Earnings Call Transcript - LUCD Q3 2023

Operator, Operator

Good morning, and welcome to the Lucid Diagnostics Third Quarter 2023 Business Update Conference Call. All participants will be in a listen-only mode. Please note that this event is being recorded. I would now like to turn the conference over to Michael Parks, VP, Investor Relations. Please go ahead.

Michael Parks, VP, Investor Relations

Thank you, operator. Good morning, everyone. Thank you for participating in today's third quarter 2023 business update call. The press release announcing our business update for the Company and financial results for the three and nine months ended September 30, 2023 is available on the Lucid website. Please take a moment to read the disclaimer about forward-looking statements in this press release. The business update, press release and this conference call include forward-looking statements, and these forward-looking statements are subject to known and unknown risks and uncertainties that may cause the actual results to differ materially from statements made. Factors that could cause actual results to differ are described in the disclaimer and in our filings with the U.S. Securities and Exchange Commission. For a list and description of these and other important risk factors and uncertainties that may affect future operations, see Part I, Item 1A entitled Risk Factors and Lucid's most recent annual report on Form 10-Q filed with the SEC and subsequent updates filed in quarterly reports on Form 10-Q and any subsequent Form 8-K filings. 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 Diagnostics. Dr. Aklog?

Dr. Lishan Aklog, Chairman and CEO

Thank you, Mike, and thanks to everyone for being here this morning. I'm excited to provide an update on Lucid's business and finances. I believe this third quarter is pivotal in the Company's history as we reached several significant milestones in translating our growth in test volume into revenue. We've achieved eight quarters of consistent growth in test volume, performing 2,575 commercial EsoGuard tests, which represents a 17% quarter-over-quarter growth and 137% year-over-year growth. More importantly, we recognized $783,000 in revenue, which marks an almost 400% increase from the previous quarter and nearly a 1,000% increase year-over-year. Our Lucid test centers and Satellite Lucid test centers contributed robustly, along with our high-volume Check Your Food Tube testing events. I'll provide more details on our strategic accounts in due course, including our collaborations with health systems and academic centers. Our strategic achievements include upgrading our revenue cycle management infrastructure and processes, which we mentioned in our last call, leading to solid results with EsoGuard claims processing and payments. We've also significantly boosted our clinical utility data supporting in-network payer coverage, reporting nearly perfect results from over 1,500 patients across three released studies, namely the Clue Study, the PREVENT registries, and the San Antonio fire department study. Two of these studies have been accepted for publication, with one currently pending. We're also enhancing our direct contracting with employers to offer EsoGuard as a benefit, having signed our first contract and commenced testing this quarter. We appointed a VP of Employer Markets to drive this initiative. Recently, we launched the 2.0 version of our EsoGuard assay, showcasing significant performance improvements and cost reductions. For context, EsoGuard is the first and only commercially available test designed to prevent esophageal cancer deaths through early detection of esophageal pre-cancer, addressing the 16,000 annual preventable esophageal cancer deaths. It's crucial to stress that our goal is cancer prevention, rather than merely early detection, which is insufficient in this case. Currently, less than 5% of individuals recommended for screening undergo endoscopy, but this test offers an opportunity to enhance that rate and potentially save lives. Regarding EsoGuard's performance, we describe its outcomes as unprecedented in cancer and pre-cancer detection. Our overall