[THREAD]
Deep Dive on Lucid Diagnostics $PAVM
- Product Offering
- $EXAS for esophageal cancer?
- Market Sizing
- Go-to-Market Strategy
- Massive Return Potential (>10x)

Future $PAVM threads on other segments and risk.

Have a starter position.
Please DYODD.
Let& #39;s dig in.
1/ GI Health segment operates under Lucid Diagnostics, 74% owned by $PAVM per Needham Conf. (81.9% per 10K).
Founded & #39;18.
$PAVM financed $17.5mm.

Patent licensed from Case Western (CWRU) for EsoCheck & EsoGuard.

Per 10K, CWRU holds 8.4%. 3 physician inventors each w/ 2.9%.
2/ What does Lucid Diagnostics address?

Early detection in:
- Adenocarcinoma of the esophagus ("EAC") i.e., esophagus cancer
- Barrett& #39;s Esophagus ("BE")

EAC primarily caused by chronic heartburn / acid reflux, or GERD.
Stomach acid damages cells in esophagus.
3/ Squamous cells at nexus of stomach is replaced by columnar epithelium.

Over time, can turn from precancerous into cancerous.

EAC x4 in past 30+ years.
30mm diagnosed GERD patients >50 y.o.
13mm high-risk population w/ other risk factors.
Today, only 10% undergo screening.
4/ Other forms of cancer have declined, but EAC has risen due to lack of pre-screening tools.

Today, gold standard is upper endoscopy / EGD, which requires:
- Sedation
- Fasting
- Taking off from work
- Biopsies

Increasing screening from 10% to 25% can save thousands of lives.
5/ Enter $PAVM.

EsoCheck is an esophageal cell collection device.
- Pill-sized bubble - "collect+protect" tech
- Office-based / <5 min
- FDA clearance on 6/21/19 (adults >22 y.o.)
- Patents end & #39;34
- Manufacturing contract w/ Coastline Int& #39;l

https://www.youtube.com/watch?v=iiv0Gws4sdA">https://www.youtube.com/watch...
6/ EsoGuard is a Laboratory Developed Test ("LDT").
- Received FDA clearance in Dec & #39;19
- Patent ends Aug & #39;24 but if extension of clinical utility approved, expect extension to late & #39;30s
- Accurate in detecting EAC and BE
- 408-patient study; 90% sensitivity / specificity
7/ We believe $PAVM will move needle by engaging in pivotal trials to COMBINE the usage of EsoCheck + EsoGuard (as In Vitro Device "IVD") to expand screening.

EsoGuard-BE-1: screening study; focus high-risk GERD
EsoGuard-BE-2: case control study of patients w/ known disease
8/ Expect to finish enrolling by end & #39;21 w/ registration in & #39;22.
Robust literature will increase usage/confidence.

Breakthrough Device designation in Feb & #39;20 means:
- Priority FDA review
- Bipartisan bill seeks for Medicare to cover for 3 yrs while determine permanent coverage
9/ Submitted dossier in May & #39;20 to MolDx, molecular diagnostic group of Palmetto, Medicare Administrative Contractor ("MAC").

MolDx coordinates coverage for molecular tests and expect coverage determination by late fall.

No private payers yet but engaged 2 consulting firms.
10/ CMS has already given final reimbursement of $1,938.10 for EsoGuard under CPT Code 0114U.
(Applicable 1/1/21-12/31/23)

This reimbursement can be used as guidepost for private plans.
11/ Filed EU& #39;s CE Mark for EsoCheck in Nov & #39;20.
EsoGuard falls under self-declaration category, should be active by mid & #39;21.

Also in separate clinical trial with Penn to evaluate $PAVM vs. endoscopic biopsy in assessment of another condition, Eosinophilic Esophagitis ("EoE").
12/ Why is the above all so attractive?

Pre-screening is best method to prevent cancer.

We& #39;ve seen this movie in the past with ColoGuard by $EXAS.
Since its pivotal trial... market cap rose from $600mm to $22Bn today.
13/ Importantly, in-depth look at dynamics actually favor $PAVM over $EXAS.

