LUCD Q4 2024: Medicare LCD Flip to Unlock $2K Tests at 90% Margin
- New Revenue Channels: The company’s strategic pivot to secured cash-pay concierge medicine contracts and direct employer contracting is already showing early traction—with over 20 concierge contracts signed—providing more predictable, upfront revenue that could lower their cash burn rate.
- Medicare Coverage Upside: A positive response from MolDX, potentially flipping the existing non-coverage LCD to coverage, would accelerate revenue recognition (shifting from waiting on cash collections to recognizing revenue at report delivery) and allow submission of a one-year backlog of Medicare claims.
- Market Expansion Opportunity: An $8 million NIH grant to study an expanded indication (targeting patients without GERD) could significantly enlarge the market—potentially adding up to 20 million more patients—further driving long-term growth.
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Medicare Coverage
Q: Expect positive Medicare LCD approval soon?
A: Management expects a draft LCD that flips the test from non-coverage to coverage in the first half, with final steps seen as formality, underscoring a key milestone for revenue growth. -
Margin Outlook
Q: How will margins improve with Medicare uptake?
A: With Medicare coverage, the test’s set price near $2,000 and a direct margin of about 90% should enhance operating leverage without significantly increasing burn rate. -
Effective ASP
Q: Why is the effective ASP so low?
A: The low ASP reflects the timing of cash collections rather than lower reimbursement, as payments are spread out over earlier and current claims despite a consistent allowable of around $1,600 per test. -
Test Volume
Q: How should future test volume be viewed?
A: Management remains conservative on test volume, targeting between 2,500–3,000 tests per quarter via traditional channels while expecting revenue improvements first before volume increases materialize. -
NIH Grant Opportunity
Q: How big is the expanded market opportunity?
A: The $8 million NIH grant supports studies for an expanded indication, potentially adding up to 20 million additional patients, thereby significantly enlarging the addressable market. -
Pipeline Outlook
Q: What is the current sales pipeline status?
A: The pipeline for concierge and contracting channels is robust, with over 20 contracts signed recently and active discussions that should translate to contracted revenue as the sales efforts mature. -
Highmark Coverage
Q: How significant is the Highmark milestone?
A: Although Highmark represents a modest regional plan, it sets a critical precedent for future payer engagements, lending credibility to the market expansion strategy.