pre-cancer detection rate is nearly 90%, which is significantly higher than other early detection tests. This performance is vital for reducing esophageal cancer deaths. The commercial opportunities for EsoGuard are substantial, with at least 30 million patients recommended for pre-cancer screening under existing guidelines. Medicare has set a payment rate of $1,938, which has remained stable. This creates a significant multibillion-dollar total addressable market, with a test gross margin exceeding 90% even at current volumes. We're pleased to report continued growth in EsoGuard testing, marking our eighth consecutive quarter of meaningful growth, performing 2,575 tests in the third quarter, a 17% increase from the previous quarter and a 137% increase from last year. This is still well below our near-term manufacturing capacity of over 10,000 tests per quarter, achieved with a flat sales team. We're adopting a mid-throttle approach, driving test volume to support claims history and clinical utility, while maintaining our sales team size in the immediate term. Our referral sources for testing show a consistent 2:1 ratio between primary care physician referrals and specialist or institution referrals. Interestingly, the percentage of cell collection procedures performed by Lucid personnel is increasing, now accounting for over 80% of total volume. Our field team has successfully driven steady volume growth despite an unchanged sales headcount and improving productivity. The Satellite Lucid test center model continues to boost our test volume and geographic reach. Our Check Your Food Tube pre-cancer detection events are growing, and we recently expanded to include policemen in addition to firefighters. We're transitioning our long-time telehealth partner, UpScript, to serve as the physician prescriber for these events, which will enhance testing efficiency. As previously mentioned, direct contracting has been a focus area. We've begun testing for our first contracted employer, Ancira, at multiple sites this quarter, and we're excited about our new VP of Employer Markets, who brings over 30 years of experience to propel productivity forward. We've been concentrating on strategic accounts, which have longer lead times but significant potential. We're actively testing with health systems and academic centers, with ongoing testing at Avita Health Center in Florida, Northwestern Medicine in Chicago, and Mayo in Scottsdale. Market access remains a priority, driven by our two pillars: revenue cycle management and payer relations. Our new VP of Market Access is spearheading initiatives to secure coverage for EsoGuard, while we've upgraded our revenue cycle management to Quadax, yielding positive results in claims processing. We're actively working on appeals and seeing successes based on medical necessity cases. Our new VP is engaged with multiple commercial payers to explore various coverage pathways, including CED programs. The recent surge in positive clinical utility data is critical for our discussions with payers. Additionally, biomarker legislation in various states mandates coverage for certain tests, presenting an exciting opportunity for us. We have four studies under our belt: one retrospective and three prospective. The San Antonio Firefighter study has been accepted for publication, while the CLUE Study continues to progress towards completion. To summarize, we've gathered a substantial amount of clinical utility data, with over 1,500 patients enrolled, enhancing our engagements with commercial payers. The AFB study is also in recruitment stages, aiming for additional participants before concluding final analyses. Finally, we've launched the EsoGuard 2.0 assay, which builds on the impressive outcomes of EsoGuard 1.0. This advancement comes from implementing multiplexing techniques, improving gene assessment capabilities. We’re also upgrading our NGS sequencing platform to accommodate increased testing volumes. We look forward to holding an Investor Day in New York City on December 13th, where we will share comprehensive insights about Lucid and EsoGuard. With that, I will pass the call to Dennis for our financial update.

