bureaucratic reasons, in getting these local coverage determinations out. through the kind of the bureaucracy and the formal process. And so we're waiting. We think it's going to be here imminently any day now. Okay, great. And since you're getting close to

Mike Mattson, Analyst — Needham and Company LLC

having Medicare reimbursement, are you, is Lucid starting to try to target more Medicare patients with your testing that you're currently doing? And, you know, do you have an estimate, any kind of estimate of the fourth quarter, your test following that you had, how many of those would

Lishan Aklog, CEO

have been for Medicare patients? Yeah. So the answer is yes, in anticipation of Medicare coverage. Let me just back up a second. Prior to now, our commercial strategy has been to generate a sort of steady volume of clinical activity, about 2,500 to 3,000 tests a year, which we've been able to maintain or at least slightly exceed as we did in the fourth quarter, and to do so in as efficient a way as possible to kind of minimize our operating expenses so that we have The purpose of that activity, as we were awaiting Medicare, was to generate sufficient activity to submit claims and be engaged with the commercial payers so we have an opportunity to seek coverage from commercial payers. A lot of that activity has been heavily focused on, I think we'll touch on this later probably, on contracted health fair type events, particularly with firefighters, so those are sort of an efficient way for us to generate that volume. And we had made no particular effort to target patients in the Medicare population. That's changed over the last quarter or so. We've had our team increasingly focused on targeting Medicare patients to increase the percentage of our patients from that population while still maintaining our volume and continuing to do the health care offense so we maintain our volume. So that process is going well. I believe Dennis reported in our last earnings call that we were in the 15 high teens for Medicare, and that will continue. The overall population is about 50%, and so we do expect to be able to push towards that as we get closer to Medicare coverage so that we'll be able to have a higher proportion of our patients be covered and paid for.

Mike Mattson, Analyst — Needham and Company LLC

Okay. And then I believe you said that there's going to be a one-year look-back period when you do get the coverage, so you can submit claims from the prior 12 months. So is that correct? And then do you have any feel for how many tests that would potentially cover, assuming you get an reimbursement kind of mid-2026?

Lishan Aklog, CEO

Yeah, so that's correct. It comes after the final LCD is published. So just a reminder that this is what we're expecting in the near term soon is draft coverage. We expect the transition from a draft coverage to a final LCD to be a relatively short and routine one because the proposed edits to the LCD are just simply to add or test. there's no substantive changes that we're requesting. But once the final LCD is cleared and published and it's in the register as a covered test, then yes, there's a one-year look back for claims for the previous year. It's a bit of a moving target in terms of the amount as we've sort of tried to ramp up. But the expected, you know, at the $1,938 price point, Medicare price point, we expect it's a couple million dollars of claims that would be paid upon the completion of the final LCD.

Mike Mattson, Analyst — Needham and Company LLC

All right. And then ISAGARD has also been mentioned in some clinical guidelines, mentioned favorably, I guess I should add, clinical guidelines. So can you give us an overview of this and what are the guidelines and what does it specifically say about ISAGARD?

Lishan Aklog, CEO

Yeah, it's really important. These professional society guidelines drive not just clinical practice, but they're really important as we engage with commercial payers as well. It's very difficult for commercial payers and, frankly, for Medicare. This has come up directly to go against if the guidelines are recommending clinicians do something for it not to be covered. So the two major GI societies, the American College of Gastroenterology and the American Gastroenterologic Association, both have guidelines on the management of esophageal precancer of Barrett's esophagus and screening for that condition. and both include guidelines that have two slightly different versions of the risk factors that I mentioned that recommend testing in those populations. And in the last updates to those two, one was a formal guideline update, one was considered a clinical practice update. They both mentioned non-endoscopic biomarker testing, such as ESAGARD, which is the only available one right now as an appropriate alternative to endoscopy, which had been previously recommended, and with the same level of evidence as the recommendation for endoscopy. Also importantly, last year, the National Cancer, the NCCN, which is the guideline for cancer care, that those guidelines for the first time included guidelines on screening for esophageal pre-cancer, and they reference the American College of Gastroenterology, the GI guidelines in there and their recommendations there. So that's also very important that the commercial payers pay a lot of attention to that. Okay. And then can you

Mike Mattson, Analyst — Needham and Company LLC

comment at all on the competitive landscape? Are there any competing tests out there, either in development or on the market? Yeah, there are no commercial

