Lucid Diagnostics Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022. Lucid is a commercial-stage diagnostics company and a majority-owned subsidiary of PAVmed Inc. Its principal products are EsoGuard, a laboratory test, and EsoCheck, a cell-collection device.
Financial performance and position
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $0.076m | $0.200m | $0.265m | $0.200m |
| Cost of revenue | $1.626m | $0.144m | $1.996m | $0.144m |
| Operating expenses | $14.425m | $6.710m | $41.508m | $16.378m |
| Operating loss | $14.349m | $6.510m | $41.243m | $16.178m |
| Net loss | $14.349m | $6.957m | $41.243m | $16.772m |
| Basic and diluted loss per share | $0.39 | $0.49 | $1.15 | $1.19 |
Margins: Revenue remained small relative to testing and laboratory costs; cost of revenue exceeded revenue in both 2022 periods, producing negative gross profit. The filing does not present a gross-margin percentage.
- Cash and liquidity: Cash was $26.934m at September 30, 2022, down from $53.656m at December 31, 2021. Current assets were $29.847m versus current liabilities of $9.700m.
- Cash flow, nine months: Operating activities used $25.427m; investing activities used $3.905m; financing activities provided $2.610m. Ending cash was $26.934m.
- Debt and obligations: The balance sheet shows no conventional borrowing balance. Liabilities include $6.610m due to PAVmed, mainly for the CapNostics transfer, employee-related costs and expenses paid on Lucid’s behalf, plus $2.003m of operating lease liabilities.
- Other metrics: Stock-based compensation was $11.251m for the first nine months. Shares outstanding were 37.016m at quarter-end. The $50m Cantor committed equity facility had provided approximately $1.8m through September 30.
Material changes versus the prior comparable periods
- Q3 revenue declined $0.124m year over year, while nine-month revenue increased $0.065m. The prior RDx commercialization agreement ended in February 2022; Lucid transitioned to its own laboratory, with test-result revenue partly offsetting the loss of RDx monthly fees.
- Operating expenses rose substantially as Lucid expanded commercial operations, laboratory activity, staffing, sales and marketing, and development. Nine-month sales and marketing increased to $11.121m from $2.627m; general and administrative expense to $18.223m from $7.793m; and research and development to $9.024m from $5.814m.
- Cash declined by $26.722m from year-end. Lucid also recorded new operating lease assets and liabilities and acquired laboratory-related intangible assets.
Outlook, management commentary and risks
- Management expects recurring operating losses and continued reliance on debt or equity financing. It stated that cash on hand and committed equity sources were expected to fund operations and obligations for one year from issuance of the financial statements; this is not a revenue or earnings forecast.
- Commercialization and reimbursement remain central uncertainties. Medicare payment had a stated determination of $1,938.01, but local coverage determinations were still proposed, not final. The company was also pursuing private-payer coverage; revenue estimates may be constrained by limited reimbursement history.
- Management reported that ACG and AGA guidance supports nonendoscopic capsule-and-biomarker screening as an alternative to endoscopy. AGA guidance also broadened the potential screening population to certain at-risk people without reflux symptoms. Adoption and coverage are not assured.
- Lucid delayed the BE-1 screening trial to prioritize reimbursement-supporting studies; it continued the BE-2 case-control study, with enrollment planned through Q2 2023. EsoGuard’s FDA PMA pathway requires completion of a clinical trial. EsoCure remained under development.
- After quarter-end, FDA expanded EsoCheck clearance to adults and adolescents age 12 and older. Lucid reported beginning manufacturing at Coastline in October 2022 and expected to transition from its existing manufacturer by mid-2023.
- Related-party exposure is material: PAVmed manages certain operations, the MSA fee increased from $390,000 to $550,000 per month effective July 1, 2022, and PAVmed may elect payment in cash or Lucid shares subject to a stated share cap.
- Key risks include market acceptance, reimbursement and regulatory outcomes, clinical evidence, ability to raise capital, execution of commercialization and manufacturing plans, and the company’s relationship with PAVmed. Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Subsequent cash use, available financing capacity and whether the stated one-year funding expectation remains supportable.
- Actual test volumes, realized reimbursement and collections, payer coverage decisions, and the timing and terms of any final Medicare coverage determination.
- Progress and results for the BE-2 study, the status of the delayed BE-1 trial, and the FDA pathway for EsoGuard.
- Execution and economics of the laboratory and manufacturing transitions, including whether Coastline can scale production as planned.
- Future dilution and related-party payments under the Cantor facility and PAVmed MSA, including any stock-based settlement.