Good morning. Thanks for joining us at the 23rd Annual Needham Healthcare Conference. I'm Mike Matson, and I lead the MedTech and Diagnostics Equity Research Team at Needham & Company. I'm pleased to introduce Lucid Diagnostics President and COO Shaun O’Neil. Instead of a standard presentation, we are gonna do a Q and A session. If you have any questions you'd like to ask, you can submit them electronically through the Needham Conference website, or you can email them to me at mmatson@needhamco.com, and I'll do my best to fit them in.
So with that, we're gonna go straight into the questions here. I wanna start out with EsoGuard. You know, there may be some people watching here that are new to Lucid, so I wanna start out with some of the basics on the company. So Lucid's developed an innovative test and sample collection system for esophageal precancer, and these are called EsoGuard and EsoCheck, respectively. So but before we really start to talk about the test and the collection device, maybe you can just give us an overview of esophageal cancer, why it's so deadly, and how it can be prevented.
Yeah. Great, Mike. I appreciate the intro. You know, maybe what I'll do is let me start by introducing Lucid real quick. I'll quickly breeze through our products, EsoGuard and EsoCheck, and talk about that unmet clinical need. So let's start with the boilerplate, right, and go something like this. So Lucid Diagnostics is a commercial stage cancer prevention medical diagnostics company, really focused on the millions of patients with gastroesophageal reflux, or GERD, you know, also known as heartburn.
These individuals are at risk of developing esophageal precancer and cancer. In our EsoGuard esophageal DNA test, performed on samples collected in a brief, non-invasive, non-endoscopic, office-based procedure with our EsoCheck esophageal cell collection device, is really the first and only commercially available tool designed for the goal of preventing esophageal cancer and cancer deaths through widespread screening and early detection. You know, but who are we really?
We're a team of, I would say, like-minded individuals, you know, experienced clinicians and industry veterans who've really teamed up with world-renowned researchers in order to commercialize a high-performing molecular diagnostic to stop what is a truly tragic missed opportunity and unmet clinical need that is the rise of esophageal cancer over the last five decades, you know?
So our collaborators have spent their careers looking to identify early stage cancer, in this case, precancer. You know, their work has been in collaboration with the NIH, the NCI, some of the most prestigious academic centers in the U.S. And I could say that, you know, we wake up every day excited to work, you know, as a team to educate both patients and clinicians alike.
There's no question, at least in our minds, that the work that we do here will make a true impact on patient lives through early detection in an anatomical location that absolutely requires it. So, Mike, if it's fine, I'll keep kind of rolling through. I'll talk real quick about EsoGuard and EsoCheck and then the unmet clinical need.
Sure. That's great.
You know, so, you know, this year alone in the United States, we're gonna see just over 22,000 individuals diagnosed with esophageal cancer. You know, the majority of those esophageal adenocarcinoma, which typically occurs in the lower esophagus. So, esophageal adenocarcinoma is typically preceded by risk factors such as GERD or heartburn. You know, it's the second deadliest cancer behind pancreatic, and it's also the seventh most common cancer among men in the U.S.
So I called this a tragic missed opportunity a second ago, you know, only because we have a good idea who these patients are, who's at risk, but also there's proven technologies to eradicate this disease when it's caught early. So, esophageal cancer, in general, it's a death sentence, right? The survival is really low. Even at stage one, it's just over 40%. In general, survival is much more dismal.
So, around 20% at 5 years, mainly because we identify these diseases late stage. It requires the full gamut of treatment, including surgical resection, chemo, radiation, and in some cases, immunotherapy. So, the reality is you can't live without your food tube. When you detect precancer, it can be treated or surveilled until such time that treatment is necessary.
So, generally speaking, unlike some other anatomical locations such as the colon and breast, the esophagus is not forgiving, and it's not anatomically a good place to be operating. So, finding early stage disease is really paramount. You know, and as I'll probably explain later, this is exactly what we do. It's exactly what EsoGuard does, which is identify precancer at a high level of sensitivity. It's absolutely critical. So, what is this EsoGuard thing, right? Let's start with that.
