Expanded Reimbursement And Cash-Pay Programs Will Open Future Markets

Key Takeaways

• Expanding reimbursement coverage and leveraging NCCN guidelines are strategies expected to enhance revenue and credibility with payers.
  
• New sales strategies and NIH grant could significantly boost revenue, with potential market expansion and direct contracts increasing financial stability.
  
• Uncertainty in Medicare coverage and low average selling prices pose challenges to revenue growth, financial stability, and potential over-reliance on new revenue channels.

Catalysts

Operates as a commercial-stage medical diagnostics technology company in the United States.

• Lucid Diagnostics is expanding reimbursement coverage for its EsoGuard test, starting with securing a commercial policy with Highmark Blue Cross Blue Shield and further engagements with other payers, setting a precedent for future coverage. This expansion is expected to drive revenue growth.
  
• The company is leveraging updated NCCN guidelines that align with existing clinical guidelines, enhancing credibility and likely bolstering its negotiating position with commercial payers, which is anticipated to positively impact projected revenues.
  
• Lucid Diagnostics has restructured its sales strategies by incorporating direct contracts with employers and launching a cash-pay concierge medicine program. These initiatives are expected to increase revenue generation and cut the burn rate in the second half of the year.
  
• An $8 million NIH grant was awarded to study EsoGuard for broader indications beyond GERD patients, potentially expanding the addressable market and substantially increasing future revenue opportunities if results are positive.
  
• The company’s pipeline includes discussions with larger aggregators and health systems for concierge medicine, providing a potential catalyst for increased revenue recognition given that these contracts involve fixed payments.

Lucid Diagnostics Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Lucid Diagnostics's revenue will grow by 129.8% annually over the next 3 years.
• Analysts are not forecasting that Lucid Diagnostics will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Lucid Diagnostics's profit margin will increase from -1699.9% to the average US Medical Equipment industry of 13.0% in 3 years.
• If Lucid Diagnostics's profit margin were to converge on the industry average, you could expect earnings to reach $6.6 million (and earnings per share of $0.05) by about July 2028, up from $-70.9 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 95.0x on those 2028 earnings, up from -1.7x today. This future PE is greater than the current PE for the US Medical Equipment industry at 31.1x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.67%, as per the Simply Wall St company report.

Lucid Diagnostics Future Earnings Per Share Growth

Risks

• The company's current revenue from test claims is inconsistent, with a substantial portion of collections stemming from claims submitted even 18 months prior, potentially impacting short-term cash flow and financial stability.
  
• Despite increased test volumes, the effective average selling price (ASP) remains low at around $300 per test, which might challenge revenue growth projections and overall profitability if not improved.
  
• The timing and certainty of Medicare coverage for EsoGuard remain uncertain, with significant process and bureaucratic requirements that could delay revenue recognition and business momentum.
  
• Relying heavily on the recently established cash-pay program and concierge medicine sector for revenue growth entails risks if these new channels don't generate the anticipated revenue, potentially affecting earnings projections.
  
• There is significant dependence on securing broader insurance coverage and transitioning out of the current out-of-network status to achieve the projected revenue targets; failure to secure further policy updates could hinder revenue growth and create financial pressures.

Valuation

• The analysts have a consensus price target of $3.792 for Lucid Diagnostics based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $7.75, and the most bearish reporting a price target of just $2.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $50.6 million, earnings will come to $6.6 million, and it would be trading on a PE ratio of 95.0x, assuming you use a discount rate of 7.7%.
• Given the current share price of $1.12, the analyst price target of $3.79 is 70.5% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.