Lucid Diagnostics (LUCD) Q4 2025 earnings call transcript

Thank you, Operator, and good morning, everyone. Thank you for participating in today's business update call. Joining me today on the call are Dr. Lishan Aklag, 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 conference call all include forward-looking statements, and these forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from statements made.

Factors that could cause actual results to differ are described in the disclaimer and in our filings with the Securities and Exchange Commission. For a list and a description of these and other important risk factors and uncertainties that may affect future operations, see Part 1, Item 1A, entitled Risk Factors in LUC's most recent annual report on Forms 10-K filed with the SEC and any subsequent updates filed in quarter reports on Forms 10-Q and subsequent Forms 8-K.

Acceptance required by law LUC disclaims any intentions or obligations to publicly update or revise any 4-3 statements to reflect changes, expectations, or 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 4-3 statements. I would now turn the call over to Dr. Lishan Akhag, Chairman and CEO of Lusage. Lishan?

Thank you, Matt, and good morning, everyone. Thank you for joining us today and for your continued engagement and support. So let's begin with some key highlights from the fourth quarter and in recent weeks. So we'll start with some key highlights from the commercial side. Our e-cigar test volume in the fourth quarter was 3,664. That exceeds our target range that we've articulated regularly, about approximately 2,500 to 3,000 tests per quarter, and that represents a 29% increase from the third quarter of 2025.

Revenue came in at $1.5 million for the fourth quarter. That's a 24% increase from the third quarter of 2025. We continue on the commercial side to engage our team in transitioning to target both Medicare, which we talked about before, but now also the VA, which we'll talk about in quite a bit more depth. And we're continuing our event-based testing to maintain the volume as prescribed.

We're entering in 2026 with significant momentum as we await Medicare coverage. So let's talk about the VA. It was a really important milestone for us that we were awarded a U. S. Department of Veteran Affairs, the VA contract for ESAGART. This was issued under the VA Federal Supply Schedule, or FFS, which centralizes ordering and includes pricing aligned with our established Medicare rate of 1938. That was a great accomplishment.

The VA, as most of you know, operates numerous, 170 medical centers across the country and serves approximately 9 million enrolled veterans annually. This is a very clinically relevant population. Veterans have a higher risk of GERD and esophageal disease and a higher risk of having the risk factors recommended for esophageal pre-cancer testing. So we believe a significant portion of those 9 million patients will be recommended for testing.

We believe that our ability to secure this and to secure it at the Medicare rate is a testament to the strength of our clinical evidence. The VA is in many ways similar to Medicare in terms of how they view the clinical evidence in approving this. We'll discuss the business implications of this and the rollout from a commercial point of view in a bit more detail in a moment.

We're also very excited that we announced positive data from the largest reported real-world experience of esophageal pre-cancer testing. This manuscript, which is now in the process of being peer-reviewed for publication, evaluated ESAGARD and ESAGCHECK in nearly 12,000 half-risk patients. And the results from this were really outstanding. The study confirmed excellent technical performance, rapid cell collection times, and really appropriate physician use across the board. More specifically, the technical success rate for ESO check cell collection was 95%, and 95% of procedures were completed in under two minutes. It's important that we compare that to the historical alternative to ESO check and to sort of explain this in contrast to that. The sponge-based capsule devices, which are 30 years old and somewhat antiquated, take at least 10 minutes or greater to do so.

And so being able to do this in a minute or two really provides an opportunity for us to roll this out in a variety of clinical settings. It was also 100% safe in contrast to previous sponge-based devices, which have been plagued by Class I recalls as a result of detachments. So this data across, again, a large number of patients, 12,000 in a real-world setting, really confirmed the scalability and the viability of Isagard on samples collected with Isagard. It sets a very high standard that any clinically viable widespread pre-cancer screening tool must meet, and we really are quite skeptical that other technologies in this space will be able to reach that high standard.

So Isagard and Isagard clearly work in real life, in real patients, and at real-world scale. And really, the study demonstrates our preparedness for broad access. It's been extremely useful for us, even in the preprint form, in our engagements and discussions with commercial payers, and even in our side conversations with Medicare. So before turning it over to Dennis, I wanted to provide a little bit more in-depth updates on two key aspects here related to reimbursement and provide some additional context on the DAD. So let's start with reimbursement. So obviously, we're all anxiously awaiting the publication of a draft LPD for Medicare. And we are really highly confident that this is close.