Dennis McGrath, CFO

Thanks, Lishan, and good morning, everyone. The summary financial results for the third quarter reported on our press release that was published last night. On the next three slides, I'll emphasize a few key highlights from the quarter, but I encourage you to consider those remarks in the context of the full disclosures covered in our quarterly report on Form 10-Q, which was filed with the SEC last night and is available on our website. With regard to cash at $24.1 million, this does not include the $5 million additional funding shortly after the end of the quarter. As the funding occurred two weeks earlier, pro forma cash would have been $29.1 million. The sequential change in the cash balance reflects a third quarter burn rate of $8.5 million, including a reimbursement to PAVmed of approximately $2.2 million. Absent this payment, the burn rate would have been $6.3 million, which is slightly less than the average burn rate for the first three quarters of $6.6 million. Given the pro forma cash of just over $29 million and a steady state for the burn rate below $7 million, the simple math suggests that if this rate is sustained, it puts our runway to more than a year. The burn rate for most of the year has been softened by PAVmed deferring most of its quarterly management service payments since October of last year. This PAVmed optionality for paying the outstanding intercompany obligation in stock or cash at PAVmed's election serves to increase PAVmed's ownership while strengthening Lucid's balance sheet. This flexibility, payment in stock or cash has created some breathing room for Lucid to allow cash collections to catch up to the submitted reimbursement claims, which we will talk about in a second. With regard to accounts payable, since the beginning of the year, if you examine the trend for the key current asset accounts, namely prepaid expenses and vendor deposits, and you compare that sum against the quarterly changes in the sum of vendor payables and accrued expenses, there is no substantive volatility, just mostly timing differences. Hence, the burn rate is not substantially influenced by changes in the net working capital balances. With regard to the intercompany debt to PAVmed, it's flat sequentially, and the reflected balance is largely pegged to be settled in stock issued to PAVmed. Shares outstanding, including unvested restricted stock awards as of today is 44.7 million shares, which includes 276,000 shares purchased by employees during the quarter as part of their participation in the Company's employee stock purchase plan as well as 115,000 shares issued during the quarter in connection with conversion notices received from a convertible debt holder. The GAAP outstanding shares of 42.3 million are reflected on the slide as well as on the face of the balance sheet in the 10-Q. With regard to Slide 17. Slide 17 compares this year's third quarter to last year's third quarter and similarly for the nine-month totals on key items. I trust you'll review the information in my comments in light of the cautionary disclosure or the bottom of the slide about supplemental information, particularly non-GAAP information. Revenue of $783,000 from the third quarter reflects actual cash collections for the quarter, plus a small amount of invoice EsoGuard test delivered to the Veterans Administration. As you can see, that is about a 10x increase over the prior year quarter and about a fivefold increase over the second quarter of this year. Test volume at just under 2,600 tests for the quarter represents just about $5 million in submitted claims for the third quarter. You will recall from our discussion in the last quarterly call that we made a major change and upgrade to our revenue cycle management company. So far, for the first six weeks of the fourth quarter, weekly collections have been averaging about 33% higher than the third quarter with a weekly high so far of $95,000 in a particular week. With regard to revenue recognition, a key determinant is the probability of collection. And therefore, due to the fact that we are in the early stages of the reimbursement process means revenue recognition occurs when the claim is actually collected first when the patient report is invoiced and submitted for reimbursement. As you'll see in our 10-Q, this is called variable consideration in the jargon of GAAP's ASC 606 revenue recognition guidelines. And presently, there is insufficient predictive data to reflect revenue when the test report is delivered to the referring physician. Our non-GAAP loss for the second quarter of $9.3 million reflects a 3.1% sequential decrease compared to the second quarter loss and approximately a 9.4% decrease year-over-year as a result of the cost control initiatives we put in place at the beginning of the year. Slide 18. Slide 18 is a graphic illustration of our operating expenses for the periods reflected. Total non-GAAP operating expense is $10 million for the third quarter of 2023 and is fairly flat sequentially and year-over-year. Except for G&A that included some increased IP filing fees, all operating expense categories were in line or lower. Cost of revenue primarily consists of EsoCheck devices, lab supplies and fixed lab facility costs. The modest increase in cost of revenue of about $85,000 is directly tied to the sequential increase in test volume, sequential test volume increases of about 375 tests and about $200 of variable cost controls account for the slight increase between the second and third quarters. Effectively, an 11% marginal cost of sales for the increased test volume quarter versus quarter. The non-GAAP loss is slightly better sequentially by $0.01 per share and $0.06 per share year-over-year. On a GAAP EPS basis, noncash charges accounted for approximately $0.12 per share in the quarter, including approximately $0.07 per share related to the change in fair value of the convertible debt. If you normalize the loss by adding back the effect of the change in fair value of the convertible debt, the GAAP EPS improved by $0.07 year-over-year for the quarter and approximately $0.26 year-over-year for the year-to-date comparison. Some reimbursement details. Since the new revenue cycle manager was put in place Quadax took over in mid-June. 5,000 claims representing approximately $10 million in pro forma revenue have been submitted for reimbursement. About 70% have been adjudicated and 30% are pending. Out of the 70% that have been adjudicated, approximately 39% have resulted in allowable amounts by the insurance company with a mean average of $1,863 per test, essentially right at the Medicare rate. Of those denied, about 58% require either additional information were deemed not medically necessary or required a prior authorization. About 36% were deemed to be non-covered. With that, operator, let's turn it open for questions.