So, EsoGuard is a commercially available molecular biomarker that's used to screen for precursors to esophageal cancer. So, these distal esophageal cells are analyzed using a targeted next generation sequence or NGS assay. It then runs through our proprietary algorithm to evaluate methylation changes on 31 sites across two genes, Vimentin and CCNA1. So, to date, we've completed over, I think, 12,000 tests in our CLIA-certified, CAP-accredited New York State licensed laboratory.
The results are reported in a binary fashion. So, EsoGuard positive results are indicated for confirmatory upper endoscopy with biopsies and definitive diagnosis, while those EsoGuard negative patients, you know, may safely forgo endoscopy and risk factors can usually be managed medically. So, in other words, EsoGuard is a triage tool for this well-defined patient population and, as I mentioned earlier, unmet clinical need.
We don't just find cancer at a high level of sensitivity, but more important, we find disease across this entire disease spectrum. Before I let you ask one more question, you know, I'll just kind of go through, you know, in terms of how these cells are being collected. It's being done in our proprietary and patented EsoCheck device.
You know, I like the way that Dennis McGrath always explains it, is that our family of patents is the moat around the castle protecting other market entrance, which will make probably more sense as we talk about the device here in a minute. The procedure itself can be done in a 2-minute office-based setting. The device is a very thin silicone catheter connected to a balloon collection device. As a patient, you swallow the device in an inverted position.
It's about the size of a daily multivitamin. The patient's own or our own natural peristalsis takes it down to the stomach. Once it's confirmed in the stomach by distance markings on the catheter, the balloon is then inflated first to confirm location by indexing at that lower esophageal sphincter. That tactile feel gives the operator confirmation the balloon is directly in position. It's then pulled through the esophageal-gastric junction and up into the esophagus, just a few centimeters where this disease state occurs.
At this point in time, our device does something really unique. It inverts back in on itself, which is great for the patient because it allows it to be retrieved the same way they swallowed it. But more importantly, it provides a targeted circumferential distal esophageal cell collection that lacks further contamination from the upper esophagus and mouth.
So, that sample is then placed in a preservative solution, and EsoGuard is used to interrogate that sample for those methylation changes I just described. And as impressive as EsoGuard is as a standalone assay, the combination of both EsoGuard and EsoCheck allow for a high level of sensitivity not only to cancer, but as I mentioned prior, to precancer, which is existential for this disease.
Okay. That's a really great overview. So, I wanna move on to just sort of the market opportunity here. So, you did host an Investor Day in December, where you hosted some KOLs, and they talked about EsoGuard, and they were really enthusiastic about it and, you know, hoping for more widespread screening. As you did provide some overview of the market and financial opportunities. So, can you just talk about the kind of TAM here and economics behind the product?
Yeah, absolutely. No, I appreciate that, and I appreciate you bringing up the December Investor Day, you know? So, for those who missed it, you know, those comprehensive presentations can be found at our website, which is LucidDX.com. I believe it's slash investor day. And as we have limited time today, Mike, it would probably be a great follow-up to this discussion if people are more interested in hearing about some specific aspects of our business. So, as for the market opportunity, let's start at the most base level scenario. You know, when we're looking at the strictest society guidelines, there's an addressable market of over 30 million patients, right? So, now with a CMS rate of just under $2,000, that's nearly a $60 billion addressable market.
So, even with limited market penetration, there's clear value creation to both the patients as well as to our shareholders, you know? And to clarify, you know, that 30 million patient population are just those patients who are symptomatic, you know, those with GERD or other risk factors. And, you know, as I'm certain we'll probably talk about later, this is the strictest guideline criteria. In other words, we have a very large addressable market, you know? And as we continue to gain traction with reimbursement, you know, with medical policy change, you know, we can afford to start doing more direct-to-consumer education and marketing, you know, as a good portion of these patients actually never make it to the doctor in the first place.
So, ultimately, with already a high margin in the 90th percentile in a large addressable market, as we scale and employ additional marketing power, you know, our patient acquisition costs will come down. So, one way to just look at it is an incremental cost, you know, of just over $200 every time we get that next patient in the door, you know? And so, as we look to scale in the future here, we've built, we continue to build the appropriate systems at both the lab level as well as field operations to handle that increased volume, you know? We put a lot of pride in three things around here: our people, our process, and our performance, really in that order. And we're highly confident in our ability to scale when appropriate. So, large addressable market, high gross margin, nothing but upside.