We've had ongoing engagements in person and otherwise with the leadership of Moldiex. We continue to feel strongly and believe that the Moldiex group and others view the CAC meeting, the contractor advisory committee meeting that occurred in September of last year, as being a home run with 11 clinicians unequivocally in somewhat unprecedented fashion, all aligning with the clinical validity and clinical utility evidence that we've demonstrated. So we believe the fact that we're still waiting for this is really related to, we have good reason to believe, to logistical delays. There have been other LCDs that have been held up. We have some positive signs in that several LCDs that were in the CAC meeting process in the late summer of last year have started to come across the finish line, and we really believe that we're next.

So there are the next steps, just to remind everybody, once we get this publication of this draft LCD that proposes coverage for ESA Guard, there will be a mandatory 45-day public comment period. After that public comment period, which includes the public meeting, there will be a publication of a final LCD and an official notice in the Register of LUCID coverage. Once that final LCD and that official notice is complete, then LUCID will be eligible for payments going back on Medicare claims, dating back one year. We're also making, you know, as we're awaiting here, as everybody else is, for Medicare coverage, want to make it clear that we are continuing to push forward on two other very important fronts on the reimbursement on the commercial side.

Let's catch up a little bit on the commercial side. So as we hinted at last time and now it's become clear that we have some very positive engagements with several of the large payers. The most notable one is with United Healthcare. So as we noted in our last meeting, UnitedHealthcare included in their guide coverage policy for endoscopy, for EGD in this condition, the fact that a positive e-cigar test was an appropriate indicator for coverage of the EGD. And we viewed that, and our consultants and others viewed that as a sign of effectively de facto coverage of the test. So we're viewing it as that, and we're proceeding accordingly. We have entered into the credentialing process with UnitedHealthcare, and that positions us to enter into contracting discussions once that's secure.

There are some other examples where that's also the case. It's a little bit more complicated, but that includes Sigma and potentially Anthem, where we believe that we have the opportunity to leverage policies related to endoscopy to secure in-network coverage of ESAGard, and we're pursuing those aggressively. What that allows us to do is to have an alternative pathway that is not typically available for molecular diagnostic tests. Molecular diagnostic tests typically have to work through the laboratory benefit management groups, the LBMs, and secure coverage through those groups that work on behalf of other payers and issue coverage policies accordingly. That's not to say that we don't remain deeply engaged with the LBMs. We do, and in the situations where we have a pathway to securing a network payment and contracting, through the EGD policies, we'll continue to do that, but we'll also continue to engage with the laboratory benefit.

And those engagements have actually been very positive. There's been very positive feedback on our clinical evidence, on our clinical validity, on our clinical utility data, and all of that, specifically locked down. The one additional challenge with the commercial payers in general, unlike Medicare, They do look at cost-effectiveness data. We believe we have solid data already existing on that, but we're continuing to supplement that with the more sophisticated modeling on cost-effectiveness that will be available for us to supplement these discussions in the coming quarters. We do – we have secured, we believe, our first LBM positive policy coverage. We can't disclose that yet. That will be coming up in the next couple of months. and we had a very good conversation with the largest LPM recently and feel like we have a pathway forward for coverage on that front.

We also continue to have extensive engagement with the Blue Cross Blue Shield Association, which is the umbrella organization over multiple Blue Cross Blue Shield plans, and those conversations continue to be in-depth and engaged, and we think that will result in future positive coverage policies from regional Blue Cross plans. In addition to that, we also remain engaged with IDS, with integrated networks.

And there are several large networks across the country, one of them, a large one on the West Coast, that we have had very good engagements with. We have good clinical champions within those. Those engagements tend to be somewhat different than the engagements with the traditional commercial payers because they involve a more integrated, multifaceted engagement with both clinicians as well as the administrators there, and those look good, and we feel like we'll have some positive views on that front in the near future. So again, to reiterate, as we're waiting for Medicare, we're continuing to work hard on the commercial side. We believe that there are some near-term wins there, and that the pipeline with our upgraded team is now very robust, and we'll continue to start seeing some wins over the coming quarters.