Operator, Operator

Our first question comes from Kyle Mikson with Canaccord.

Kyle Mikson, Analyst

First question on the RCM situation. You said that weekly collections were trending like 30% higher. Just wondering how that kind of flows into the P&L. You did $700,000 in revenue this quarter, or I guess, last quarter in 3Q. Could you approach based on that math with the 30% higher collections, everything, could you approach or exceed $1 million maybe in the fourth quarter based on the higher collections? Or just kind of thinking about the run rate or the kind of inflection point in volume and revenue going forward.

Dennis McGrath, CFO

Yes, the collections are directly tied to future revenue recognition. We do have a study with the VA, and while that last clinical study is nearing completion, there will be another upcoming one. Last quarter, we recognized a small amount of revenue based on this, but collections are on the rise, increasing at a significant rate. Currently, the average for the quarter suggests we will surpass $1 million in recognized revenue for the fourth quarter. So, your assumption is correct.

Kyle Mikson, Analyst

Okay. Regarding the financials, looking at the EBITDA and net income slide, the figures appear quite comparable year-over-year, and the nine-month data hasn't really shown much contraction. It seems like you're still experiencing a similar level of cash burn. What are your thoughts on reducing cash burn over time? Is it a priority for you as you consider profitability with EsoGuard being more widely deployed? With regard to adoption, what strategies do you plan to implement? You mentioned that your sales team may stabilize and possibly grow in the long term. How are you planning to address these factors in terms of expenses and cash burn?

Dr. Lishan Aklog, Chairman and CEO

Let me share some overarching thoughts and then Dennis will elaborate. I believe your evaluation of the numbers may need some adjustment. This is a balancing act, as we've mentioned before, where we are focused on driving test volume growth to a level that allows us to effectively engage with medical directors of payers while keeping our burn rate low in the current environment. This requires maintaining our sales headcount at a consistent level for the entire year. We are pleased with how this has worked, as we have seen steady test volume growth while keeping our headcount flat and making necessary advancements in revenue cycle management, claims processing, and claims payment. Dennis, perhaps you could discuss further the impact of the reduction in force and restructuring earlier this year concerning our burn rate over the past year and looking ahead.

Dennis McGrath, CFO

Yes. If you examine the EBIT number of $9,251, it includes approximately 2,250 in intercompany obligations from Lucid to PAVmed. Ideally, PAVmed would accept this in stock, which has been the case for most of the time since last October. Excluding that, we arrive at a burn rate of just below $7 million. We believe our current operating expenses can be sustained until we see an increase in collections, which will then certainly enhance our go-to-market strategy, and we have a clear plan for those initiatives. Looking ahead at how the burn rate could change over the next four quarters in 2024, collections will be pivotal. Even if the submitted claims of $5 million a quarter remain mostly unchanged, the demand is still quite robust. As collections rise, based on the information provided for the initial six weeks, you're seeing over $1 million. As this percentage of the submitted claims continues to grow, the burn rate is expected to decline. We anticipate that, thanks to efforts from our market access team and the availability of published data on clinical utility, this trend should materialize. We feel confident about our operating expenses. If the assumptions regarding revenue collections do not materialize, which we see as highly unlikely, we would then look to further reduce our operating expenses. However, as Lishan mentioned, our goal is to find the right balance. Claims history is crucial for securing reimbursement, as it is essential to engage the Chief Medical Officers who interact with our market access team. Therefore, we believe our operating expenses will remain stable, our collections will rise, and the burn rate will decrease due to these factors.

Kyle Mikson, Analyst

Thank you, Dennis, and Lishan for your earlier comments. Lishan, regarding the EsoGuard 2.0 assay, I have a few questions. First, why is now the right time to launch this assay? I feel like the previous version has been in the market for a couple of years and has not reached full penetration yet; it is still on an upward trajectory. How are you approaching FDA approval for the new assay? What data has been generated so far, and how much more will be produced in publications moving forward? Also, how much lower would the cost of goods sold be for the 2.0 assay compared to the previous version? In addition, will the turnaround time improve, or could it potentially increase with this new assay? It would be great to hear your thoughts on these aspects.

