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Operator: Thank you for standing by, and welcome to the InnovAge Fourth Quarter 2025 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. Star 11 again. And now, as a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Ryan Kubota, Director of Investor Relations. Please go ahead, sir. Ryan Kubota: Thank you, operator. Good afternoon, and thank you all for joining the InnovAge 2025 Fourth Quarter and Fiscal Year End Earnings Call. With me today is Patrick Blair, CEO, and Ben Adams, CFO. Michael Scarbrough, President and COO, will also be joining the Q&A portion of the call. Today, after the market closed, we issued an earnings press release containing detailed information on our 2025 fiscal fourth quarter and year-end results. You may access the release on the Investor Relations section of our company website, InnovAge.com. For those listening to the rebroadcast of this call, we remind you that the remarks made herein are as of today, Tuesday, September 9, 2025, and have not been updated subsequent to this call. During our call, we will refer to certain non-GAAP measures. A reconciliation of these measures to the most directly comparable GAAP measures can be found in our earnings press release posted on our website. We may also make statements that are considered forward-looking, including those related to our 2026 fiscal year projections and guidance, future growth prospects and growth strategy, our clinical and operational value initiatives, Medicare and Medicaid rate increases, the effects of recent legislation and federal budget cuts, enrollment processing delays, the status of current and future regulatory actions, and other expectations. Listeners are cautioned that all of our forward-looking statements involve certain assumptions that are inherently subject to risks and uncertainties that can cause our actual results to differ materially from our current expectations. We advise listeners to review the risk factors discussed in our annual report on Form 10-K for fiscal year 2025 and any subsequent reports filed with the SEC. After the completion of our prepared remarks, we will open the call for questions. I will now turn the call over to our CEO, Patrick Blair. Patrick Blair: Thank you, Ryan, and good afternoon, everyone. I'll begin with gratitude to our colleagues across InnovAge, to our participants and families, to our state and federal partners, and to our investors. Thank you for your continued support and trust. Fiscal 2025 was a year of delivery. We made clear commitments, and we followed through. In many cases, we exceeded both our internal goals and external expectations. And importantly, we finished the year with strong momentum heading into fiscal 2026. Today, I'll cover fourth quarter and full-year results, fiscal 2025 guidance for fiscal 2026, and progress we're making to position InnovAge for long-term success. Our fourth quarter capped a strong year of consistent execution. Revenue was $221.4 million, up 11% from Q4 last year. Center-level contribution margin was $41.3 million, representing an 18.6% contribution margin. Adjusted EBITDA more than doubled year over year to $11.3 million, representing a 5.1% margin. We ended the year with a census of approximately 7,740 participants. These results reflect disciplined cost management, strong medical utilization performance, and continued sense of growth. Now turning to the full year. Total revenue was $853.7 million, up nearly 12% year over year. Center-level contribution was $153.6 million, with contribution margin expanding to approximately 18%, up 70 basis points from FY '24. Adjusted EBITDA was $34.5 million, above the high end of our FY '25 guidance of $31 million. Adjusted EBITDA margin nearly doubled from 2.2% in FY '24 to approximately 4% in FY '25. These numbers matter not just in isolation but in the context of what we committed at our Investor Day in February 2024. We committed to expanding margins, and we delivered. Center-level contribution margin improved from 17.3% in FY '24 to 18% in FY '25, with further progress expected in FY '26. We committed to improving clinical outcomes, and we delivered. Key internal utilization measures such as inpatient admissions, ER visits, and short-stay nursing facility visits all improved through execution of our clinical value initiatives. We committed to driving revenue growth, and delivered. Revenue grew at greater than a 10% compound annual growth rate from FY '23 to FY '25. We committed to improving operating leverage, delivered. G&A as a percentage of revenue declined steadily from FY '23 to FY '25. We committed to return sustained positive adjusted EBITDA and delivered with year-over-year improvements and results above expectations. And, critically, we closed the year with no material compliance deficiencies. This combination of responsible growth, financial discipline, clinical performance, and compliance execution is what gives us confidence in the durability of our progress. We're operating in a complex environment. Recent legislation has created uncertainty for many value-based care models, particularly Medicare Advantage and Medicaid long-term care programs. State partners are facing fiscal pressures, which can translate into budgetary and operational strain. PACE is different. The strength of our model lies in the integration and coordination of care. Our interdisciplinary teams personalize care for every participant. Today, approximately 40% of our total cost of care is delivered directly in our centers by our employees under one roof. Through regular center attendance, we seek to maintain an active line of sight into each participant's health status, allowing us to intervene earlier and prevent avoidable hospitalizations and ER visits. For the remaining 60%, our providers individually order or prescribe virtually all other non-emergent care. This integrated, high-touch model gives us a real advantage in managing costs and utilization, and we believe this sets InnovAge apart in an inflationary medical cost trend environment. Looking ahead, we're advocating with the new administration and legislators to broaden the role PACE can play in addressing America's senior care challenges. While today PACE primarily serves a subset of dual-eligible seniors, we see meaningful opportunity to expand access to those who could benefit earlier in their care journey. We're advocating for new pathways, such as a Medicare-only option, that would give more seniors access to the coordination and support services that make PACE unique. With more than five decades of public investment in PACE centers across the country, we believe this is the right time to leverage that infrastructure more fully. Done right, this could both improve quality of life for seniors and generate savings by delaying Medicaid enrollment and prolonging nursing home placement. Importantly, it can also create a natural growth channel for the company as participants' needs increase and they transition into full PACE eligibility. Looking ahead, our guidance for FY '26 reflects both continued momentum and the realities of our environment. We project a census of 7,900 to 8,100, member months of 91,600 to 94,400, total revenue of $900 to $950 million, adjusted EBITDA of $56 to $65 million, and de novo losses of $13.4 to $15.4 million. We expect profitability to build through the year, exiting FY '26 with a higher run rate, and we remain on track to achieve adjusted EBITDA margins of 8% to 9% over the next few years. Ben will take you through the details of this shortly. On growth, census increased 10% year over year in FY '25. We strengthened the foundations of our enrollment strategies and processes while also testing and scaling new channels that are beginning to pay off. We're also building strong partnerships. Last year, we formed a joint venture with Orlando Health, and this past quarter, we announced a similar partnership with Tampa General Hospital. These partnerships extend our reach, strengthen our provider networks, and create new pathways to connect eligible seniors with PACE. We continue to work closely with our state partners on enrollment processing. While we have experienced delays in some states and are monitoring the impact of budget constraints and Medicaid eligibility determinations, these dynamics are incorporated into our FY '26 guidance. Demand for PACE remains robust, and we expect healthy top-line growth as we move through the year. Beyond the numbers, we're advancing our transformation agenda. We're investing in talent, technology, and tools to make InnovAge a more disciplined, efficient, and scalable organization. Approximately 40% of our total cost of care occurs within our four walls of our centers, where we are uniquely positioned as both a payer and a provider to capture efficiencies and improve outcomes. This transformation is not just about tightening operations; it's about reimagining the model for the future, positioning InnovAge as the partner of choice for states, payers, providers, and communities looking to create a more sustainable, continuous senior care. In closing, fiscal 