- $EXAS was in landscape w/ existing screening, whereas upper EGD screening is <10%
- $EXAS competed w/ GI, whereas $PAVM will lead to confirmatory biopsy even w/ positive result.

$PAVM expands funnel.
14/ $PAVM goal is not to replace EGD but to enlarge top of funnel in screening.

If positive -> Confirmatory diagnostic procedure or therapeutic ablation w/ GI
If negative -> Follow-up sessions w/ GI

As a result, healthcare systems can allocate resources better.
15/ Assume:
- 13mm U.S. male GERD patients w/ RF
- 10% already screened
- 11.7mm target screening pool
- $1,938 / test
- $22.7Bn TAM (Co provided $25Bn, w/o 10% haircut)

Above excludes 18mm female GERD patients & 30mm silent GERD patients.
Big opp as GERD PPI sales >$13Bn/yr
16/ If achieve:
1% -> $227mm
5% -> $1.13Bn

We believe $PAVM is a superior product vs. competition.

Other endoscopy requires effort, capital equipment or time.

Med device giant $MDT rolled out Cytosponge.
Though slow to gain traction, product also usable in any office.
17/ List of other competition include:
- PillCam Eso (cleared by FDA in & #39;04)
- Interspace Diagnostics (IDXG)
- NeoGenomics (NEO)
- Cernostics (private)

Large market so expect competition but $PAVM is very well positioned.
Others in pic below. A lot acquired by larger players.
18/ Another product in $PAVM& #39;s GI Health segment (not FDA approved yet) is EsoCure.

- Ablation technology to treat dysplasia
- Built on $PAVM technology (IP called Caldus)... not licensed from CWRU
- $PAVM will have arrangement w/ Lucid re: selling / marketing
19/ What is $PAVM& #39;s go-to-market plan for Lucid?

Omnichannel approach:
1) GI/Forgut Sales Channel
2) PCP / Internal Medicine
3) Direct-to-Consumer

Believe all 3 work in unison to drive awareness / educate public that chronic heartburn can lead to cancer.
20/ Idea is to build EsoCheck& #39;s own network of operators (has some parallel to $TMDX& #39;s efforts in OCS National Program).

$PAVM initiative called Phoenix Program.

Commercialization process is important. It& #39;s not just about the product but how to sell it and speed up adoption.
21/ 7 regional sales manager (8-10 goal), covering 50 independent sales reps (100-150 goal).
1 clinical specialist (7 goal); train clinicians / support accounts.

Lucid will train a network of FT nurses, sent to:
- Partner physician
- Own testing center
- JV w/ lab testing co
22/ EsoGuard testing process...
1) Physician/NP evaluates patient & assesses heartburn + RF
2) Lucid-trained Physician/NP performs procedure
3) If positive, treatment via endoscopy + ablation on dysplasia

Current sales effort on gastroenterologist who does all 3 steps.
23/ Once broad GI adoption, can drive w/ PCP & DTC efforts.

Mascot: Freddy the Food Tube
- Social media engagement
- Drive self-referrals
- Patient inquiries

https://www.youtube.com/watch?v=PswcQ4jyq7g

Step">https://www.youtube.com/watch... on gas pedal once geographic coverage of testing locations ready and everyone has access.
24/ Keep in mind Covid-19 was negative impact.
"Testing volume grew steadily during the fall until the winter Covid surge filled hospitals and the testing pace slowed once again" Dr. Aklog, CEO

- Pace remained negative in January
- Rebound post-vaccination of healthcare workers
25/ Despite performing few tests, no revenue recognition yet.

Per CEO, must be recognized upon receipt of cash. $PAVM didn& #39;t submit claims yet - keep in mind CMS payment became effective in 1/1/21.

Past claims submitted as of Q1& #39;21.
Revenue coverage metrics coming Q1& #39;21.
26/ At steady-state for EsoGuard...
- GM of 90%
- Variable sales rep cost of 20-25%
- Contribution Margin of 65-70%... or $735-790mm @ 5% sales penetration off sales opp above.

Note: $PAVM pays royalty fee to CWRU for licensing IP for EsoCheck / EsoGuard.
27/ Important point to note - $PAVM is looking to spin-off Lucid into separate co. Announced intention as of 2/22/21.