Okay. Thanks for that. And then, you do have a Medicare payment rate that's just under $2,000, but you haven't yet gotten Medicare coverage. But you are getting paid for the tests in some cases. So, can you just talk about, you know, what coverage you do have, I guess, with maybe other insurers, PPOs, etc.? And then, what, you know, payment, the amount, when you do get paid, you know, how much are you actually collecting relative to where the Medicare set that payment rate?
Yeah, I think this is a great, and I guess I would call it a fundamental question, you know? So, at the highest level, based on our claim submission, and these submissions are mostly to private payers, we can talk about in a little bit, our allowed success rate is in and around 46%, right? And from that allowed success, we've maintained a high allowable payment rate of just over $1,800. And this is important because, in lieu of widespread current medical policy and contracts, we're still maintaining a high ASP, you know? So, the vast majority of this allowed success is, in fact, from private payers. And that allowed success is allowed from payment from either the payer themselves or, in some cases, in terms of patient responsibility.
So, I think the long story short here is that, even in lieu of current medical policy, you know, there are payers that see the true value at the time of submission or, in some cases, post-appeal, where we get to further explain medical justification. And so, hopefully, that answers it, you know? I think that the high level numbers you're looking for is probably around 46% of that allowed payment rate, maintaining a high level of ASP, reminding folks that our CMS rate is just under $2,000 at 1,938. And that, you know, it's our job to continue to explain medical justification and look to change that medical policy.
Okay. Got it. And then, you know, since you aren't getting paid on a decent portion of the tests that you're doing, how are you balancing early adoption versus the lack of payment in some cases? And I think, you know, this relates to the most recent earnings call. It sounds like you've maybe dialed back a little bit or taken your foot off the gas pedal a little bit just because you want to kind of catch up in terms of the ability to get paid.
Yeah, you know, maybe I'll make a nuanced statement and then hopefully answer your question, which is, you know, there are multiple things to consider. You know, first and foremost is our monthly and quarterly burn rate, our ability to raise capital, the volume needed to gain attention by payers, and I'll explain that later. And then, finally, what is, if any, a linear correlation between claim submission and payment or receivables, you know? To your point, we believe, at least, you know, if you ask Dennis and Lishan that we're probably mid-throttle, I think that we're probably more quarter-throttle with our commercial ramp-up. And, you know, we're probably at that last mile, you know, to more consistent payment. We probably believe that we have critical mass in terms of testing volume to get, you know, the attention of medical directors.
Keep in mind that all these private payers have a number of medical directors that make decisions based on their constituents, their patients, you know? There's no need right now for us to further step on the throttle until we've really increased that collection rate. You know, when reimbursement becomes more fulsome, we can really step on the gas. As I mentioned, you know, in the previous question, we've built processes in and around and across our organizations, and we're ready to scale, you know? We've already proven that clinicians will order the test. You know, we have the ability now to flip that growth switch at any time.
Okay. And then, just in terms of Medicare, maybe you can give us an update on where things stand there in terms of gaining coverage and, you know, what, if anything, there's left to do on Lucid's side there?
Yeah, so, in terms of Medicare for molecular diagnostics, they farm some of that work out to a program called MolDX based out of a Medicare-approved contractor, Palmetto GBA in South Carolina. And out of the many things that they're going to look for, you know, as we submit for medical policy change, there's really three main ones. There's clinical validity, you know, which is, does your test work in its intended-use population? Clinical utility, which is really important to payers.
It's proof that clinicians and patients abide by these test results. And then, finally, analytical validity, which is a series of tests that confirm, you know, what's happening at the lab level is actually happening. So, we believe we have base level data across all of the above to successfully submit to and navigate the MolDX tech assessment process. You know, our plan hasn't changed.
We plan to engage mid-year, which is in line with a few things. First and foremost, the peer review of a clinical validity study from some of the BETRNet data. So, BETRNet is the Barrett's Esophagus Translational Research Network Consortium out of the NIH, which is comprised of seven, you know, well-known universities. And, you know, that's already in preprint and been submitted, as well as the submission of our own BE-1 screening study, which adds additional support to the intended-use population. So, all in all, I think our data is pristine, and we look forward to having a comprehensive review with the MolDX team in the coming months here.