2025 was a strong year. We delivered on our commitments, exceeded expectations, and ended the year with momentum. Fiscal 2026 will be another important step forward, one that we expect to further advance our financial performance, strengthen our model, and bring us closer to achieving our long-term ambitions. I want to thank all our colleagues who make this possible. Every day, they bring both a caregiver's heart and an owner's mindset to serving our participants. They are the reason we've been able to execute consistently, and they will be critical to our success in the years ahead. With that, I'll turn it over to Ben for more detail on the financials. Ben Adams: Thank you, Patrick. Today, I will provide some highlights from our fourth quarter and fiscal year-end 2025 financial performance, followed by our fiscal year 2026 guidance. I am pleased with our overall performance and strong finish to the year. As Patrick mentioned, we really started to feel the impact of our clinical value initiatives throughout this year, and we expect those to carry through into fiscal 2026. We are also pleased with the progress of our new operational improvement initiatives this year and expect them to continue building throughout the next fiscal year. Starting off our fiscal 2025 highlights with Census, we served approximately 7,740 participants across 20 centers as of June 30, 2025, which represents annual growth of 10.3% and sequential quarter growth of 2.8%. We reported 23,000 member months in the fourth quarter, an increase of approximately 10.5% compared to 2024 and an increase of approximately 2% over 2025. Total revenues increased by 11.8% to $853.7 million for fiscal year 2025. The increase was primarily driven by an increase in member months coupled with an increase in capitation rates. The increase in capitation rates includes rate increases for both Medicare and Medicaid, partially offset by revenue reserves and an out-of-cycle risk or true-up payment received in fiscal 2024. Compared to the third quarter, total revenues increased by 1.5% to $221.4 million in the fourth quarter, primarily due to a sequential increase in member months partially offset by a decrease in Medicare rates associated with decreasing risk scores as new participants are entering PACE with lower risk scores and disenrolling participants are leaving PACE with higher risk scores. We incurred $431.2 million of external provider costs during the fiscal year, a 7% increase compared to fiscal year 2024. The increase was primarily driven by an increase in member months, partially offset by a decrease in cost per participant. The decrease in cost per participant was primarily driven by a decrease in inpatient, assisted living, permanent nursing facility, and short-stay nursing facility utilization, a decrease in external hospice care associated with the transition of this function to internal clinical resources, and a decrease in pharmacy expenses due to the transition to in-house pharmacy services. The decrease in external provider cost per participant was partially offset by an increase in inpatient unit cost and an annual increase in assisted living and permanent nursing facility unit cost. During the fourth quarter, we incurred $108.2 million of external provider costs. And when compared to 2025, external provider costs were essentially flat. The stable costs were the result of higher costs associated with an increase in member months offset by a decrease in cost per participant. The decrease in external cost per participant was primarily driven by a decrease in inpatient and permanent nursing facility utilization and a decrease in pharmacy expense associated with the transition to in-house pharmacy services, partially offset by an increase in short-stay nursing facility and assisted living facility utilization. Cost of care, excluding depreciation and amortization, was $268.9 million, an increase of 17.5% compared to fiscal year 2024. The increase was due to an increase in member months coupled with an increase in cost per participant. The overall increase was driven by higher salaries, wages, and benefits associated with increased headcount and higher wage rates, an increase in software license fees, an increase in de novo occupancy and administrative expenses associated with opening centers in Florida and the acquisition of the Crenshaw Center, an increase in contract provider expenses in California associated with growth, consulting fees and shipping costs associated with in-house pharmacy services, and fleet costs inclusive of contract transportation. For the fourth quarter, cost of care, excluding depreciation and amortization, increased 3.5% compared to the third quarter. The increase was primarily due to an increase in consultant fees and shipping costs associated with increased volume of in-house pharmacy services. Center-level contribution margin, which we define as total revenues less external provider costs and cost of care, excluding depreciation and amortization, which includes all medical and pharmacy costs, was $153.6 million for fiscal year 2025 compared to $132.1 million, a 16.3% increase for fiscal year 2024. As a percentage of revenue, center-level contribution margin of 18% increased approximately 70 basis points compared to 17.3% in fiscal year 2024. For the fourth quarter, center-level contribution margin was $41.3 million compared to $40.7 million for 2025, an increase of 1.3%. As a percentage of revenue, center-level contribution margin of 18.6% decreased by approximately 10 basis points compared to 18.7% in 2025. Sales and marketing expenses of $28.2 million increased 13.1% compared to fiscal year 2024, primarily due to increased headcount and wage rates to support growth. For the fourth quarter, sales and marketing expenses increased by 2.6% compared to 2025, as a result of additional marketing support and project timing in the fourth quarter. Corporate, general, and administrative expenses increased 9.6% to $122.1 million compared to fiscal year 2024. The increase was primarily due to the $10.1 million accrual of the potential settlement of the securities class action lawsuit and an increase in employee compensation and benefits as a result of greater headcount and increased wage rates to support compliance and bolster organizational capabilities. These increases were partially offset by a reduction in consulting and insurance expenses. For the fourth quarter, corporate general and administrative expenses decreased 27.9% to $27.8 million compared to 2025. The decrease was primarily due to the potential settlement of the securities class action lawsuit referenced earlier that was recorded in the third quarter. Net loss was $35.3 million compared to a net loss of $23.2 million in fiscal year 2024. We reported a net loss per share of 22¢ compared to a net loss per share of 16¢, each on both a basic and diluted basis. Our weighted average share count was approximately 135.4 million shares for the fiscal year, on both a basic and fully diluted basis. For the fourth quarter, we reported a net loss of $5 million compared to a net loss of $11.1 million in the third quarter and a net loss per share of 1¢ each on both a basic and diluted basis. Adjusted EBITDA was $34.5 million for fiscal year 2025, compared to $16.5 million in fiscal year 2024 and $11.3 million for the quarter compared to $10.8 million in 2025. Our adjusted EBITDA margin was 4.0% for fiscal year 2025, and 5.1% for the fourth quarter. We do not add back losses incurred by our de novo centers in the calculation of adjusted EBITDA. We define de novo center losses as net losses related to preopening and startup ramp through the first 24 months of de novo operation. We incurred $15.4 million of de novo losses in fiscal year 2025. This compares to $12 million in fiscal year 2024. For the fourth quarter, de novo losses were $3.9 million, primarily related to our Tampa and Orlando centers in Florida. This compares to $3.5 million of de novo losses in 2025. Turning to our balance sheet. We ended the quarter with $64.1 million in cash and equivalents, plus $41.8 million in short-term investments. We had $72.8 million in total debt on the balance sheet, representing debt under our senior secured term loan and finance lease obligations. We also refinanced our term loan facility in the fourth quarter with a $50.7 million term loan, renewed our revolving credit facility commitments, and extended the maturity of both to August 8, 2028, from March 8, 2026. For the fourth quarter, we reported positive cash flow from operations of $9 million and had minimal cash capital expenditures of $200,000, primarily due to timing. We completed the share repurchase program that we launched back in June 2024, acquiring approximately 1,426,000 shares of common stock for an aggregate of $7.3 million during the entirety of the program. During the fourth quarter, we acquired approximately 101,800 shares of our common stock for an aggregate of approximately $300,000. Turning to fiscal 2026 guidance, which we included in today's press release, and based on information as of today, we expect our ending census for fiscal year 2026 