Dr. Lishan Aklog, Chairman and CEO

Yes. It's the same assay, with the same genes and CPG islands, and the same methylation sites. Fundamentally, we're interrogating the biological process in the same way. This is an incremental improvement that incorporates cutting-edge technology for multiplexing. Just to clarify, we're not introducing a completely new assay; we’re using the same biology and genes, but we’re performing the assay more efficiently, which could provide an edge in performance, especially as we screen populations where positive results may be closer to the cutoff. We’re focused on continuous improvement, which is essential for us. Regarding the regulatory aspect, this is currently marketed as a laboratory-developed test. We have engaged with the FDA over the years through various pre-submission meetings and a breakthrough device designation. We plan to reengage with the FDA in the long term to have EsoGuard presented as an IVD. The goal is to ensure we have the best version of the assay as we enter studies that could ultimately lead to IVD approval, which is necessary under the proposed FDA rule. We are making the assay better incrementally, and we believe these improvements will benefit the existing commercial volume and future studies. The primary impact on overall costs relates to sequencing, which is a significant portion of that. We are operating with a solid gross margin, and we anticipate a meaningful reduction in costs. As for turnaround times, they currently range from seven to nine days. This includes the time needed to transport samples to our central lab and several steps such as DNA extraction and bisulfide conversion. Seven to nine days is acceptable since this is an elective test; decisions around the results and subsequent actions involve scheduling an endoscopy. We are content with this timeframe. There may be a chance to reduce that by a day or two at higher volumes, but that wouldn’t significantly impact clinical outcomes. Dennis, do you have any additional thoughts on the cost improvements in the 2.0 version?

Dennis McGrath, CFO

Yes. Look, we need to prove it out, but it's safe to assume that we think there's about a 10% improvement in our actual costs there.

Kyle Mikson, Analyst

Okay. All right. That was like great color. Like it sounds as a similar as say, like you said, Lishan like a fundamentally similar performance has gotten better and improved. The workflow is now more efficient. So the COGS improvement as well, 10% pretty good, I would say. That was great. Let me just ask a really quick one before I hop off. The progress with commercial and private payers, what are they reimbursing on average? Remember, in the past, that was like 50% to 60% of the Medicare rate? Like how is that looking now?

Dr. Lishan Aklog, Chairman and CEO

Yes, Dennis.

Dennis McGrath, CFO

Kyle, could you please rephrase your question? I'm not exactly sure what you're asking, as we discussed allowable plans at nearly $1,900. What specific aspect were you looking to clarify?

Kyle Mikson, Analyst

I believe that in the past, the commercial payer segment was reimbursing around half of the $1,938 rate, which would be approximately $1,100 or $1,200. However, this might have changed in recent quarters.

Dr. Lishan Aklog, Chairman and CEO

Gone up. I think it's clear to say it's gone up, right, Dennis?

Kyle Mikson, Analyst

Yes. That was perfect. Again, thanks so much guys for all the commentary.

Dr. Lishan Aklog, Chairman and CEO

I want to emphasize that the test is not similar; it is the same test, just improved in terms of efficiencies. To be clear, the underlying biology is identical to the original test. I wanted to make sure there was no confusion about that.

Operator, Operator

Our next question comes from Ross Osborn with Cantor Fitzgerald.

Ross Osborn, Analyst

You mentioned targeting police officers for new pre-cancer detection events. Would you discuss the rationale for this population and if you plan to create a registry from these events similar to firefighters?