Let's talk about the VA system. Couldn't really be more excited about this. This was an important win for our team. Getting on the FSS was important. Getting that, getting on the FSS without discounting relative to Medicare, acknowledging and validating the Medicare price, and our clinical evidence was a big win. And what that now allows us to do is allows our team to engage with individual VA centers. We have a very robust pipeline of such engagements with individual centers across the country. Those engagements have been positive. We've been able to leverage the fact that we have solid data in a VA population. That's the Dr. Greer study from the Louis Stokes VA Center in Cleveland that published part of our clinical evidence package.

Being in the VA population, very powerful as we engage. And we know that the dynamics within the VA are different than they are at other centers, that the VA can often be resource-limited with regard to procedures. EGD resources in particular are limited. that the wait times and timelines to get an EGD, particularly a screening EGD, can be high. And so ESAGARD really fits in nicely within this clinical ecosystem as a test that will allow for broader screening and triaging only those who are positive ESAGARD, only those who have the highest yield to EGD. The process is fairly straightforward. Since we're on the FSS now, we can engage with fine clinical champions at that center. We engage in contracting, have a PO issued at the time.

We do need to coordinate cell collection at these sites, and we have a variety of pathways to do that. We've also figured out how to allocate our commercial resources accordingly. As we've talked about before, prior to the VA, when it became clear that Medicare coverage was imminent, We've made some changes to our commercial team to shift them towards and shift their incentives towards enhancing our Medicare, the percentage of our population, the percentage of tests that we do being Medicare, so that once we get Medicare, we can put our foot on the gas and drive that Medicare business. We're reallocating our existing resources in the same way. We not increasing our resources because we very cognizant of our cash burn and our OPEX right now but we are reallocating resources to make sure we taking advantage of the opportunity with the VA So we appointed one of our senior leaders on the commercial team to be a national director for the VA, and he's working in close collaboration with our VP of Market Access to drive these engagements with the VA, turn them into contracts, turn them into PO, test volume, and ultimately revenue.

And that happens both at that level, at the senior leadership level, but also in the field. So everybody in the field, within their region, they're incentivized to not just engage with their primary care physicians or gastroenterologists or their typical call points or even with fire departments, but they're also incentivized within their region, and every region has a VA, to develop relationships with physicians and identify clinician champions that they can hand over to the senior leadership team and on the more strategic side. So all of this activity on the commercial team, all of the adjustments we're making, all the adjustments we've made on the Medicare side, and now we're making on the VA side. We're really looking forward to those bearing fruit in the coming weeks and quarters.

So really, to summarize from a commercial point of view, throughout 2025, we've demonstrated there's a market for Isagard that we can maintain a steady volume that allows us to remain engaged with commercial payers, and that engagement with the commercial payers is starting to pay off into progress towards securing a network coverage. We've demonstrated that we know how to generate demand. We know how to get physician adoption. We're increasingly improving our ability to engage with health systems, and our ability to engage with health systems will be accelerated dramatically once we get Medicare because the lack of Medicare is an obstacle to engaging with health systems. And all of that groundwork has really been laid really nicely, culminating in the data that will be published soon and as public as the release on the real-world experience.

So that foundation, 2025, was a really important year for us to lay in that foundation. As we move into 2026, our focus is on converting the lessons that we've learned, converting our ability to generate that demand into revenue, and the focus is on the VA and Medicare. The VA right now and then on Medicare once we secure that coverage. And so that progress with the VA, with our commercial payers and with Medicare, really puts us in a great position to turn the corner here with regard to our commercial experience and track record and to ultimately drive, help us be in a position where we can put on the gas and drive test volume and revenue accordingly.

And everything we've done to date, all the real-world experience that we've been able to document, and our full body of clinical evidence puts us in a great position to do so. You know, one aspect of this that comes up regularly has to do, and the timing for this is perfect because we believe we're at an inflection point, has to do with EHR integration. In order in this day and age, in 2026, for a molecular diagnostic test to be implemented clinically, it's not sufficient just to get sufficient adoption. having EHR integration, which facilitates not only the ordering of the test, but the delivery of the test results. And in our case, in fact, facilitating the identification of patients through the identification of risk factors, EHR integration is a major boost to commercial activity.

So we have, in addition to this other work on the commercial side and the VA side and on Medicare, we've started to put some resources to work on EHR integration. Now, at this stage, we're doing so using systems that are more cost-effective to us, but that still allow us to, when we engage with the health system, for example, to engage in such a way so that the EHR, the Epic Instance, or whatever other system that the health system happens to be using, we can actually offer the ordering physicians the ability to order the test and the ability to receive the results. Once we are in a position where we have accelerated volume and we're further along, we're already in a position to invest in the most aggressive way to pursue EHR integration, which is to actually engage with Epic directly on Epic Ora, and we're well positioned to do that at the appropriate time.