to be between 7,900 and 8,100 participants. In member months, to be in the range of 91,600 to 94,400. We are projecting total revenue in the range of $900 million to $950 million and adjusted EBITDA in the range of $56 million to $65 million. And we anticipate that de novo losses for fiscal 2026 will be in the $13.4 to $15.4 million range. I will also provide some additional color on a few of the components that comprise our guidance assumptions. Our census and member months reflect the redesign of our eligibility enrollment system due to state Medicaid redetermination. We expect that this will result in more rapid disenrollments in the first half of the fiscal year for those participants who have lost Medicaid coverage and have not been able to regain eligibility. Regarding revenue, we are expecting a low single-digit Medicare rate increase and a mid-single-digit increase for Medicaid. As a reminder, our Medicare rates are based on county-specific rates that are adjusted by CMS in January, coupled with prospective risk score adjustments in January and July. Effective January 1, CMS will begin to transition PACE organizations onto the V28 Medicare Advantage payment model from our current V22 payment model. The process is scheduled to begin on January 1, 2026, and be phased in annually through 2029, starting with a 90/10 split of V22 and V28, respectively, and has been factored into our guidance. Regarding cost of care, external provider costs, and overall center-level contribution margins, we have continued to make measurable progress since we returned to issuing guidance in September 2023. In 2024, we introduced clinical value initiatives, followed by operational value initiatives in 2025. This upcoming fiscal year, while we continue our focus on quality, we are also pushing ourselves to stretch operationally by continuing to reimagine and further refine what we do and how we do it in order to continue growing our adjusted EBITDA margin. As an example, the ramp-up of our new internal pharmacy initiative is going well and is expected to give us more control over pharmaceutical fulfillment, allow us to improve medication adherence, enhance participant outcomes, and streamline logistics. We are also excited to see that the business is reducing costs and is expected to continue generating overall cost savings into the future. In closing, we are pleased with our 2025 results. We continue to push ourselves toward improving and optimizing the business as we strive to be the provider of choice for participants as well as our federal and state partners. We remain focused on quality, and we believe in the value that the PACE program can bring to eligible seniors with complex needs. We look forward to the trajectory of the business and toward the year ahead. Operator, that concludes our prepared remarks. Please open the call for questions. Operator: Certainly. And our first question for today comes from the line of Matthew Gillmor from KeyBanc. Your question, please. Matthew Gillmor: Hey, guys. Thanks for the question. I wanted to ask about member mix and how that's impacting margins and cost trends. If I recall, I think the acuity of the membership is in the process of normalizing with your census growth that had been resuming starting last fiscal year. How far along are you on that process? Is there still more room to go in terms of acuity normalizing? And is there any way to think about the impact that that's been having on margins or some of the utilization metrics you've been sharing? Patrick Blair: Hey, Matt. It's Patrick. Great question. I'd say largely, we've sort of seen the mix rebalancing that we would expect since the sanctions were lifted. We've grown well. We've kept a very balanced pool of enrollments as it relates to people living in the community, people living in assisted living facilities, and I think we've done a really nice job of ensuring that we're a solution to keep people in the community rather than to go into nursing homes. As a result, the mix of our population, the age, the acuity has, I think, progressed much as we anticipated. I'd say we're largely at a point where we feel like achieving our targets. All of our work going forward is about continuing to grow and maintaining an appropriate mix. It does negatively impact our risk score, so we have to be mindful of that shift, which can come with some revenue impacts. But generally, we've got the right mix of healthier folks, and with the right clinical model wrapped around them, they can be a contributing factor to the company's growth and margin expansion. Ben, anything to add? Ben Adams: No. I think you really covered it. If you think about the average tenure of a PACE participant, it's three and a half years or so. We've been going through a normal enrollment process for about two years now, so the mix is pretty much normalized if things have washed through the system. Matthew Gillmor: Okay. Great. That's helpful. And then as a follow-up, I wanted to ask about V28. I heard Ben's comments about the phase-in starting next year. Should we think about that as being a slight headwind to your revenue growth, or is that a slight tailwind? Just wanted to sort of understand how that might play out both in 2026 and then, of course, beyond that as well. Patrick Blair: Well, as I think Ben said in his remarks, we're just sort of entering into this phase where we're starting to see a phase-in of the V28 relative to the V22. It's going to take multiple years for that to play out. As you probably know, there are a lot of variables with the PACE population and how all this will work out. It is included in our guidance, and I just want to make sure that's clear. Ben Adams: No. I think you pretty much hit it. We expect it to be a headwind over the next couple of years. We only provide one year of guidance, so it's all factored in for this year. But obviously, it's something we're spending a lot of time thinking about for future years. Matthew Gillmor: Got it. I appreciate it. Thank you. Operator: Thank you. And our next question comes from the line of Jared Haase from William Blair. Your question, please. Jared Haase: Yeah. Hey, guys. Thanks for taking the questions. Maybe I'll ask on the outlook for EBITDA margins. Congrats on all the progress that you've made there. I know you kind of reinforced the expectation that you're on track for the 8% to 9% target over the next few years. I think the guidance implies about 250 basis points of margin expansion. I guess, number one, should we think of that as a reasonable cadence in terms of margin expansion continuing for the next few years on that pathway to the high single-digit target? And then I'd also be curious if you could just unpack, given all the initiatives and progress you've made, where you think the balance is in terms of the bigger opportunities for leverage between center-level margin and then operating leverage. Patrick Blair: I'll let Ben pick up, but I would just start with I do think a lot of our margin improvement over the last couple of years has been a combination of factors. Being able to reinstitute growth for the company and growing that in double digits. We've had a variety of transformation efforts that focus on a lot of clinical value initiatives. We've done our best to predict when that value will flow through. We've talked about the latency between execution of an initiative and when we start to see the impact flow through the P&L. We're doing our best to predict that, but it's kind of hard to hit on a quarter-by-quarter basis. But I'll say we're very pleased with the work by our clinical teams to address medical costs. I think that is a nice driver of this. As I said in my opening remarks, one of the things that I think we're really developing a strong appreciation for, especially since we've brought pharmacy in-house, is that over 40% of the total cost of care we're delivering with our team, our employees, in our centers. And then this notion that for the remaining 60%, we're ordering that care. We're ordering the specialist visits and specialist services, and that gives us a lot of control. So I do think medical costs are an area we've been very successful in. We've got a great team, and we continue to move there. And then the operating leverage, as we grow our centers, we're getting operating leverage at the center level. Pharmacy insourcing is an area where the real value to that is the medical-pharmacy integration. That's given us more control over the total cost of care when we have pharmacy integrated more closely with our medical. So overall, I think we're pretty pleased with margin growth. And I think it is fair to say that over the next couple of years, the growth we've seen in the last two probably translates over the next couple. Ben, what would you say? Ben Adams: Yeah. I mean, I think Patrick pretty much covered it. I would say that the guidance we put out about the long-term margin opportunity when we met with everybody back in two years ago in February, I think that sort of outlook we put out there probably holds true today. And I think probably today more than ever, we've always been convinced