Lucid Diagnostics Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Amounts are in U.S. dollars; financial statement figures below are in millions unless stated otherwise. Lucid is a majority-owned subsidiary of PAVmed and develops and commercializes EsoGuard and EsoCheck for detecting esophageal precancer, while also developing EsoCure.
Financial performance and liquidity
| Metric | Q2 2022 | Six months 2022 | Comparable 2021 period |
|---|---|---|---|
| Revenue | $0 | $0.189 | $0 in Q2; $0 in six months |
| Cost of revenue | $0 | $0.369 | $0 |
| Gross profit (loss) | $0 | $(0.180) | $0 |
| Operating expenses | $14.624 | $26.714 | $6.016 in Q2; $9.669 in six months |
| Net loss | $(14.624) | $(26.894) | $(6.163) in Q2; $(9.816) in six months |
| Net loss per share | $(0.41) | $(0.76) | $(0.44) in Q2; $(0.70) in six months |
- Q2 operating expenses included sales and marketing of $3.873 million, general and administrative expenses of $7.311 million, and research and development expenses of $3.440 million. No Q2 revenue was reported, so a Q2 revenue margin is not meaningful. Six-month gross margin was negative because cost of revenue exceeded revenue.
- Six-month operating cash use was $19.081 million; investing cash use was $2.584 million, including $2.2 million of acquisition payments. Financing provided $0.688 million from option exercises. Cash fell $20.977 million to $32.679 million at June 30.
- Current assets were $35.875 million and current liabilities $7.878 million. Total liabilities were $9.160 million; these included $2.080 million of operating lease liabilities and $2.429 million due to PAVmed. The filing reports no outstanding borrowings at period-end.
- Stock-based compensation was $7.679 million for the six months. Shares outstanding at June 30 were 35.995 million, versus 34.918 million at December 31, 2021.
Material changes and business developments
- Six-month net loss increased to $26.894 million from $9.816 million. Operating expenses rose substantially, principally with higher compensation and headcount, consulting and public-company costs, product development and clinical work, and intangible-asset amortization.
- Six-month revenue of $189,000 came from the former ResearchDx commercialization arrangement, which ended February 25, 2022. The company reported no revenue in Q2. It said claims for approximately 1,000 tests performed at its own laboratory were being processed, including 850 tests in Q2, but reported no collections from those claims by June 30; reimbursed rates were not yet established.
- Lucid established its own CLIA-certified, CAP-accredited laboratory after acquiring assets from ResearchDx. It recognized $3.2 million of laboratory-related intangible assets and paid $2.2 million of the $3.2 million purchase price by June 30; the remaining $1.0 million was paid in July.
- In April, Lucid obtained rights from PAVmed to commercialize EsoCure, subject to royalties and reimbursement of specified development and patent costs. CapNostics was transferred from a PAVmed subsidiary to Lucid effective April 1, with a $2.1 million payment obligation to PAVmed.
Outlook, risks and unusual items
- Management expects recurring operating losses and continued reliance on debt and 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 statements; this is not a guarantee of future funding.
- A committed equity facility allows Lucid to request up to $50 million of stock purchases from a Cantor Fitzgerald affiliate. No shares had been issued under it by June 30; by August 10, 308,152 shares had been issued for approximately $927,000.
- After quarter-end, PAVmed and Lucid approved increasing the monthly management services fee from $390,000 to $550,000, effective July 1, 2022. PAVmed may elect cash or Lucid shares, subject to pricing terms and a maximum of 7,709,836 shares. The related-party arrangement and potential dilution warrant attention.
- Lucid prioritized studies intended to support insurance reimbursement. It delayed the BE-1 screening study indefinitely and planned to continue the BE-2 case-control study through Q2 2023. Medicare coverage remained pending; proposed coverage determinations were still under review. Payor coverage, claim acceptance, reimbursement levels and commercialization remain uncertain.
- Management cited risks including market acceptance, regulatory approvals, financing needs, clinical evidence, reimbursement, intellectual property, growth and integration, cybersecurity and COVID-19. The filing also references the impact of a material weakness among risk factors; management reported disclosure controls effective at June 30 and no material quarter-on-quarter change in internal control over financial reporting.
- No formal financial guidance was provided. The filing describes possible legal claims in the ordinary course but reports no other pending legal proceedings it believed material.
Important facts for investors to verify
- Whether claims for tests performed at Lucid’s laboratory have been collected, and actual reimbursement rates from Medicare, Medicaid and commercial payors.
- Cash burn, cash runway and any use and terms of the committed equity facility, including resulting share dilution.
- The effect of the higher PAVmed management fee, any stock-based settlement and other related-party obligations.
- Progress toward Medicare coverage, private-payor adoption, and the BE-2 study; confirm any changes to the delayed BE-1 plan.
- Current status and disclosure of the material weakness referenced in the filing’s risk factors.