Okay. And then, one area where you have had some success from a payer perspective is PPOs. So, can you talk about, give us a couple examples of where you've had some PPOs or, I guess, specifically what the PPOs are that are covering your test and, you know, why has this particular group of insurers kind of gravitated toward the test and been more willing to maybe pay for it than some of the other payers?
Yeah, great. I think what you're probably referring to is our contracts with secondary PPOs, including one of the largest PPO providers, which is MultiPlan. So, just to clarify, there is a slight nuance or difference between contracted and covered lives. You know, we have tens of thousands of contracted lives. But those lives are also beholden to medical policy at the level of the payer itself, right?
You know, in this case, medical policy in and around screening for a well-known at-risk population, as well as, you know, screening for this only known precursor to esophageal cancer, which is Barrett's esophagus. So, in parallel to the MolDX submission, we've already had and will continue to have a high level of activity across the majority of private payers, you know? Even for our small lab, we've submitted to a couple hundred payers, you know?
So, including the big ones, you know, sometimes referred as BUCA, you know, Blue Cross, United, Cigna, and Anthem. So, our greater market access team works daily on educating medical directors on this disease state, the epidemiology, the unmet clinical need, our two-minute office-based tests, and, of course, all of our associated clinical data I just described. So, I think we'll just continue to use our quarterly earnings calls, you know, our 8-Ks and press releases to update the investment community in general on any and all movement with payers.
Okay. And then, I think the other positive news in the last couple years has been that there has been some positive mentions in clinical guidelines for EsoGuard or at least, you know, the esophageal screening test, maybe not EsoGuard specifically. But can you give us an overview of what these are and, you know, what it means to Lucid?
Yeah, thanks, Mike. I mean, this is a really important topic, you know, as payers take these society guidelines, especially national society guidelines, into account for coverage and contracting opportunities. So, both the American College of Gastroenterology or ACG, as well as the American Gastroenterological Association or AGA, not only define who this patient population is, but also recommend screening for this population. They both also recommend the use of non-endoscopic cell collection in collaboration with molecular diagnostics, you know, like EsoGuard and EsoCheck.
And it's at the same level of recommendation as evidence as what I would consider to be the current gold standard, which is upper endoscopy. So, guidelines are important. As a matter of fact, one of the biggest reasons for denial, at least our denials, is medical justification, which is really interesting because all of our patients meet said society guidelines, you know? Which really gives us a leg to stand on when we approach these payers about the appeals process for denials and medical policy change for, you know, as I mentioned, a very well-defined at-risk group.
Okay. And you have seen eight consecutive quarters now of strong year-over-year growth for EsoGuard test volume. Can you talk about what's driving the growth and where in your sales channels the growth has primarily come from?
Yeah, so, I think the way I'm reading that question, Mike, is that we're talking in and around patient acquisition, you know? So, let's talk about, yeah, how we acquire these patients and where they are. So, first is the how, right? I think we've mentioned this for years now that we acquire patients in a multitude of ways. And what we're looking to do is conform to standard clinical workflow to make it easy on our clinicians. We want to go to where the patients are, right?
And so, the first is our LTCs, our Lucid Test Centers. So, we have brick-and-mortar locations, around 13 of them in and around the United States, where we offer cell collection as a service, you know? Not unlike LabCorp or Quest would with phlebotomy, where these primary care physicians, especially, are used to referring patients out to specialists as well as laboratories.
And so, we provide cell collections as a service for those individuals. The second is what we call internally satellite testing, where in certain states, we have the ability to go on-site, to be within the doctor's four walls and provide this service to that well-defined population in their building, you know? As of January of 2023, we've also been hosting health fairs that we call our CYFT or Check Your Food Tube free cancer screening events, where we're really focused in and around first responders, specifically firefighters, who have an even more increased risk of cancer in general, but a much higher risk of esophageal cancer, almost a 62% increase and almost a 40% increase in mortality, right?
And then, finally, there are rules that we have to follow in certain states like Florida, where things like a mobile test unit, where we have a van that drives around that serves, you know, EsoCheck as a cell collection service to providers in the area and also serves as a great marketing tool. So, that's ways that we acquire patients, you know? And next is, let's look at where these patients are, right? Number one, the bulk of our patients, not surprisingly, due to what I described probably earlier, is coming from primary care, you know? If we look at where these patients are, I think I always break it up into three big groups. First is Rite Aid, Walgreens, and CVS. Most of us, guilty, never make it past that. We grab our Tums and we go home.