So, again, hopefully, you know, again, we're all waiting for Medicare. Hopefully that's any day now, but hopefully you get a sense as to the extensive work this team has put in over the last quarter to set us up for a lot of success this year. We're doing now and once we get back.

So with that, I'll pass it over to Dennis to provide an update on the financials.

Thanks, Lee Shannon. Good morning, everyone. The summary financial results for the fourth quarter in the year were reported in our press release that's been distributed. On the next three slides, I want to emphasize a few key financial highlights from the fourth quarter, but I encourage you to consider these year marks in the context of the full disclosures covered in our annual report on Form 10K.

With regard to the balance sheet, cash at year end December 31st was $34.7 million. The average burn rate, including cash interest on the debt for 2025, was $11.1 million per quarter, with the fourth quarter a bit higher as we made investments in our sales team and market access staffing until about $500,000 in the fourth quarter, and we settled some annual compensation obligations during the period. You'll recall at the end of 2024, we refinanced our convertible debt into a $22 million five-year note, interest only at 12% with a $1 conversion price, which is held by long-term shareholders. The fair value of the convertible notes in the amount of $24 million at year end is really the only other substantive change from the previously reported balances at the end of the third quarter.

The fair value increase of $1.7 million in the quarter reflects a marked-to-market quarterly adjustment in parallel with the common stock price changes between the periods. The fair value increase is also a substantial part of the fourth quarter expense charge of $2.4 million, reflecting other income in the P&L. And for the year, the year-over-year change of $5.4 million reflects a 33% increase in the stock price over the year and also drives a similar non-cash expense charge to the annual P&L in the amount of $7.7 million.

Shares outstanding included unvested RSAs and conversion of the Series B preferred as of last week, approximately $177 million. After the conversion of the preferred Series B on March 13th, there were approximately 13 million common shares held in abeyance due to the 4.99% ownership blockers in the Series B certificate of designation.

If these abeyance shares had been issued, common shares obtaining would be about 190 million. The GAAP outstanding shares as of December 31st of $131 million are reflected on the slide as well as on the face of the balance sheet in 10K. GAAP shares do not reflect unvested RSA amounts.

At present, PadMed continues to be the single largest common shareholder of Lucid Diagnostics with ownership of approximately 18% of the common shares outstanding. Although PadMed no longer has voting control of Lucid, PadMed together with the board and management still have a significant influence over Lucid with approximately a 25% voting interest.

Lucid Series B1 preferred securities convert to common shares in a couple weeks on May 6th. including the dividends owed on the Series B1, an additional 16.8 million common shares will be issued, subject to the 4.99% beneficial ownership blocker in the certificate designation.

With regard to the P&L, this slide compares this year's fourth quarter to last year's fourth quarter in year-over-year on certain key items. I trust you will review the information and my comments in light of the cautionary disclosure in the bottom of the slide about supplemental information, particularly in non-GAAP information.

Our sales team sold over 3,600 tests for the fourth quarter with a billable value over $9 million, resulting in recognized revenue of 1.5 million, reflecting a sequential 29% increase in test volume and 24% sequential recognized revenue for the period. with new investors once again joining our call. It's worth repeating what we've communicated in the past quarters about revenue recognition.

The key determinant of how revenue is recognized at this point in our reimbursement journey is the probability of collection. And therefore, due to the fact that we are in the transitional stages of our reimbursement process, means revenue recognition for the majority of our claims submitted to whether traditional government or private health insurers will be recognized when the claim is actually collected versus when the patient report is delivered, invoiced, and submitted for reimbursement.

As you'll see in our 10K, this is called Variable Consideration or Jargon of GAPS ASC 606 Revenue Recognition Guidelines, and presently there is insufficient predictive data to reflect revenue from all of our quarterly test volume at the point where the test report is delivered to the referring physician.

For billable amounts contracted directly with employers and are fixed and determinable, will be recognized as revenue when our contracted service is delivered. Generally, that means when the report is delivered to the referring physician, which will be the case with the VA.