Already hired bankers. Unsure if going traditional route or SPAC merger route.

Mgmt believes Lucid can better capitalize on potential if trade separately.
28/ $PAVM confirmed they are not selling shares / exiting by any means.

Management still TBD for NewCo.

By going this route, Lucid gets more funding but $PAVM shareholders will get diluted.

If SPAC, will get SPAC Cash-in-Trust and PIPE $ but give up PF % ownership.
29/ Lots of detail not yet disclosed / hammered out, but...

If we go by EsoCheck + EsoGuard (even excluding $PAVM& #39;s EsoCure)...

We believe Lucid can reach approx. $1Bn in sales assuming 5% market share.
Applying a very conservative 5x sales multiple gives $5Bn in EV.
30/ Per $PAVM& #39;s Needham Conf. using $4.89 stock price (4/14/21)

Basic Shares: 82.5mm

Adj. for:
PAVMZ Warrants ($1.60 strike)
Options ($2.55 strike)
Convert Pref Stock ($3.00 conv)
PAVMW Warrants ($5.00 strike)

FDSO: 109.6mm

FD Market Cap of consolidated $PAVM is $535.4mm
31/ Scrubbing subsequent events...
FY& #39;20 Cash: $17.3mm
New Cash: $54.7mm raised in & #39;21 (financing/warrants)
Debt: $14.5mm convert debt paid off in & #39;21
Cash burn: $2mm/mo (i.e., $7mm so far in Q)
Net cash: approx. $50.5mm
EV: $484.9mm

Feel free to let me know if diff numbers.
32/ Was unclear whether options/warrants on conference slide was PF& #39;ed for all recent exercises already.

Either way, this is directionally correct.

Believe investment can 10x.
If multiple was aggressive @ 10x sales, can 20x investment.
This is on Lucid segment alone.
33/ $PAVM is backed by a very capable team of seasoned executives & strategic advisors.

- Chairman/CEO: Lishan Aklog
- Strategic Advisor: Stan Lapidus
- Regulatory Advisor: Alberto Gutierrez
- Medical Advisory Board Chair / Principal Investigator in Pivotal Study: Nick Shaheen
34/ CEO Aklog and his related party Pavilion Holdings Group ("PHG") hold a large stake in $PAVM.
Michael Glennon, his Co-Founder in PHG is still vice-chairman.

PHG was founded as a medical device incubator. Guys at $PAVM have the mindset of savvy capital allocators.
35/ Partner w/ academic medical centers to drive product from concept to commercialization w/ low-risk on the company.

Lapidus is brought in as strategic advisor and joins public Biz Update calls w/ $PAVM.
Founder/CEO of:
- $EXAS (ColoGuard)
- Cytyc (acquired by Hologic $6.2Bn)
36/ Lapidus is tight w/ Sandy Markowitz whose lab established EsoGuard from CWRU (worked together since $EXAS days for >2 decades).

Lapidus& #39; expected involvement in spun-off entity also not disclosed. Nobody better than Lapidus for guiding Lucid.
37/ Alberto Gutierrez $PAVM& #39;s other advisor - former Director, FDA Office of IVD (Perfect bullseye for IVD trials)

Nick Shaheen - Lead figure in Esophageal disease space and Lead author of American College of Gastroenterology Guidelines

Expert for all important aspects of biz.
38/ It is clear that Dr. Aklog designs unique growth plans for each product in $PAVM pipeline.

$PAVM sources top-notch assets from academic medical centers, locks in valuable partnerships and adds value for all products.

When asked about other products, Dr. Aklog said...
39/ "B/c we are working in multiple clinical conditions, we have a targeted and tailored solution for each.

One of the things moving forward that will change is that as $PAVM has grown and we& #39;ve built this infrastructure...

We are looking to do the next Lucids. Lucid 2/3/4"
40/ Just on the Lucid segment alone and applying conservative multiples, we believe $PAVM can potentially >10x.

Feel free to provide any industry insights.
Always appreciate constructive comments.

Thank you - would appreciate RT of thread so can get more perspectives on Lucid.
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