that we'd get to the right margin structure. It was always just a question of when we would get there. So it wasn't an if, it was a when. And I think we feel very confident with the vision we put out a couple of years ago. And I think this year shows us that we're kind of halfway there. Jared Haase: Got it. That's helpful. I appreciate that. And then maybe as a follow-up, I'll switch gears a little bit. But I'm curious, you obviously have the partnership with Epic, your electronic health record, and they've been in the news recently rolling out a number of new AI or automation-related features. I'm not sure if you're able to benefit from any of that at all. I know you probably had some specific modules and implementations related to PACE. But just curious, anything specific to Epic or, I guess, even more broadly, areas where you might see opportunities for automation and continue to take cost out of the cost structure. Patrick Blair: I'm going to flip that to Michael, but I'll say it's a great question. It's something we're spending a lot of time on, really trying to figure out how do we leverage the latest AI-driven tools just to make us a better company and help us with cost efficiencies and quality of care and outcomes, etc. I think, given the size of our company, we certainly don't have the capability or the ambitions of a much larger managed care organization as an example. So to that point, you're correct in that we're working very closely with a broad range of technology partners that we have within the company today. That, of course, includes Epic, and I'll let Michael say a little bit about some of the work there. But then whether it's a medical partner, or it's a claim system partner, or some of our clinical programs, each of those companies has a really robust AI agenda. And ours is really trying to figure out how do we leverage what our partners are developing and then connect that to how we operate as a PACE program. And I think we're off to a good start, but it's certainly early days. Michael, please say more. Michael Scarbrough: Yeah. Thanks, Patrick. And so I would just add, I think as we have continued to invest in our technology capabilities, we've really gone with a kind of a best-in-class strategy and doing so. Tools like Epic and others provide us a number of out-of-the-box capabilities and out-of-the-box solutions that we're finding a lot of applicability with within our business. Everything from how we provide clinical care, inform our clinicians, highlight for them information about our participants, which might not be otherwise easily discernible from all of the information in Epic, through our Oracle implementation and the ability to use tools like that. Just continue to look for opportunities with our business where we have processes that could be optimized and generate not just efficiency, but also greater accuracy of the work that we do. And so I think we're very much working as the whole industry is around just looking for opportunities where AI could be a lever to improve the output of our business. Patrick Blair: I'd probably highlight Salesforce as another partner who we're doing some really interesting work with. More focused on sort of efficiency and accuracy of business processes both in compliance as well as in sort of the enrollment processing space. So Salesforce has been a great partner as we sort of dip our toe in the AI space. Jared Haase: Got it. That's really great to hear. I appreciate all the color. Operator: Thank you. And as a reminder, our next question comes from the line of Jamie Perse from Goldman Sachs. Your question, please. Jamie Perse: Hey, thank you. Good afternoon. I wanted to start with one quick clarification which relates to my first question. I know you talked about the Medicaid redeterminations and that being a headwind to census and member progression through the year. You mentioned that being a headwind in the first part of the year. Is that a January type of headwind? Or are you referring more to the start of the fiscal year, so impacting the first quarter? Ben Adams: Well, I think if you think about redeterminations, they go on obviously throughout the course of the year. And I think what you've seen with us is we've changed a lot of our internal processes. Because as we've tried to partner with the states and make that whole eligibility enrollment redetermination process more efficient, we basically put in new processes that made it easier for us to identify people who are going to lose Medicaid coverage potentially. And if we think they're going to lose it and it's not recoverable, we can get them disenrolled more quickly, right? So as those new processes roll in and we begin to disenroll people who will never regain Medicaid eligibility more quickly, it'll put a little bit of a headwind on growth both in terms of census and in terms of member months. And you'll see that really happening in 2026. And then we think it will wash through the system by the time we hit January. And the other thing I would say is it's not really changing the rate of growth for us. Our trends around gross enrollment growth per month are really going to be the same. So it's not changing the slope of the line. It's really just shifting the line down slightly as we work through the implementation of this new eligibility process. Jamie Perse: Okay. That's helpful. And I think you partially answered my first question here, but just want to make sure I'm clear. Obviously, you had really strong census growth in fiscal '25. The guidance is kind of call it, low, maybe mid-single-digit growth this year on a net basis. I hear your comments on the redetermination piece. Are you assuming that the gross enrollment trajectory that you had in fiscal '25 continues? And maybe just any updates from a capacity standpoint, anything that might change that enrollment trajectory? Ben Adams: Yeah. You're right. The gross enrollment trends are going to remain the same, we think, this year. What you're seeing in terms of slightly lower census and member months growth is basically the work through the new eligibility process. And we kind of went through an intentional strategic decision this year where we said, look, there were people that we were probably carrying too long to try to reestablish Medicaid eligibility. As opposed to moving them off of our system into a more appropriate place for them once we knew that they weren't going to get their Medicaid eligibility renewed. By moving people out of the system more efficiently when we know they no longer qualify for PACE, it slows us down on the top line. But it actually gives us a big boost on the EBITDA line. Right? So you think of this as kind of a year where we're using the enrollment mechanism to strategically reposition the business. We're going to give up a little census growth, but not the growth in gross enrollment trends. But we're going to get a big pickup in EBITDA from it. Jamie Perse: Okay. Alright. That's really helpful. My second question, I know there were some earlier ones on just kind of connecting your guidance to the long-term targets you've laid out. Looking back at those targets, you're kind of a little bit ahead on external provider costs. There's maybe some room to continue seeing some progression on cost of care and then certainly on G&A. There's more room relative to the prior financial targets you laid out. Are those two buckets, just the cost of care and G&A operating leverage, the primary areas we should expect continued margin performance or improvement in fiscal 2026 specifically? Ben Adams: Yes, it's a good question. When you think about when I think about when you go back and you look at the presentation we gave back in February '23 about '24. Sorry. Had the year wrong. Anyhow, we gave that presentation about what the long-term margin potential is. You probably remember we went through sort of breaking out the different components. There was sort of the third-party provider care where we get some efficiencies. But then there was the cost of care, which was provided in our centers. And we get a lot of efficiency out of that number. Not only because we can, as Patrick spoke about before, we can control and coordinate that care more closely. But there's also an administrative component in there as well. Where we get some margin lift as the business scales. So we get some out of that line item. Then when you think about the G&A, obviously, we had some activities in the past related to compliance and other things. That we've been able to scale down going forward. So where we're investing in G&A really today is around improving operations. And if we start to look at that G&A line item as a percentage of revenue or even on a PMPM basis, we think you'll continue to see improvements in the next couple of years in that line item. So again, really focus more on the EBITDA percentage target than anything else. But those are probably the two line items where we'll get the biggest lift. Jamie Perse: Got it. Thank you. Operator: And this does conclude the question and answer session of today's program as well as today's program. Thank you, ladies and gentlemen, for your participation. You may now disconnect. Good day.