It's important to note that pending Medicare approval decision impacts 40% to 50% of our addressable patient population, and therefore will have a significant impact on our future revenue recognition analysis.

Furthermore, for tests performed on Medicare patients with dates of service within 12 months of a final positive Medicare policy, we'll also get paid within a reasonable timeframe after the final policy is issued.

With regards to the remainder of the P&L, the variation analysis for the fourth quarter substantively aligns with the year-over-year analysis, so I'll focus my comments on the annual changes and happily answer any specific questions in the last quarter in the Q&A. On a non-GAAP basis, total operating expenses increased from $44.3 million in 2024 to $48.7 million in 2025, an increase of $4.4 million comprised of the sum of commercial expenses, largely increases in sales personnel and market access staff in the amount of $1.6 million with a remainder in G&A, which includes approximately $1.6 million in financing costs together with $1.8 million in annual compensation expenditures.

Our non-GAAP loss for the year of $44 million versus $40 million in the prior year is largely related to the same items I just mentioned. The non-GAAP net loss per share of $0.10 in the fourth quarter and $0.43 for the year is better by almost half versus the same periods in 2024.

With regard to the operating expenses, this slide is a graphic illustration of our operating expenses after eliminating non-cash expenses for the periods you collect it. Non-GAAP operating expenses of $14.1 million are higher than the average $11.6 million for the last four quarters, largely related to the compensation expenses related to increased personnel in sales and market access and annual compensation-related plans.

Let me close with a few reimbursement highlights for the fourth quarter as we've done in past quarters. In the fourth quarter, we sold over 3,600 tests reflecting about $9 million pro forma revenue. During the fourth quarter, we recognized revenue about 17% of that amount or $1.5 million. Of that amount, about 49% was from claims submitted in prior quarters with the longest dated item from over two years ago. Of the claims submitted in the fourth quarter, about 76% were adjudicated, 24% are pending.

Out of the 76% that have been adjudicated, about 50%, about half of them, resulted in an allowable amount by the insurance company with an average of $1,623 per test, which bumps up against the Medicare rate. Of those denied, most fit into one of three buckets.

Medically not necessary or deemed to be not medically necessary or require a prior authorization or lastly require additional medical records.

The balance are considered to be non-covered. With that, operator, let's open it up for questions.

Yeah, so this is a little bit tricky, so let me work my way through that. It hasn't changed how we've submitted claims. We've continued to do so. The fact that we believe that the reason why this is on the radar now is, in fact, because of our prior strategy of making sure we had sufficient volume. And United has been one of the payers where we've submitted a significant number of claims.

So let me just kind of walk through it step by step. It's not a positive coverage policy specifically for the ESOGARD test, right? But what we've learned since discovering that United and, as I said, other plans have followed in almost verbatim identical fashion, have included ESOGARD as an appropriate indication for an EGD within their endoscopy guidelines, you know, the endoscopies for Barrett's is. on sort of deep analysis of that internally and externally and in consultation with different medical directors, we've concluded, I suppose we can use the term as de facto coverage. So, you know, much of, you know, we focus on coverage policies and positive coverage policies here in this space, in the diagnostic space, but, you know, frankly, a lot of effective coverage of being in network and credentialing and contracting happens outside of explicit written positive coverage policies.

A lot of, particularly my understanding is that United actually operates a lot within guidelines, right? And so this is within the guidelines for how they assess claims related to endoscopy. So as I said, you know, it's our conclusion that we can pursue, we can go directly to credentialing and subsequently to contracting based on on ESAGARD being included in the BE guidelines as an appropriate indication for the test. Because by definition, if you say that it's an appropriate indication for an EGD, then it's not experimental. It's not that there's sufficient support to justify a positive test as being in its role as a triage tool for EGD. So that's a long-winded way of getting to the actual practicalities here, which is that our team has initiated the credentialing process.

The credentialing process is the process by which you become an in-network provider. And once we achieve that threshold, which we think will be shortly, we are prepared to enter into and have solicited the opportunity to enter into contracting discussions directly with United.

Okay, great. And then maybe my last question, you know, you've talked about reallocating resources to, you know, Medicare lives. Can you just perhaps give us maybe an example or two? And then as we think about 2026 progressing, is there a time this year where you think we can start measuring productivity of these reps? And just give us a sense for how we should be thinking about that as we're thinking about our model for the reps of the year. Yep.