The second largest group, where there's tens of millions of patients, is your primary care setting, right? Where we know there's almost 40 million prescription proton pump inhibitors that are prescribed every year. And then, finally, the specialists, you know, where we've started a lot of our work and we continue to collaborate with the gastroenterologists and foregut surgeons. But as I mentioned, in terms of where we're acquiring the most of our patients, around 70% come from that primary care setting.
Okay. And then, I want to ask you about the competitive landscape. I think there's maybe at least one other private company that's working on a similar test, very early stage. And then, probably more significantly, Exact Sciences recently released some data on their early-stage Oncoguard Esophagus test. So, maybe just comment on, you know, how many competitors there are, who they are, and where they're at. And then, you know, in particular, this Exact Sciences data, I'd be curious to get your take on how that compares to EsoGuard.
Yeah, so, the fast answer is right now, there is no competition, right? And so, we're truly the only ones that are commercially available in the U.S. market. But to your point, we are expecting market entrance in the coming years. You know, part of me wants to say it's not a bad thing, right? This is such an unmet clinical need with such a large addressable patient population that more eyes and ears in and around this disease state, more education is going to help all of us, right? All ships rise in high tide.
But let's just jump into real quick the Exact Mayo data, because this was a recent thing. So, they did recently publish new data in the Clinical Gastroenterology and Hepatology Journal. And the headline sounded good, but let's kind of dig into those details. So, first, this isn't the first time that they've published data, but it is the first time they published data post-Lucid's acquisition of Capnostics in late 2021. And it's the first time that they've trained a new algorithm and are using a specific three-marker panel.
So, on the surface, their headline would indicate, and the headline was that they have a sensitivity of over 82%, that it's just under EsoGuard's performance, you know? So, as a reminder, our Science Translational Medicine paper had an overall sensitivity of 88, our recent VA study around 93%, the BETRNet data around 85, and the soon-to-be-released BE-1 screening study is also in line at 88%. But the critical number that's not in that headline is the sensitivity for short-segment Barrett's esophagus, which is defined clinically as Barrett's esophagus measuring about one to three centimeters visually.
So, I think we have to first acknowledge that the vast majority of BE is short-segment, you know, over 70%. So, missing this stage of precancer is a true diagnostic failure. And in their text, their SSB or short-segment Barrett's esophagus sensitivity is really poor. It's around 63% versus EsoGuard's short-segment Barrett's esophagus sensitivity, which has clinically been between 86% and 100%. So, the sole reason, the only reason for screening is to save lives by preventing esophageal cancer.
I can't stress it enough. We're talking about true cancer prevention. And this requires detection of esophageal precancer, and SSBE or short-segment is the most common type. So, next really is digging into their cell collection effectiveness. Now, I just mentioned that in late 2021, Lucid acquired a company called Capnostics, which has a sponge-based device called EsophaCap that Mayo was using up until last year.
You know, EsoGuard's clear superiority over Oncoguard and short-segment is a direct result of EsoCheck's superiority as a cell collection device, right? The Oncoguard investigators themselves, if you read the paper, attribute their poor performance in short-segment to this sponge-on-a-string technology, right? Even a perfect assay, you know, would have suboptimal results with poor cell collection.
EsoCheck, as we know, it gently, precisely collects cells from an anatomically targeted section of the esophagus where this disease state occurs prior to us protecting it from further contamination upon retrieval, where EsophaCap or really any sponge-on-a-string technology for that matter is crude. It's really decades-old technology. It pulls a Brillo pad-like sponge indiscriminately to scrape cells not just from the stomach, but also the esophagus and the mouth, right? Next, I guess we can talk about the procedural effectiveness.
The capsule sponge does require a dwell time of around eight minutes prior to retrieval. In the study that they mentioned, there's actually two device failures where they failed to expand in the first place. They also describe in the study that the use of a tropical or, excuse me, topical antiseptic, which, you know, the wait time for retrieval could potentially be double that, so eight, 10, 15 minutes. As a reminder, the EsoCheck procedure has been completed in clinical research and a research setting in less than 3 minutes. I can tell you that clinically and commercially, it's really a one to two-minute procedure. The authors did report a tech failure of around 10% with EsophaCap.