Operator: Welcome to the Rubis 2025 Half Year Results presentation. [Operator Instructions] Now I will hand the conference over to the speakers to begin today's conference. Please go ahead. Clemence Mignot-Dupeyrot: Good evening, everyone. I'm Clemence Mignot-Dupeyrot, Head of Investor Relations. I am here today for Rubis's H1 2025 Results. I am with Clarisse Gobin-Swiecznik, Managing Partner; and Marc Jacquot, CFO. Clarisse will start the conference. Clarisse Gobin-Swiecznik: Ladies and gentlemen, good evening. To kick off this presentation of our H1 results, let me very quickly remind you what we do. Our business is about distributing energy while supporting mobility solutions. In Europe, we distribute and sell LPG, and we also produce and sell photovoltaic power. In Africa, we distribute and sell bitumen to road contractors in West Africa and fuel and LPG in East Africa. In the Caribbean, we distribute and sell fuel and LPG. Those products reached a wide range of customers, both individuals and professionals while the distribution is supported by a reliable and most of the time in-house logistics. For H1 2025, this diversified business model delivered a steady performance. In a global economic environment marked by uncertainty, our results for the first half of 2025 standout with growth in volumes and margins across all regions and product lines. Photosol continues to progress according to plan on track towards 2027 objectives. Our group EBITDA grew by 3% and the net income group share by 26%, driven by a stronger operational performance, better FX management and stable emerging currencies. Cash flow generation remains steady at EUR 276 million for H1, which is a key highlight of this publication. All of this gives us confidence in reaching our full year guidance, even in a less favorable USD-Euro exchange rate environment in H2. The following slide highlights our balanced growth across product lines and geographies. It showcases the strength of our commercial strategies, our agility, and seamless execution. Looking at our H1 performance by business line, you can see that in Retail & Marketing, all products delivered both volume and margin growths. LPG was driven by a very strong commercial momentum in Europe. In fuel distribution, the expected pricing formula adjustment in Kenya took the first step in March. The second step implemented in mid-July will show in our H2 performance. In bitumen distribution, demand in Nigeria is strongly picking up. The sharp decrease in unit margin visible here is purely a basis effect linked to the 2024 currency devaluation. We already mentioned it in Q1, Marc will elaborate further on this point. As for Support and Services, which covers supply to the distribution business, and the SARA refinery performance remains overall stable. Finally, the renewable business is expanding as planned with a sharp increase in both assets in operation and secured portfolio, in line with the remark we presented at last year's Photosol Day. In conclusion, this first half results are yet another demonstration of the group's ability to deliver consistent commercial and operating performance, cycle after cycle. And when you combine that resilience with discipline and proactive financial management, the outcome is clear, the strong and steady cash flow generation is fully in line with our historical standards. Marc Jacquot: Thank you, Clarisse. Good evening to all. Let's start with the big picture for the first half. Our EBITDA is up 3% year-on-year and flat on a comparable basis. As Clarisse already mentioned, this is driven by strong LPG performance in Europe, while in Africa, Kenya improved volumes and margins in the retail segment, and bitumen return to growth in Nigeria. Net income is up 26% to EUR 163 million, reflecting the absence of FX losses. CapEx related to the distribution business remains well under control, roughly stable at EUR 73 million while they are increasing in renewable to EUR 85 million, which is a concrete and positive sign that our growth projects are now materializing and are being steadily derisked. Nearly 85 megawatts were put in operation over H1 and 290 megawatts are now under construction. Corporate net debt is stable at 1.4x despite a negative trend in working capital over H1 which confirms our strong financial position. And finally, cash flow from operations remained strong at EUR 276 million for the first half year, supported by the good operating performance and the absence of FX losses. All in all, that's a solid performance. Now let's take a closer look at our activities. Retail & Marketing delivered a solid performance across the board with EBITDA increasing by 3% year-on-year. In Africa, we have three things to highlight. First, retail. Retail is contributing well and the impact of the new pricing formula in Kenya is expected to be fully visible in the second half. Second, aviation, which is more volatile, is facing higher pricing competition, leading us to reduce our volumes for the moment in Kenya. And the third one is bitumen. Bitumen margins increased less than volume and this is a basis effect from 2024 when naira devaluation impact affecting the financial results below the EBITDA was passed through to customers. Now let's look at the Caribbean. The Caribbean region was broadly stable, which is in line with our expectations. Guyana slowed down a bit with the election coming up in September, creating some kind of wait-and-see behavior among our B2B customers. In Haiti, the measures we have taken in our logistic management are starting to pay off, even if volumes remain a bit soft. Jamaica is normalizing with supply conditions slightly less favorable than last year. Now Europe. In Europe, the momentum is particularly good as a result of our challenger positioning combined with the excellence drive of our commercial teams and a colder winter this year. Looking at Support and Services, it remained stable, which is normal as this segment usually flexes with our Retail & Marketing activities. Now the renewable electricity production, what we can say is that the power EBITDA stands at EUR 22 million, which is up 38% year-on-year. In line with our road map, our development expenses have increased, reflecting the acceleration of the growth of this business, resulting in a consolidated EBITDA at EUR 10 million. In conclusion, this is a robust operating performance, attesting to the strength of our product and geographical diversification. Let's have a look at our financial results. Let me highlight just a few items here. The net income group share is up 26% or on a comparable basis, 18%. This is the result of lower expensive local debt levels and reduced FX exposure. When analyzing our income statement, let me remind you that the share of net income from associates in H1 2024 included Q1 results from Rubis Terminal. Interest costs are down, thanks to lower debt in Kenya and more favorable interest rates. As you know, last year, Rubis recorded significant FX losses, particularly in Kenya and Nigeria. In H1 this year, local currencies were more stable and the strategies we put in place to mitigate the FX risk have proven efficient, and we didn't incur any FX loss. As for taxes, nothing major to flag, the OECD global minimum tax is now fully integrated in our normal run. Overall, Rubis demonstrated agility and delivered solid financial results, fueling its cash flow momentum and supporting its balance sheet. Now a word on our financial debt. Total net debt stands at EUR 1.4 billion, with corporate debt at EUR 910 million, maintaining a healthy leverage of 1.4x at corporate level. Our liquidity level is high with more than EUR 180 million under RCF in addition to our EUR 530 million cash on balance sheet. The main variation of this debt this half came from the steady operational cash flow of EUR 390 million, which is up 11%, reflecting the good operating performance combined with the absence of FX losses. A negative impact from change in working capital of EUR 68 million after a very positive effect in H2 '24 as a consequence of lower trade payables. CapEx of EUR 164 million, which is higher than last year with the ramp-up of Photosol, hence, our usual June dividend that we paid to shareholders, but also to minority interest and general partners. Nonrecourse debt increased by EUR 63 million, in line with the renewable investments. All in all, our balance sheet remains solid with ample liquidity to support our future growth. Clarisse Gobin-Swiecznik: Thank you, Marc. Before we open the floor to Q&A, let me wrap up. So first, we saw Rubis commercial and operating performance. Second, our seamless execution and agility deliver reliable cash flows through the cycle. Finally, these H1 achievements make us confident, we are on track to reach our 2025 targets even in the less favorable euro-dollar context in H2. With a healthy balance sheet and a stable leverage ratio, we confirm we are aiming at EUR 710 million to EUR 760 million EBITDA within the framework of assumptions you have here on the slide. Thanks a lot for your attention. We