So, you know, the challenge is from a strategic point of view, we've taken the position that we want to maintain test volume, right? We want to make sure we continue to have engagements with the individual commercial plans so that we can have meaningful conversations with them, like we've seen with United and with many of the other plans. That volume previously has been heavily dominated by event-based testing, fire departments and so forth, because, frankly, that was a highly efficient way for us to execute on that strategy while maintaining our operating expenses and our cash burn at a level consistent with this as we await broader coverage for Medicare and others. And so what we've been working on since the fall, which, as we've discussed, is taking our commercial team, which has been, frankly, incentivized based on volume and incentivize to drive event-based testing, increasingly event-based testing that is subject to contracting, and steadily move them towards engaging with physicians, physician practices, and the broader team with health systems, but to do so in a way without sacrificing volume and revenue in the short term.

So it's a little bit of a tricky balancing act, and really the commercial leadership team has done a remarkable job not just maintaining volume, but as we've noted, growing volume while turning the ship in the direction of more traditional engagements with physicians and health systems targeting so we can get our Medicare volume up. You know, the examples are really different in every site, but we have some really fantastic examples of that, a couple of examples in the Northeast and the Atlantic Coast where high productivity teams in the field who are doing really well with engaging with fire departments and driving volume and increasingly getting those events to be contracted, shifting towards Medicare, towards engaging with physicians and we're seeing the way that manifests itself on the ground is we're seeing what we've referred to as our satellite lucid test center activity at individual practices and health systems come to fruition.

So we'll suddenly see a practice that one of our field members is engaged with, with scheduled testing events. The SLTC model is where we bring our nurses to the physician practice, co-locate them on scheduled days to test patients. And we had one recently that was notable where our clinician came in and tested, I believe it was 30 patients in a day, and the vast majority of those were Medicare patients.

So that process of kind of turning the ship while maintaining our volume and maintaining our revenue is working, and it's working because of a very carefully designed incentive plan and training program to train folks that are really engaged and have had significant time in the field now with this. And it's going quite well. I'm not sure by the end of this year, but I may want to comment on that, that we'll be ready because we are making this transition dominated by one type of testing to another, whether we'll be in a position to start reporting on productivity on a rep-by-rep basis. But certainly I think that's something that will be coming next year.

Dennis, do you want to just confirm that from your perspective? Yeah, I think reimbursement, more fulsome reimbursement across the states will certainly contribute to the timing in terms of when to start reporting that so that an individual account that can go in and really test their entire base rather than just solicit just the Medicare patients or VA. So in time, I think as we publish additional coverage policies, that's probably a metric that ultimately we'll start publishing as to when. The end of the year is as good a guess as any.

Great. All right, guys. Thanks so much for the time. Thanks, Mark.

Yeah, that's the Medicare radar standard billable amount $2,499. And we've actually increased that ASP by another couple hundred dollars. So that's what we bill and we collect. Obviously, we haven't billed anything to Medicare yet. As far as the Medicare component, that has grown sequentially in the fourth quarter versus the third quarter by about 28% as we started to direct the focus toward this effort.

The percentage of test volume is around 16%. That's up from 10 to 12 from the prior quarters. If you go back into early 2024, we were probably as high as 25%. So it does reflect, you know, post-CAC meeting September 4th, in the fourth quarter to start directing that effort. And we expect as we move through 25, the percentage of our test volume with Medicare beneficiaries will be higher as well.

Just a couple of reminders on that, Kyle, just for the listeners. Based on the epidemiology of the risk factors, of patients recommended for testing, about 40, probably closer to 50% of patients would be in the Medicare population. But our goal is to drive that in the early phases. Above that, and then just a reminder that to Dennis, the numbers that Dennis offered, that's really just less than one quarter of activity after we had sort of, after the CAC meeting and after transitioning the team and training them and adjusting incentives and so forth. So it really just reflects the early stages of that. I think qualitatively I would say that that process of shifting towards a greater Medicare portion of our mix is going very well.

Yeah, the sequential increase in the fourth quarter from the third quarter was around 28% Medicare. In Medicare claims? Yeah, that's correct.