Lishan Aklog, CEO

technologies out there. There are groups that have been working in this space in trying to identify markers for esophageal pre-cancer to be utilized as part of a pre-cancer screening program. There is published data. All of those technologies use an older technology that's been around for several decades. It's a sponge on a string technology that's sort of similar to like a Brillo pad on a string that the patient swallows in an encapsulated form. And that technology has been around for a long time and is clearly inferior to ESAGuard and the ESACheck device in several ways. And that's reflected in the data. It's inferior because it does not do targeted sampling of where this occurs. So you get contamination and dilution of cells all the way up the entire three feet of esophagus, as opposed to just a couple of inches, which is the area that we target. Those technologies have also been prone to detachments that put patients at risk, and there have been multiple class one recalls of sponge devices over the years, and they've been pulled off the shelf Medtronic. We actually had one technology that was being used in research in Medtronic as well, and they pulled those technologies because of safety issues with the FDA. That notwithstanding, there is published data on there and the data is clearly inferior uh it the the headline numbers at times look comparable with regard to sensitivity and specificity but if you dig deeper uh in all of these on all of these studies uh for the competing technologies they have vastly inferior ability to detect short segment disease so disease that's um not that's less than three centimeters the reason that's important is that the majority of patients with esophageal pre-cancer have short segment disease It encompasses about 70% of the overall target population, and the sensitivities that have been published in those have been just unacceptably low for these alternative tests. It's not surprising because the cell collection device is nonspecific and doesn't target anatomically where the pathology occurs. Short segments, not just important because it represents 70% of the patients you're trying to find, but it also represents about 50% of the cancers. So you need to find these little short, you know, it really is a reminder of how remarkable Eastern credit Eastern check are in that you can detect as little as one centimeter, sort of half an inch or less than half an inch of abnormal cells using this non-invasive technique and detect these very subtle epigenetic abnormalities with a 90%, 85% to 90% sensitivity and a very high negative predictive value. So there's published data, there's data that ongoing studies that are looking at these sponge-based devices and these alternative molecular tests. But so far, the data and the safety profile have been really underwhelming.

Mike Mattson, Analyst — Needham and Company LLC

Okay, so I wanna move on to your marketing strategy with the tests. So what's your current approach in terms of marking the test and are your reps in the field currently calling on primary care physicians or gastroenterologists or a combination of

Lishan Aklog, CEO

Yeah, it's really all of the above. It's a combination of where these patients are in any kind of screening application and particularly for pre-cancer testing, these patients are not seeing the gastroenterologist. They're out in their primary care. It's not a, you know, GERD is not a high priority for primary care physicians, right? And so we have to be out there in primary care land, and we are, and our reps do call on primary care physicians. But the gastroenterologists are our partners in this endeavor. They're the ones who understand this disease. They're the ones who will see these patients both for screening, for monitoring, as well as for the treatments, the ablation treatments once, if and when a late pre-cancer is detected. So we've had excellent engagements through across the country with gastroenterologists, as well as with foregut surgeons, the specialty that also emphasizes that are experts in this disease. And so it's a partnership where we work with the gastroenterologists to help them identify patients within their primary care referral networks to refer in. They do either we or or they do the cell collection procedure, and then if the patient's positive, they get the endoscopy. But I'd also like to add that we've increasingly been engaged, particularly as we're approaching Medicare approval, with health systems and IDNs. So the opportunity to engage at a health system level to work in concert between primary care physicians, gastroenterologists and the network as a whole is really an ideal way to implement this technology on more of a programmatic basis for esophageal pre-cancer testing and esophageal cancer prevention. We have numerous engagements in this regard, but Medicare will definitely accelerate that because many health systems will, you know, you need to have Medicare coverage in

Mike Mattson, Analyst — Needham and Company LLC

order to consummate those. Okay. And another thing that you've been doing to some degree is these Check Your Food Tube events, particularly with firefighters, but I think you've done them maybe in some other situations with self-insured employers. So can you maybe just provide an update there? How many of these are you doing? And is this going to continue to be part of the