Our recent data that was presented last year on over 1,500 EsoCheck procedures showed a tech failure of, you know, less than 2%. And then, you know, finally, there's the cell collection device safety, right? The authors reported a really high rate of catastrophic device failures, you know, in the form of sponge detachment. This is really consistent with previous reports of sponge-on-a-string devices like Cytosponge.
Both of these specific attachments they described or detachments, excuse me, in this case, you know, put the patients at risk. You know, one required actually endoscopic retrieval of the sponge itself. The other patient passed the sponge through their entire GI tract. And, you know, in over now 10,000 procedures, EsoCheck has never had a detachment or any other reportable device failure for that matter.
So, you know, I think the Oncoguard authors disclosed additional safety concerns as well, consistent clearly with this the sponge's Brillo pad-like rough surface, which is approximately 20%, which is a really high number, had evidence of esophageal abrasion. And two of them were described as serious and in their own words as "tear abrasions" and one with oozing. Not surprisingly, given its gentle surface, EsoCheck, you know, our data from our BE-1 study showed less than 2% with minimal abrasions.
So, the data reported on Exact's Oncoguard esophagus non-endoscopic precancer test is not consistent with the headline per se, you know, the sensitivity in the critical short-segment Barrett's subgroup from which most of these esophageal cancers arise is very poor. And I guess I can say that we remain highly confident that we have a superior solution for both cell collection as well as assay performance.
So, I will just kind of wrap it up with, you know, you know, we welcome market entrance. You know, I said it, I'll say it again. This is a really large unmet clinical need. The rise in esophageal cancer over the last four or five decades is tremendous. And the more people we have on this, the better. But I stand by the fact that we have a better cell collection technology. We have better assay performance. And the combination of our assay and device is paramount to our success.
Okay, great. That was a very comprehensive response to that. So, okay. So, I want to move on to just kind of your sales and marketing strategy. And you did touch on this a little bit in a prior question that I'd asked. So, you kind of laid out the way that you're approaching the market. So, I don't want to go through that again. But one aspect, though, of the marketing strategy is these test centers. So, can you just talk about the test center's role and maybe more importantly for investors, talk about the economics of running them and why this isn't a, you know, huge cost burden to Lucid?
Yeah, absolutely. I think, as you mentioned, I explained already that we're looking to go where the patients are. We're looking to build into existing clinical workflow. We're not looking to be burdensome on our clinicians. The LTCs or Lucid test centers or our satellite testing is another way for us to go to the patients or provide that well-known referral pattern to laboratory diagnostics. The economics is easy, right? It's only a few tests per month cover the cost of our brick-and-mortar location. These Lucid test centers are a home base for our current field teams.
They're a place for clinicians, as I mentioned, who want to send their patients versus offering in their office. You know, I think it's going to serve a really important role moving forward as we kick off direct-to-consumer education, right? We leverage our telehealth partners like we do now with our CYFT events where these patients need a place to go. So, not only will they be able to see a provider, you know, and have a quick telemedicine visit, they'll also be able to leverage these existing test centers. Per previous comments, that means their cost of patient acquisition goes down tremendously.
Okay. Alright. And then, I think over time, the companies or, I guess, the test mix has shifted more towards sort of the primary care channel as opposed to the GI channel. Can you just talk about that and maybe why that's happening?
Yeah, I think it's a logical shift, right? I mentioned those three buckets: Rite Aid, Walgreens, CVS, primary care, and GI. You know, your GI or your foregut surgeons only see a really small portion, 5%, you know? Not 10%, not 55% of this well-defined at-risk population by society guidelines. You know, so, we know where the patients exist. And a lot of them exist in primary care. So, our shift towards more patient referrals for primary care is really natural. I'll say it's not stopping us from continuing to collaborate with the specialists, with large healthcare systems, with GIs, with foregut surgeons.
We'll continue to always have that as part of our call point. But certainly, even with their support, we're going to where the patients are and helping build referral patterns from primary care. Eventually, you know, direct-to-consumer, you know, where education and marketing will become important about what this disease is, the fact that heartburn causes cancer, and there's a two-minute office-based test to be diagnosed or triaged for said disease.