Yeah, yeah. So just to be clear, even though we feel like there's a path, a really interesting path that United has brought forth and a couple of others may be in the mix with regard to using the EGD guidelines and essentially separate from the LBM process, I think it's an important opportunity to emphasize that the LBM process remains kind of the main path towards positive coverage policy, many or most of the plans continue to outsource the technical assessments and the writing of, ultimately it's the plan that decides the policy, but the writing of the policy and the technical assessment is still typically outsourced to the LBM. The LBMs range in size from smaller, mediums to larger, and the number of cover lives they reach.

And so as I said we have had positive discussions with the largest LBM that covers the most in the largest and then all up and down the chain in terms of size So the one we are that we will announce we obviously can announce it until it posted publicly What's useful about that is that, you know, the coverage policy really does align closely with the existing guidelines. And as you may recall, Kyle, the proposed LCD also aligns with existing guidelines. So there's a nice consistency across the board between those. And we look forward to those coming in.

That particular LBM, as others, have engagements with their clients, which are a set number of plans and a set number of covered lives. And we will be able to use that information and know where those are geographically. and be able to target those. Now, that's not going to happen immediately in terms of translating a coverage policy towards volume in that target coverage area and revenue, but it's the first step, and we see that obviously after a coverage policy, you still need to engage in a contracting discussion and agree on pricing and so forth, but being a network following a coverage policy is an important step.

All right, great. And then final one, just like basically a housekeeping question, actually, on your kind of broader commercial strategy as well. The sales and marketing expense increased a million quarter over quarter to 25% increase quarter over quarter. That's quite a bit. And you were at a pretty consistent run rate previously, it seems. And so should we, you know, I know you're doing more reallocating than increasing investment there, but, you know, is this $5 million or so a quarter a good level to expect going forward, or could this increase quite a bit in 2026?

I think that's a reasonable level going forward. The fourth quarter is also burdened by some annual compensation expenses, truing up sales teams and non-sales personnel in the support side of the sales and marketing side as well. So the fourth quarter is a little bit higher than the previous run rate, but it's a reasonable number to look at moving forward over the next couple of quarters.

Perfect. Thanks, guys. Great.

Thanks, Tom.

So it's really a kind of two-level process, as I was sort of hinting at during my very remarks. You know, at a national level, we have a national account director. We have a national VP of market access who helps those two work hand-in-hand in bringing individual health systems across the finish line through contracting, PO submission, and then the team will implement the launch within that center. But as I mentioned, we really view our entire sales team as the kind of the tip of the spear, the early engagement. So with any of these individual centers, we will, you know, you still need to have a physician champion, still need to have a commitment from the physicians, typically the gastroenterologists, in partnership with the primary care internal medicine folks to launch within that center.

So the initial engagements will often be, not 100% of the time, but will often be from the local team in that particular region. but then once there's a champion identified and an interest, again, the interest has been strong since we're now in the FSS, that gets handed over to a national team who can quickly move towards executing and, you know, establishing cell collection and so forth. We do also have a positive engagement with the national clinician leaders, particularly over GI, And we believe that after we've had a number of these sites in place, and given the fact that we have really solid research, both published research and an ongoing clinical trial within the VA, the VA is very kind of a research-centric health system, and it bodes well for us that we have published data and incoming published data, incoming data from a larger study, that there will certainly be discussions on the national level with national clinical studies.

leadership in this space to potentially launch some type of national program in the future. The other thing that I'm just as a reminder from your question to point out is that, as most people know, VAs tend to be linked with existing academic medical centers, right? So typical medical centers in any of the major cities that are linked to medical schools will often have one or sometimes more than one VA associated with them, and often the physicians that staff the VAs, whole faculty positions, and clinical positions had affiliated academic medical centers, right? So the LAVA and UCLA have a close relationship. So that's really helpful to us in both directions, right? So at places where we've already engaged with the, you know, a large health system, an academic health system, transitioning, and we already have champions that are helping and working with us to bring that, bring ISAGARD into the academic medical center.

It's a national transition to identify the physician within that group that works at the VA, and it gives us sort of an immediate in on the, on identifying a clinical champion there, and vice versa, that any success we have at a VA center that comes de novo gives us an entry point to the typically and often to the group associated with the academic center and the health system associated with that.

Okay, great.

Yeah, there is some annual compensation expense triggered in there, but the market access team, the clinical service team, and the commercial team, I think it is a baseline that we should plan for as we move forward, particularly as the volume increases and revenue increases, the variable compensation plans will kick in as well. Okay, got it. Thanks.