are ready to take your questions. Operator: [Operator Instructions] Marc Jacquot: We have no audio questions for the moment. I propose you begin by the written questions on the webcast. Clemence Mignot-Dupeyrot: So we have 2 questions on the webcast from Auguste Deryckx of Kepler. Question number one is group EBITDA was stable on a comparable basis despite 5% volume growth, what are the key headwinds preventing stronger margin conversion? Marc Jacquot: What we can say on the margins, as I mentioned, the LPG margins were stable over the first half. And in the fuel distribution business, so the unit margin decreased by 1% in H1. And this decrease came exclusively from the Caribbean, especially from Jamaica. In Jamaica, the supply is not in Rubis' hands. And last year, we had very favorable condition for this supply. And this semester, actually, those conditions normalized, I would say. So that's the first explanation. Second one is on the bitumen, bitumen distribution business. So the volume growth in Nigeria resumed, as we explained. And H1 2024 was high due to the FX pass-through and the significant decrease in margin is explained by the basis effect after H1 2024 devaluation, after considering the guidance. Clemence Mignot-Dupeyrot: We have 2 questions considering on euro and USD FX. So question number one is -- but both questions have the same answer. Question number one is what level of FX rate and hyperinflation assumptions underpin the guidance, the EBITDA target of EUR 710 million to EUR 760 million. And what contingency levers do you have if the macro backdrop worsens. And another question from Emmanuel Matot is what is the total negative impact we can expect for 2025 on your EBITDA? Marc Jacquot: So regarding the guidance and the hyperinflation embedded in the guidance. We have the same level of hyperinflation in the guidance than in 2024, meaning a positive impact of EUR 25 million -- EUR 24 million on the EBITDA, EUR 22 million on the EBIT and minus EUR 10 million at a net income group share level, okay? So this is our assumption, and it will be -- and this is something that we will know only at the closing. So there is a lot of uncertainty in the hyperinflation. So we cannot commit on this number. In terms of impact of U.S. dollar, euro, the initial assumption we have was the euro-dollar level of the beginning of the year, meaning an exchange rate of $1.05 okay, for EUR 1. Now we are at $1.17 or $1.16 depending of the day. What we can say is that the good performance of the H1 will compensate the favorable impact related to the U.S. dollar impact. The margin we have in U.S. dollar is concerned, actually, I would say, 2/3 of our business, okay? So you can calculate what is the impact yourself on for H2. Operator: [Operator Instructions] Clemence Mignot-Dupeyrot: So we have another question online from [ Jean-Luc Romain ]. Could you please give us an idea of what the renewable EBITDA is before development costs? Marc Jacquot: So the renewable EBITDA before development cost is what we call the power EBITDA, the power EBITDA amounted to EUR 22 million in H1. Clemence Mignot-Dupeyrot: We have another question from [ Thomas Trotter ] saying about the aviation business. Are any of your markets showing activity in SAF, sustainable aviation fuel and is that a market Rubis might get into? Clarisse Gobin-Swiecznik: We are more or less agnostic to the type of fuel we distribute. We adapt to the demand of our customers. We would be able to distribute SAF and we do, in some places, especially in the Caribbean, but it's mainly a question of offer and demand, and there is not a lot of offer to date. We are, in any case, adapting ourselves to the demand from our customers. Clemence Mignot-Dupeyrot: Another question from Mr. [indiscernible] about Photosol portfolio evolution. It is not on the slide you have here in the presentation that is in the webcast, which you can find it on our website. Operator: [Operator Instructions] Clemence Mignot-Dupeyrot: We have another question from Emmanuel Matot at ODDO online, asking us if we have any impact of U.S. tariffs during the summer? Clarisse Gobin-Swiecznik: Rubis geographic and operational model makes it largely insulated from the direct effects of tariffs. We are not present in the U.S. nor in China, and we do not depend in any case of U.S.-based or China-based suppliers in our distribution business. On the indirect side, the products and services we offer are essential, particularly in the energy space. As such, demand tends to be relatively inelastic, meaning it remains quite stable even during periods of price volatility or economic slowdown. So I would say we have no effect of tariffs on our P&L or results. Clemence Mignot-Dupeyrot: Another question from [ Roger Degree ]. Can you update us on the CapEx plans and specific projects for the next year or 2 in the energy distribution business? Marc Jacquot: Roger. What we can say on the Photosol CapEx, this level, as you know, will increase in line with the ambitions communicated to the market at Photosol Day. So this is a EUR 1.1 billion CapEx in the 2024, 2027 back-end loaded. And for 2025 it should be in the range of EUR 150 million to EUR 160 million. Talking about Rubis Energy, so the distribution business, we should be in the normalized level in the -- I would say, EUR 185 million on the run rate. Clemence Mignot-Dupeyrot: Another question online. Can you give us an update on the shareholder structure? So the answer is public. The shareholding structure as of today is, the largest shareholder is Mr. Patrick Molis with more -- a bit more than 9%. Then you have the Bolloré Group through Plantations des Terres Rouges, a bit above 5%. You have Mr. Sämann 5% or so, Groupe Industriel Marcel Dassault a bit above 5%, and then the rest of the shareholding is structure an overall split between different shareholders. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing remarks. Clemence Mignot-Dupeyrot: Thanks a lot for being here. We will be on the road on the days to come. So do not hesitate to reach out to us if you want to schedule a meeting or if you have questions, you know where to reach us. Thanks a lot, and have a nice evening.
Operator: Greetings, and welcome to Limoneira's Third Quarter 2025 Financial Results Conference Call. [Operator Instructions] It is now my pleasure to introduce your host, Deirdre Thomson with ICR. Thank you. You may begin. Deirdre Thomson: Good afternoon, everyone, and thank you for joining us for Limoneira's Third Quarter Fiscal Year 2025 Conference Call. On the call today are Harold Edwards, President and Chief Executive Officer; and Mark Palamountain, Executive Vice President and Chief Financial Officer. By now, everyone should have access to the third quarter fiscal year 2025 earnings release, which went out today at approximately 4:05 p.m. Eastern Time. If you've not had the chance to review the release, it's available on the Investor Relations portion of the company's website at limoneira.com. This call is being webcast, and a replay will be available on Limoneira's website. Before we begin, we'd like to remind everyone that prepared remarks contain forward-looking statements, and management may make additional forward-looking statements in response to your questions. Such statements involve a number of known and unknown risks and uncertainties, many of which are outside the company's control and could cause its future results, performance or achievements to differ significantly from the results, performance or achievements expressed or implied by such forward-looking statements. Important factors that could cause or contribute to such differences include risk details in the company's Form 10-Qs and 10-Ks filed with the SEC and those mentioned in the earnings release. Except as required by law, we undertake no obligation to update any forward-looking or other statements herein, whether a result of new information, future events or otherwise. Please note that during today's call, we will be discussing non-GAAP financial measures including results on an adjusted basis. We believe these adjusted financial measures can facilitate a more complete analysis and greater understanding of Limoneira's ongoing results of operations, particularly when comparing underlying results from period to period. We have provided as much detail as possible on any items that are discussed on an adjusted basis. Also, within the company's earnings release and in today's prepared remarks, we include adjusted EBITDA and adjusted diluted EPS, which are non-GAAP financial measures. A reconciliation of adjusted EBITDA and adjusted diluted EPS to the most directly comparable GAAP financial measures are included in the company's press release, which has been posted to its website. And with that, it is my pleasure to turn the call over to the company's President and CEO, Mr. Harold Edwards. Harold Edwards: Thank you, Deirdre, and good afternoon, everyone. During the third quarter, we made significant strides in unlocking long-term value through our two-part value creation strategy: agriculture production optimization, and land and water value