Okay. Alright. And then, I want to move on to a discussion of your clinical evidence. So, I think you're running some trials right now. And then, there's been some clinical utility studies that were published recently. I think it was in December. Just overall clinical program, I guess, if you could give us an update, it'd be helpful.
Yep. So, real quick, you know, clinical utility, as I mentioned, serves a really important purpose for payers, right? This is, you know, will the prescriber, will the clinician abide by this? Will they prescribe it for the patient? Will the patient actually go and have this test done, in this case, EsoCheck cell collection? And then, will they abide by the result, right? So, positive patients go on to confirmatory endoscopy. Those with known disease go for treatment.
And those with a negative EsoGuard just go on their day. So, yeah, we did publish a number of clinical utility studies, including our San Antonio Firefighter Cohort from last January. Our CLUE study, which is a true prospective clinical utility study run by our primary principal investigator, Dr. Dan Lyster, in Arkansas, as well as an ongoing registry.
So, we have a Lucid registry, Prevent and PreventFF for Prevent Firefighters, where we continue to enroll patients. As a matter of fact, I was at one of our CYFT events in Boston. I got back last night. And out of the 70 or 80 people that we saw on the, you know, in a couple hours over the last two days, almost 100% enrolled in our registry. And this is really important for ongoing clinical utility data. We don't have a plan to stop. We have some stuff coming down the pike, you know.
We have an internal program called PEPI or Positive EsoGuard Patient Identification Initiative, which clinically will be called SPEDI. We're following patients basically all the way through to treatment. And when you look at the clinical validity data, right? We have our Science Translational Medicine data.
We have expected right now in preprint the BETRNet data that's been submitted for peer review. We have the recent publication from the VA, right? So, Veterans Affairs in Cleveland, just around 125 patients, really high-level sensitivity in an intended-use screening population. And then, coming down the pike is also our BE-1 screening study, as well as our BE-2 case control study. So, all these things are wrapping up. But the only thing that's probably a gatekeeper for us to engage with MolDX is what's already been submitted for peer review and in preprint, which is that BETRNet data.
Okay, got it. And then, I think earlier on, there were plans to, over the longer run, at least seek an FDA approval or de novo clearance, maybe is the better term. But for EsoGuard, is that still something that you're planning to do? I know it's not required per se because it's a, you know, CLIA test.
First, let's acknowledge the question from before that we maintain committed to continuing to gather clinical research needed for all of these things, you know. I'm happy to report that our data is pristine. It continues to be. We'll continue to work with high-level collaborators. But, you know, as you mentioned, as it relates to FDA approval, you know, or premarket approval for the combination use of EsoCheck and EsoGuard, yeah, at some point in the future, it probably will make sense, you know.
For those that are paying attention to the industry, the FDA came out with recent rulemaking, right? Where this will go into effect in April and we have a few years to prepare, where the FDA is looking to take over oversight of LDTs. You know, whether the rule is oversight of LDTs under CLIA and CAP or they're under the FDA, it's not a limiting factor for us. We were built on the notion that we were going to submit for an IVD. Our parent company is a medical device company. Holds the highest level of standards for quality management.
Under the proposed rules, we feel that we're in a good shape from both a quality management standpoint. And otherwise, we'll comply within, you know, the timelines that they allotted. But to your point, it's not necessary right now, you know. Do I personally see value in the future to an IVD submission? Absolutely. But also, as it currently sits, it's as an early-stage diagnostic, it's really constricting, right? And so, running EsoGuard as a laboratory test will always probably be a part of our commercial strategy.
Okay, understand. And then, last year, you transitioned to a new revenue cycle management provider to help you collect your payments more effectively. So, can you just give us an update on this and to what degree it's helping with the collections?
Yeah, we saw value early last year in transitioning to a new partner. We stopped submitting claims in May and started up again in mid-June with our new partner, Quadax, right? So, when I think about market access, there's really two pieces to this. One is the operational aspect, which is your revenue cycle management.