Dr. Lishan Aklog, Chairman and CEO

Yes. I believe that expanding our focus beyond firefighters to include other groups is more about recognizing broader populations rather than just policemen with specific risk factors. Looking at the incidence of esophageal pre-cancer, while it's notably high among them, it's not tied to any specific occupational exposure, unlike firefighters, who have documented higher cancer rates in general, particularly for esophageal cancer. Therefore, it’s important to highlight that we are still dedicated to firefighters as a distinct group, which is why we created a separate registry for them. I see the police as part of a broader effort to reach a larger audience that has a reasonable prevalence of the risk factors suitable for testing, especially when organized through groups like police unions. This approach allows us to access a larger collective group and improve testing availability. We aim to extend these CYFT events to include public service employees as part of our broader direct contracting initiative with employers. Essentially, employers and unions serve as self-insured entities within the same category of groups where we see the potential for impactful testing events. Firefighters are unique due to their clearly elevated risk, which demands our focused attention. Does that make sense?

Ross Osborn, Analyst

Yes, makes perfect sense. And going off of that, and apologies if this was addressed in your prepared remarks or in a couple of calls. But would you discuss how your conversations going with additional employers for Direct Contracting? Do you think it should be a key driver for '24?

Dr. Lishan Aklog, Chairman and CEO

I believe it will. The discussions we've had, including our initial employer contract, which is currently in testing this quarter, have been fascinating. There seems to be a significant opportunity among small to medium employers, particularly those that are self-insured. The presence of even one esophageal cancer patient in such companies can have a major economic impact, especially since the diagnosis can lead to costs exceeding $1 million when accounting for surgery, chemotherapy, radiation, and immunotherapy. This creates a strong economic rationale for smaller companies. Additionally, these organizations often have close-knit communities, making the effects of cancer or cancer-related deaths deeply felt on a personal level. There is a genuine motivation from leadership within these companies to offer valuable support to their employees, especially around health and wellness. The concept of integrating testing as part of a broader health and wellness program—distinct from regular medical insurance—represents a significant untapped market. Other diagnostic companies have found success in this area, and we are poised to explore it further, particularly with our new VP of Employer Markets, Jim Fraccione. Our goal is to collaborate with brokers and others to package health and wellness benefit programs effectively. This initiative could encompass offerings like smoking cessation and nutrition programs, with targeted testing, especially for cancer prevention, fitting well into the mix. I am very excited about this opportunity. There is a cyclical aspect to this, with demand peaking around open enrollment periods, but the potential here is immense and could circumvent some traditional pathways through payers. So yes, I am eager to move forward in this area.

Operator, Operator

Our next question comes from Mike Matson with Needham & Co.

Mike Matson, Analyst

I guess I wanted to ask about, Dennis, just given the trends you're seeing with the revenue cycle management, collections and so forth. Do you have any feel for our ability to predict when you could maybe start to recognize revenue when the tests are actually performed as opposed to when we get paid for them?

Dennis McGrath, CFO

Yes, Mike, I think that's still several quarters away. We're gathering the data to be ready for that, but I don’t anticipate it happening until the end of 2024.

Mike Matson, Analyst

Okay. I understand. And then just on the Check Your Food Tube events, I mean, it's good to see the traction there. But I'm just wondering about kind of the scalability of that as you grow and do more tests. I mean is that something that can kind of scale with the Company?

Dennis McGrath, CFO

Definitely. I thought you might ask whether it's impacting our core business, but we really appreciate the Check Your Food Tube event. These events are highly efficient, generating a significant number of tests with minimal person hours for sales interactions. Our nurse practitioners and other clinicians performing the EsoCheck contribute to this efficiency, making it highly scalable. For instance, we typically engage with a fire department, and a representative along with their area director helps to organize this. It's managed by a single person on our sales team in an efficient manner. Once scheduled, our nurse practitioners or device administrators can perform around 50 tests in a day, which is something we'd love to replicate in more traditional settings where we are more directly involved with physicians. This approach is indeed highly efficient and scalable. I want to emphasize that our strategy encompasses all possible avenues, whether it involves direct interactions with physicians and institutions or conducting health events through employers, unions, and self-insured entities. We are focused on enhancing patient access wherever we can. So yes, this remains a very appealing and scalable method for us.

Mike Matson, Analyst

Okay. Got it. And finally, now that you have or are close to having some of the clinical utility data, do you have any plans to return to Medicare? I understand you're focusing on payers, some employers, and similar entities, but Medicare presents a significant opportunity. So do you have plans to revisit them? What would the timing look like for that? Is there a specific cycle you need to wait for?