I think it's a mix of all of the above. And, again, I just, you know, this is an opportunity to kind of give kudos to the team that they actually, we grew volume during a quarter where we were asking them to make a significant transition away from kind of the higher, more efficient event-based testing, not away from those, but towards more traditional engagements to drive Medicare and then increasing with the VA. So I would say it's a kind of combination of the factors you listed, but still driven at the end by productivity because that volume is increased. That increase in volume, despite the structural changes, is driven by the same number of people. We haven't increased the meaningful numbers in the field.

And then, as I said, I think the potential to continue to sustain somewhat higher volume than the target that we've had could be driven by the opportunity to start seeing volume in the VA. And obviously, you know, once we get Medicare and pushing volume, more aggressively there.

Okay, understood. So just, you know, on the VA, you know, you mentioned that it serves 9 million lives, and the patient population does have a higher, you know, I guess, risk of GERD, and so it would be for a target population, a strong one. But what are you – how are you viewing the total addressable market there, you know, and what are you hoping to, in 2026, to, you know, testing volume run rate, you know, let's say, leaving the year? Sure. I think if you start with 9 million patients, the proportion of those patients that would be recommended for testing by existing guidelines is certainly at least a couple million patients. So call it 20, 25% of that population would be the target based on existing and existing in the most conservative subset of the risk factors for testing.

So, for example, over 50 with three risk factors based on the ACG. So you take a couple million times the Medicare rate, and that's what we would address a little market within the VA.

Got it. Okay, so it's a really good opportunity. Okay, and then just the last question. I know you've mentioned numerous times in the past that there's a one-year look-back period for Medicare billing. So anything, once you get, you know, approval, you could look back a year. So just questioning why, you know, it seems like we were hoping to get that draft letter by the end of 22-5. Now it's, you know, the end of the first quarter. So hopefully it's really any day now really imminent. You know, what's holding you back from, you know, signing on more sales, you know, beefing up the sales team and to push the Medicare because you still have that look back.

Hopefully you'll get that. And then it's not like it's just maybe putting the cost up front and then getting the reimbursement in a couple of months once you get the approval. Just because you're nervous, you never know with the... No, I don't think we're nervous.

I just think it's prudent to be cautious about that. It's not because of any sort of concern about the likelihood of us getting Medicare or the likelihood of us getting paid for that amount. but I think it's just a general provenance with regard to being super careful about our OPEX in a particular capital markets environment. I don't know, Dennis, if you'd like to add anything to that.

80% of our billable amounts are not being collected and so we have been judicious about our spend and you see that we've started to spend more. We're not going to turn the faucet on completely until we have the ability to collect a good chunk of the test volume that we actually bill for. So that will be kind of a gating factor. So to your point, could we put more salespeople on particularly to go after Medicare patients? The answer is yes.

But any time they walk in the door, there's going to be commercial patients as well that they're attracted to. And so having a Medicare draft policy in place and knowing the timing certainly would give us clarity as to when to step on the gas even further. We've started to. We're being judicious about it. And we'll accelerate that initiative once we know the timing of it.

Got it. Understood.

It's a rolling couple million dollars. Obviously, it changes every day, right, that we're delayed in getting this towards a final policy.

But as a rule of thumb, it's a couple million dollars of collections that we'll be able to get soon after we get the final policy.

Okay, great.

Thanks, Jeremy. Thanks, Jeremy.

Thanks, Operator. And thank you all for taking the time and for your attention this morning. You know, really, as always, we appreciate, in particular, the thoughtful and informed questions by our analysts and hope all the listeners find that back and forth enlightening. So, again, we really believe this is going to be a big year for Lee Sid. Last year, we established a solid commercial foundation. I established a really solid evidence base with – addition to our evidence base with our large and overall study.

Medicare is coming. It's a matter of when, not if. And our activity to date, while we're waiting for Medicare with the VA, with Medicare patients, and our continued progress on the commercial side with payers and laboratory benefit managers, continues to really lay a strong foundation for future growth. We're also really excited on the commercial side to be moving into network credentialing and contracting for the first time with a large pair. We hope that that will really be a transformational event in the coming weeks and quarters. So thanks again. As always, we encourage you to keep abreast of our progress. Please follow our news releases, our quarterly update calls, as well as through our website and social media.

Feel free to reach out to us if you have any questions. So thanks again, everybody. Have a great day.