The second is your payer relations piece. So, from a medical policy submission or claim submission, you know, what we've been doing with Quadax is building out a process for claim submission for a more sophisticated appeals approach on those denials, as well as implementation of things like prior authorization. So, you know, I think what we're seeing is a more efficient process, you know. Evidence is the speed to adjudication, how quickly we're submitting claims and how quickly we're getting paid or getting to a denial so that we can start appeals.
All of this helps us move from what is considered out of network to in network. So, you know, really happy with the progress we've made with our new partner, Quadax, and we'll continue to report on that in the coming months.
Got it. And then, you referred to this earlier, I think, but Lucid also did hire some experienced market access people to try to, you know, pursue insurance coverage and whatnot. So, can you maybe talk about the folks that you hired and kind of what they're doing day-to-day to increase the coverage?
Yeah, Mike. People, process, performance, right? In that order. And so, yeah, we hired some great, really experienced payer relations and market access folks that have been helping us really build out this entire portfolio, not just for submission to MolDX, but as mentioned earlier, to all private payers. And so, they're overseeing not just the revenue cycle management side, but also the medical policy change, right? Leveraging the existing and future clinical evidence to educate these medical directors, these payers on the unmet clinical need on this disease state, the epidemiology, our two-minute office-based test. And they're doing a really good job of it. So, that's one avenue.
There is another piece here too, which is our interest in direct-to-employer opportunities, where we've also built out a team where we're going directly to HR, to benefits administrators, you know, to coordinators, to brokers who look to add EsoGuard as a benefit to an existing group or plan, whether it be self-insured or otherwise. And so, we have a lot of high expectations. I mentioned in December that this is a transformational year in terms of Lucid in general.
And part of that transformation is, you know, a more efficient claim submission and appeals process, a lot of activity in and around private payers and medical policy change, and also an initiative where we're going direct-to-employer. So, all of these things we're doing in parallel.
Okay, got it. And then, I just have a few financial questions that sort of wrap things up here. I understand your volumes are really low right now. And if you're not getting paid for every test, it's not going to result in a great gross margin. But I guess what I'm getting at is longer term, when you start to collect on, you know, 80% to 90% of your tests, you know, where do you think the gross margins can go?
Yeah, I think it's a fair way to answer this that, you know, when you look at the fixed costs of running the lab around $1 million a quarter, the incremental costs of running a test around $200 per patient, and we do believe there's probably room for improvement, that that next patient in the door is always 90% margin, right? And so, as we fully scale, as we realize the potential of our field team, as we leverage direct-to-consumer and these patient costs go down, there's a lot of room for improvement and we'll continue to maintain this high level of margin, you know, in the 90th percentile.
Okay, got it. And then, what about your operating expenses in 2024? I know there's been some cost reductions. So, you know, and I don't think you're going to give specific dollar guidance, but just generally, I mean, should it be, if we look at 2023 as a baseline, would it be, you know, kind of flat, up, down from 2023?
Yeah, no, I think the word is flat. You know, if you looked at 2023, we were really flat the second, third, and fourth quarters as well. We're prepared to ramp up, as I mentioned, when the reimbursement process gets to a place where we're realizing more money is there, you know. With additional realization, we'll plan to scale again. But right now, we'll continue to keep those claims flat. And if I haven't mentioned it earlier, you know, it's important that we continue to kind of be annoying to these medical directors, right? That we're seeing enough claim submission that we have a seat at the table to discuss medical policy change for this well-known patient population.
Okay. And then, finally, just on cash, because it's an important part of the story for an early-stage company. So, can you remind us, you know, where you were at at the end of the year, end of last year, sorry, 2023, and, you know, just the cash burn rate and how far you think you can get with the remaining cash?
Yeah, I can be a little bit more specific than that. Obviously, we just had our earnings call. So, with the recent cash raise, our pro forma cash on hand is around $36 million. And our average burn rate is $8 million per quarter, right? And so, we continue to be really picky in terms of how, where we're spending those money. And, you know, our focus is obviously revenue generation and all the activities associated with that, as we described in this conversation.
Okay, great. Well, timing worked out. We're right at a 40-minute mark. So, I think we're going to have to wrap up there. But thank you, Shaun.
Mike, it's not always great that I talk so fast, but this was one of those scenarios where it worked in our favor. So, again, I appreciate it. We'll talk to you guys soon.
Okay, thanks.
Take care.