creation. As we enter the fourth quarter and turn our attention to fiscal year 2026, we're excited about the profitable growth opportunities ahead. In the third quarter, we continued to navigate challenging lemon market conditions with pricing pressures in the first 2 months, though we saw improvement in the final months as we captured higher prices for fruit held in storage. Our fresh utilization was lower due to the strategic timing, but we remain confident in achieving our volume goals for both lemons and avocados in fiscal year 2025. In addition, we expect pricing to improve in fiscal 2026 due to anticipated shortages in several international areas. Our strategic partnership with Sunkist for citrus sales and marketing remains on track to drive $5 million in annual cost savings and EBITDA enhancements starting in fiscal year 2026. This partnership will unlock access to new high-quality customers while creating the operational efficiencies we've discussed. We expect lemons to return to profitability with more normalized pricing and fresh utilization levels in fiscal year 2026. Our avocado business continues to expand, with pricing and volume on plan during the quarter. We anticipate a significant increase in avocado production as our newly planted acreage begins maturing in fiscal year 2027 and beyond. We have 700 acres of nonbearing avocados estimated to become full-bearing over the next 2 to 4 years, enabling strong organic growth. This will be a near 100% increase in avocado producing acreage. Our Real Estate Development continues to exceed expectations. Harvest at Limoneira is selling homes ahead of schedule, and we continue to expect future distributions from our real estate projects to total approximately $155 million over the next 5 fiscal years. Today, I'm also excited to announce our exploration of development options for our Limco Del Mar property. This 221-acre agricultural infill property bordered by developed areas in the city of Ventura presents an opportunity for residential development that directly addresses Ventura County's critical housing shortage. As a historically local company, Limoneira is dedicated to helping solve this housing crisis. We believe that a strong community needs homes for everyone, and we're ready to do our part. The Limco Del Mar Ranch is ideally suited for efficient, well-planned infill development that may stimulate economic growth, create jobs and contribute to vibrant livable communities. We're committed to conducting a comprehensive community-based planning process, including complete CEQA, which is the California Environmental Quality Act review, City of Ventura City Council Review, a SOAR, Save Open-space and Agricultural Resources vote and the LAFCO, Local Agency Formation Commission, review process for annexation to the City of Ventura. Our goal is to create a pathway to design, permit and develop new homes that will meet the needs of Ventura County's residents. We continue to advance our water monetization efforts. In January 2025, we sold water pumping rights in the Santa Paula Basin for $30,000 per acre foot across three transactions, generating $1.7 million in proceeds and recording $1.5 million of gains. In summary, we're executing a comprehensive strategy that positions us for long-term growth. Our citrus operational enhancements through the Sunkist partnership, expanding avocado production, accelerating real estate development, adding new housing development opportunities and ongoing water value creation, all contribute to building sustainable long-term shareholder value. And with that, I'll now turn the call over to Mark to discuss our third quarter results. Mark Palamountain: Thank you, Harold, and good afternoon, everyone. Before I begin, I would remind you it is best to view our business on an annual, not quarterly basis due to the seasonal nature of our business. Historically, our first and fourth quarters are the seasonally softer quarters, while our second and third quarters are stronger. For the third quarter of fiscal year 2025, total net revenue was $47.5 million compared to total net revenue of $63.3 million in the third quarter of the previous fiscal year. Agribusiness revenue was $45.9 million compared to $61.8 million in the third quarter last year. Other operations revenue was $1.5 million for the third quarter of fiscal year -- fiscal years 2025 and 2024. The decline in Agribusiness revenue stems primarily from continued pricing pressure in the lemon market during the first 2 months of the quarter, though we saw improvement in July. Additionally, our fresh utilization was lower as we held lemons longer in storage to capture higher prices during the final month of the quarter. Looking beyond this year, the citrus sales and marketing plan we announced with Sunkist is anticipated to enhance our resilience to market volatility by creating a more efficient cost structure, leading to an expected $5 million in EBITDA improvement during fiscal year 2026. Agribusiness revenue for the third quarter of fiscal year 2025 includes $23.8 million in fresh packed lemon sales compared to $25.8 million during the same period of fiscal year 2024. Approximately 1.4 million cartons of U.S. packed fresh lemons were sold during the third quarter of fiscal year 2025 at a $17.02 average price per carton compared to 1.4 million cartons sold at an $18.43 average price per carton during the third quarter of fiscal year 2024. Brokered lemons and other lemon sales were $3.8 million and $9.8 million in the third quarter of fiscal years 2025 and 2024, respectively. The company recognized $8.5 million of avocado revenue in the third quarter of fiscal year 2025 compared to $13.9 million of avocado revenue in the same period of fiscal year 2024. Approximately 5.7 million pounds of avocados were sold in aggregate during the third quarter of fiscal year 2025 at a $1.50 average price per pound compared to approximately 8.9 million pounds sold at a $1.57 average price per pound during the third quarter of fiscal year 2024. The California avocado crop typically experiences alternating years of high and low production due to plant physiology and was the primary reason for lower volume this year compared to last year. Both avocado pricing and volume were on plan, and we achieved our volume goals for fiscal year 2025. The company recognized $1.7 million of orange revenue in the third quarter of fiscal year 2025 compared to $1.2 million in the third quarter of fiscal year 2024. Approximately 94,000 cartons of oranges were sold during the third quarter of fiscal year 2025 at an $18 average price per carton compared to approximately 43,000 cartons sold at a $26.98 average price per carton during the third quarter of fiscal year 2024. Specialty citrus and wine grape revenue were $600,000 for the third quarter of fiscal years '25 and '24. Farm management revenues were $100,000 in the third quarter of fiscal year 2025 compared to $3.2 million in the same period of fiscal year 2024. The decline was due to the termination of our farm management agreement effective March 31, 2025. Total costs and expenses for the third quarter of fiscal year 2025 decreased to $48.1 million compared to $54.3 million in the third quarter of last year. Operating loss for the third quarter of fiscal year 2025 was $600,000 compared to operating income of $9 million in the third quarter of the previous fiscal year. Net loss applicable to common stock after preferred dividends for the third quarter of fiscal year 2025 was $1 million compared to net income applicable to common stock of $6.5 million in the third quarter of fiscal year 2024. Net loss per diluted share for the third quarter of fiscal year 2025 was $0.06 compared to net income per diluted share of $0.35 for the same period of fiscal year 2024. Adjusted net loss for diluted EPS for the third quarter of fiscal year 2025 was $400,000 or $0.02 per diluted share compared to adjusted net income per diluted EPS of $7.8 million or $0.42 per diluted share in the same period of fiscal year 2024. A reconciliation of net income or loss attributable to Limoneira Company to adjusted net income or loss for diluted EPS is provided at the end of our earnings release. Non-GAAP adjusted EBITDA for the third quarter of fiscal year 2025 was $3 million compared to $13.8 million in the same period of fiscal year 2024. A reconciliation of net income or loss attributable to Limoneira Company to adjusted EBITDA is also provided at the end of our earnings release. Turning now to our balance sheet and liquidity. Long-term debt as of July 31, 2025, was $63.3 million compared to $40 million at the end of fiscal year 2024. Debt levels as of July 31, 2025, less the $2.1 million of cash on hand resulted in a net debt position of $61.3 million at quarter end. In April of 2025, we received $10 million of our share of a $20 million cash distribution from our 50-50 real estate development joint venture with The Lewis Group of Companies. The distribution came from the joint venture's available cash and cash equivalents, which as of July 31, 2025, totaled $36.4 million. Now I'd like to turn the call back to Harold to