Lishan Aklog, CEO

approach. Yeah, as I mentioned earlier, it's been an important part of the way we've been able to maintain a level of commercial activity, a level of test volume that's necessary for us to remain engaged with commercial payers and to be able to submit claims. And so that activity has been, we've been doing that now, I believe it's been four years since we've been doing that. And we've tested, I think, well over 10,000 firefighters. And the fire departments are really excellent partners with us because firefighters are an elevated risk of all cancers, but particularly of esophageal cancer. And there's a lot of attention and leadership for fire departments in this. And so it's been an excellent way for us to maintain a good level of commercial activity in a much more efficient way. One of the things that we, and I believe it'll continue to remain an important part of our commercial activity. We're very committed to that community. In particular, We engage with firefighter leadership on a regional and national level on a regular basis. The one thing that has changed over the past couple of quarters is we're doing an increasing number of these are contracted events. We used to just go in and test a bunch of folks and we'd submit to their insurance policies, but without broad commercial coverage, we'd only get paid on a fraction of those tests. Now we're increasingly doing, have a substantial pipeline now of events where we have agreed prior to the event to get paid on a contracted basis. And that'll be a nice contributor to our bottom line in the near term. We also have activity, similar activity with these kind of health fair events on the employer level as well. And that sort of intersects with our engagement with commercial payers because even self-insured employers still typically interface with TPAs, with the insurance plans. And so that's really part of the overlap significantly with our commercial with our commercial engagements with commercial payers, which I think, as we've discussed previously, is really accelerated to the point where we really believe we're going to start getting some runs across the plate. We have a laboratory benefit manager that is going to issue coverage for us in the near term. We're in credentialing and subsequently we'll be in contracting discussions with United and some other larger plans in the near term.

Mike Mattson, Analyst — Needham and Company LLC

And how big is your sales team currently and do you have any plans to add to that when you do get the multi-x coverage in place?

Lishan Aklog, CEO

Yeah, we have just under 30 sellers in the field. And that is, we've been stable. Actually, it's a little bit down. We've been able to extract and maintain our volume with increased productivity from that team over time. And we've been very careful about our operating expenses. And so we've been very cautious not to get ahead of ourselves in terms of increasing our burn and expanding our team prematurely. But we do definitely are ready to go and ready to put our foot in the gas once we get Medicare coverage and obviously broader commercial coverage as well. We've tweaked the team, even though we've maintained the same headcount with more senior, experienced leaders who can build teams around them, basically to put us in a position so that the team is very scalable over time. And once we do get Medicare and broader coverage, we will start accelerating some of that, some of the trajectory of that will depend a little bit on the facts and facts on the ground at the time. It'll depend on sort of what percentage, how our Medicare percentage, the percentage of our volume that's Medicare is at that moment in time. And, you know, where things are in the capital markets and our utilization of the capital that we have. But we can we can grow this team. And we can, you know, we have plans where we could double our sales team on a, you know, every, every, every couple of quarters if we, if need be, once we get the coverage.

Mike Mattson, Analyst — Needham and Company LLC

Okay. And then you also recently announced a contract with the VA for ESO card. So maybe you can provide us an overview of that and what it means and how you're going to kind of target the VA customers.

Lishan Aklog, CEO

Yeah, this is a pretty big deal. We're really excited about it. So we entered into a contract with the FSS, the Federal Supply Schedule, and the most important thing about that is that we were able to preserve the Medicare prices. So the nationwide price for the VA is that same $1,938 that gives us a very attractive per-test gross margin. So that's in the books. And so we have, in addition to tweaking our commercial team, our sales team to target on Medicare, we're also doing the same with regard to targeting the VA. We appointed one of our senior most salespeople to be the national account manager for the And he is working in very close concert with the people, with the folks in the field. So that leads with regard to identifying clinical champions that individual VAs pass through to him and also in partnership with our market access team. The way it works is that with this FSS contract in place, we go to individual centers, of which there are several hundred in the country, and engage with them directly. We know what the price is, and we engage in establishing a program at that site. That includes working through various local contracting, individual contracting exercises, as well as establishing how to do cell collection and so forth. And that's going extremely well. It's only been a couple of months since we got the VA contract, and we've got a nice pipeline of VAs around the country. At some point, once we get a critical mass, we do have aspirations and engagements with nationwide leadership, gastroenterology and leadership at the VA with the possibility of sort of doing larger term national programs. But right now, this is a center-by-center activity with the team targeting individual centers and individual clinical champions there. And once we get rolling there, that'll be guaranteed revenue for the tests that we perform there.

Mike Mattson, Analyst — Needham and Company LLC

Okay. And then just a couple of questions on operations. So how much capacity do you have in your existing lab, and at what point would you need to expand? and then maybe comment on the turnaround time for ESOGAR results.