Dennis McGrath, CFO

Yes, we've made significant progress. We have two clinical utility studies published and are awaiting the third. Our approach with Medicare differs from our engagement with payers. The payer process involves pilot programs and is ongoing, whereas interactions with Medicare are more binary. We'll wait until we have all our clinical utility studies published in peer-reviewed literature before initiating discussions with Medicare in the first half of next year regarding our submission under the existing LCD. We may hold off until later in the first half to obtain results from the BE2 study, which is currently enrolling. We'll plan our approach with them in the first half of the year and aim to submit the full package of clinical utility data later. This is an active process, but it's fundamentally different from our incremental work with commercial payers. As you pointed out, having clinical utility data is crucial, and now that we have it, we are close to reengaging with MolDX.

Operator, Operator

Our next question comes from Mark Massaro with BTIG.

Unidentified Analyst, Analyst

This is Vivian on for Mark. As I can see the progress with establishing claims history and clinical utility data, I guess, supporting conversations with commercial pay. You called out the revenue cycle management as well. I guess how should we think about remaining levers to pull for ASP improvement? What kind of growth we could see off of Q3 ASP?

Dennis McGrath, CFO

Yes. So the ASP growth is really just a matter of the collections against the submitted claims. First off, our price per test is just under $2,500. Medicare rate is just under $1,900 or just at $1,900. And we think that those numbers will continue to hold for us as we go forward as the benchmark to be paid against. Now we're all out of network and at the allowable amount of '18, just under $1,900 we're kind of out of network, not in coverage policies by the private pay. We think that's an indication that, that becomes a pretty good floor for us. So in terms of actual revenue recognized divided by number of tests delivered in a quarter, we think that ratio changes purely based upon collection and the movement in the market access from out of network to in network over time. So I think that's where you are aiming at in terms of ASP, getting to that benchmark, but we don't see that benchmark eroding at any time soon.

Dr. Lishan Aklog, Chairman and CEO

Sort of a qualitative response to that is that the levers are what we're doing on the coverage side, which is utilizing the clinical utility data now that it's coming out, engaging with payers on pilot programs and a variety of other ways to leverage that data and actually get in-network coverage as we are improving collections with the processes that Dennis mentioned. So the levers are really focusing on medical policy coverage as the RCM, the revenue cycle management activity is improving and gearing up.

Operator, Operator

Our next question comes from Ed Woo with Ascendiant Capital.

Ed Woo, Analyst

Congratulations on the quarter. As you guys continue to have consistent high growth and scale up the testing business in the U.S., have you thought about international opportunities?

Dennis McGrath, CFO

Yes, that's a great question. That comes up a lot. I think I might have mentioned this on previous calls. We have previously done an analysis in Europe. The EsoCheck has CE mark, and we have the ability to run the assay there. Europe is very tough for molecular diagnostic screening tests, some of the genetic profiling tests and so forth that have a strong presence there. But even tests like Cologuard and others have struggled in Europe because the overall reimbursements there are low. We've had some discussions about Canada, and that's really been our focus at this point. So we get occasional input from other parts of the world, but that's not been a major focus right now. We're really laser-focused on the U.S. market.

Operator, Operator

This concludes our question-and-answer session. I would like to turn the conference over to Dr. Aklog for any closing remarks.

Dr. Lishan Aklog, Chairman and CEO

Great. Thanks, operator, and thank you all for your attention this morning, and thanks for all the great questions. It's always enjoyable to discuss the results. As I said, we couldn't be happier with this quarter. It's really as a result of incredibly hard work that's laid the groundwork on clinical research on our laboratory and market access team and so forth, and we're looking forward to a bright future for Lucid technologies. We look forward to you continuing to update you on our progress through press releases and follow-up calls. And as always, feel free to contact us through mikeparks@pavmed.com and to follow us on social media. So thank you all, and have a great day.

Operator, Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.