Lishan Aklog, CEO

Yep. Let me just do the latter one first. So our lab operates in, we have a 20,000 square feet laboratory building that we lease in Orange County, California. And operations are really smooth. We have our turnaround times are under 10 days, which is what we seek. A lot of that is just the actual running of the assay. and our capacity, we've built that to be very scalable. So in very short notice, if we needed to increase up to 50,000 or more tests a year, which is about five times, four to five times per current volume, we could do that in a very short period of time just by adding personnel and adding key pieces of equipment within the current space that we have. So we have plenty have time to ramp up. And as volume ramps up, it'll take a while before we outstrip the current space that we have. That's also true on the manufacturing side for ESOcheck. We have outsourced contract manufacturing with a U.S. firm that operates in Tijuana, Mexico. And again, that's a scalable manufacturing line that could, in very short order, get up to a million ESO checks a year as needed. So everything we've done, whether it's the sales team, whether it's how we we're in the laboratory or as our sales team, we've built that to be able to scale as we expect significant volume growth in the upcoming years.

Mike Mattson, Analyst — Needham and Company LLC

Okay, and then just a few financial questions to wrap up. So right now with the ESAGAR tests that you're doing and submitting to the payers without coverage policies, what portion are you ultimately getting paid for and how long is it taking to collect those payments typically?

Lishan Aklog, CEO

Yeah, it varies a lot. I mean, we've submitted to 400 payers. I believe that may even be an old number. I think it's a bit higher than that now. And we get an allowed amount, actually. So the allowed amount that shows up on an EOB, on an explanation of benefits, that's not that far from the Medicare rate. It averages about $1,400, $1,500 or so. But because we're out of network, There's a substantial portion of that is offset to patient responsibility. So we're collecting about 15% of our list price, which is $2,749 per test. That obviously will change as we obviously will change with Medicare. It will change with the VA. And it will change as we start picking up commercial payers along the way. And that's our opportunity to take even just our current volume right now and generate substantially, you know, a substantial multiple of our current revenue just from the volume that we currently have as we get a higher number, a higher percentage of our patients that are covered in network within a commercial plan or in the Medicare or VA.

Mike Mattson, Analyst — Needham and Company LLC

Okay. And then once you're at scale, where should we expect your gross margins to be?

Lishan Aklog, CEO

Yeah, so there are, if we kind of use the Medicare rate, call it just a hair under $2,000 as the benchmark, our variable cost to run the assay and to manufacture the cell collection device is under $200. So we have about a 90% per next test in the door incremental margin. That obviously doesn't include our fixed costs, but our fixed costs for the lab, for the laboratory and other elements of our fixed costs, really, we expect those to be absorbed over time and even at volume. We expect to be able to hold our own at around 80% or so gross margin, even at volume.

Mike Mattson, Analyst — Needham and Company LLC

And then operating expenses in 2026, should we expect them to be out from 2025? And how does the timing of the Moldyx, I guess, final coverage decision affect that outlook?

Lishan Aklog, CEO

So, you know, we've had just a slight uptick for those of you who are kind of in the weeds on this in our OPEX over the last couple of quarters, but very, very small. really relate to kind of just some tweaks related to increasing our market access personnel, flipping some of our sales personnel to more senior personnel and so forth. But we're still very much committed to keeping that flat until we get Medicare coverage. So once we get the draft LCD, we certainly will be gearing up to expand our commercial activities, but in a very measured way. I wouldn't anticipate a substantial increase in our OPEX until we're well on our way with a substantial portion of our tests being Medicare and the ability to really put our foot on the gas. So for the time being, we expect to remain and continue our discipline with regard to our OPEX that has served us well over the last couple of years. All right. And then finally,

Mike Mattson, Analyst — Needham and Company LLC

just one on the balance sheet, I guess, sort of related to the prior question, but where were you with cash as of the last time you publicly said something, which I guess would have been probably the fourth quarter, and what's the cash burn outlook for 2026? Yeah, so at the end of the year,

Lishan Aklog, CEO

the fiscal year, at $35 million in cash. We reported we raised about $5 million off of the ATM in the last quarter, although most of that was on one kind of crazy trading day that we had in January related to the, to the VA really was, I believe 60 or 70% of that 5 million. So we've been careful about that. Our annual burn rate's about 11 million, which is, as I said, sorry, our quarterly burn rate's about 11 million, which is, as I said, just a hair above what it, what it has historically been over the last couple of years. So we, we, we certainly have enough cash to get us through Medicare and to position ourselves well to respond to that based on our projections.

Mike Mattson, Analyst — Needham and Company LLC

Okay, great. Well, thank you so much for your time, LeSean, and overview of the company and look forward to catching up when you report your upcoming quarter.

Lishan Aklog, CEO

Yeah, thanks a lot, man. I really appreciate it. I really enjoyed it.