discuss our fiscal year 2025 outlook and longer-term growth pipeline. Harold Edwards: Thanks, Mark. We continue to expect fresh lemon volumes to be in the range of 4.5 million to 5 million cartons for fiscal year 2025, and avocado volume is approximately 7 million pounds for fiscal year 2025. Fiscal year 2025 avocado volume is lower than fiscal year 2024, primarily due to the alternate bearing nature of avocado trees. Looking beyond fiscal year 2025, we have strong visibility on multiple value drivers. First, we believe we are in a good position to divest additional real estate assets in fiscal year 2026. Second, we expect to receive an additional $155 million from our real estate projects over the next 5 fiscal years. Third, we have 700 acres of nonbearing avocados estimated to become full-bearing over the next 2 to 4 years, which we expect will enable strong organic growth in avocado production. Additionally, we plan to continue expanding our plantings of avocados over the next 2 fiscal years. Fourth, we expect lemons to return to profitability with more normalized lemon prices and fresh utilization levels in fiscal year 2026 in which we continue to estimate 4 million to 4.5 million cartons. Our partnership with Sunkist fundamentally strengthens our citrus business model, unlocking availability to new high-quality customers and driving an anticipated $5 million in annual cost savings beginning in fiscal year 2026. This partnership positions us for sustainable EBITDA growth and creates a strong foundation for long-term value creation. And fifth, the exploration of our Limco Del Mar property represents another significant value creation opportunity, addressing critical community needs with anticipated substantial returns for shareholders. In summary, we're executing on a comprehensive strategy across agricultural production optimization and asset monetization that positions us for both near-term resilience and long-term growth. We believe we have the asset base, strategic partnerships and operational improvements in place to deliver sustainable value creation while maintaining flexibility to capitalize on additional opportunities as they arise. Operator, we will now open the call to questions. Operator: [Operator Instructions] Our first question comes from the line of Ben Klieve with Lake Street Capital Markets. Benjamin Klieve: First, a couple of questions on the Limco Del Mar opportunity here. It's great to hear that, that's progressing. One very specific question on, is there any kind of expectations of costs flowing through the income statement on this, say, through '26, maybe associated with regulatory costs or consulting costs, anything of that nature? And then second, on a higher level, what's your vision for how this will get developed over the long term in terms of what Limoneira's role will be? I mean, are you going to be looking for kind of a Lewis Group type 50-50 partner? Do you want to maybe offload more of the kind of developmental burden on a partner? Kind of how are you thinking about that on a -- from a big picture perspective? Mark Palamountain: Great question, Ben. Thank you. So multiple pieces to that. So we'll start with the cost and the income statement. So as you know, we recently tendered from our position, we had 28% as the general partner and achieved up to 55%. It's good to know we have a bunch of local still involved in this. And so we've got support from all around. From a cost perspective, it will be similar to how we developed Harvest and the entitlement period. We're trying to be conservative, thinking 3 years on a minimum, 5 years out and $3 million to $5 million depending on that time frame. But the majority of those costs will be capitalized and will not run through the income statement and then as we develop the project. Now Limoneira being the community player behind all this, and Lewis has been a great partner and we'd love to have them involved at that point. Right now, it's just Limoneira running with the ball, and we've put together a great team of legal experts and development experts and county experts to really figure out what the community benefit is going to be and how we make this a benefit for everybody so we can move it across the line. And so at the end of the day, I think the $3 million to $5 million is a good number to hold on to. And we're working really hard. We've already started and had some good progress and good support as well. Harold Edwards: So Ben, I would also just add that there'll be two value triggers that happen along this journey. The first real value-creating opportunity will become evident upon entitlement. And so as mentioned in the description earlier, we'll go through a comprehensive CEQA review, a comprehensive SOAR vote. And then assuming that we are successful in winning a SOAR vote, and that vote will be comprised of the City of Ventura citizens voting to support the project. Assuming a majority of the citizens vote yes, then we'll work with the Local Agency Formation Commission to annex the 220 acres into the City of Ventura. And at that point, it would become entitled. At that point, the value creation will be significant. But then the second chapter of that value creation will be in the actual development of the project. And as Mark pointed out, we've had a great relationship with the Lewis Group. The way that we've developed Harvest at Limoneira and Santa Paula has been extremely successful. But I would say when we get to the point of development, we'll assess what the best options are for the community of Ventura, but also for the Limoneira Company and decide at that point. Benjamin Klieve: Got it. That makes plenty of sense. Very good. We'll stay tuned for updates on that in quarters to come. I've got a question on the lemon side. Great to see fresh lemon prices rebound sequentially from a difficult second quarter. You guys talked about kind of a normalization of pricing going into next year as there's maybe some industry supply constraints that should be supportive. Given the reset that lemons -- the lemon market has had over the past few years, how do you kind of think about what normalized pricing is in this business today? And then kind of what are the different kind of sources of supply constraints that you see out there that are going to be helpful as you look into next year? Mark Palamountain: Yes. So Ben, we were pleasantly surprised into August into the lemon pricing. So as we mentioned, it lasted a little longer. Our average price in the quarter was -- in Q3 was just over $17. August, we saw prices in the low 20s, so almost a $4 to $5 jump. There was a bit of a shortage around on the East Coast. A lot of the imports that usually came to the U.S. went to Europe. And you mentioned some of those issues. And Turkey had a really challenging freeze, which it's always hard to get the best assessment, but could have gone all the way down to damaging trees, which would be 2 years of crop. And so -- and then also Spain had their own set of weather issues. So next year, we see Spain and Turkey being short, call it, 20% to 30%, which then, again, will allow some of our Southern Hemisphere friends to move fruit there. And all of our market is about balance, right? And so when us -- Limoneira coming back into the Sunkist, there's a lot more contracted business. And we've got those new customers in the quick-serve restaurant business, along with our existing customer base, we see a lot more potential for stability. And I think you'll see a price with a two in front of it. Right now, as I said, August was in the low 20s, call it, $23. And if you keep a higher price, and this has been historical since as long as I've been here, coming into the fall, you always have a dip into that winter. But if you have a higher entry point, obviously, you're going to have a lower low theoretically. And so that's sort of what is setting up. And we're at year 7 going into year 8 of a really challenging lemon environment. And usually, those cycles last that long. Will we have a mother nature event? We're not sure about that. But for the most part, that's what gives us confidence is the balance around the world, the lemons we've seen come out, including our own at a higher starting point going into next year. Benjamin Klieve: Got it. That would be great to see. Very good. One more for me, and I'll get back in queue. And it might be a little premature on the '26 outlook for avocados. But given the kind of biannual nature of the crop and the California harvest complete at this point, do you have any kind of rough ideas of what your expectations are for avocado volumes here looking into '26? Harold Edwards: So it's a little premature, but we're looking up into the trees right now. You're seeing a set. I would say that as this -- as we're counting pieces and assuming we hold on to the fruit, I would expect it to not be greater than this year. It looks like it's going to be similar to this year to less, but it's too early to really know that. So I wouldn't count on a big rebound in production. It's why we made our forward-looking comments that we believe our first big breakout year with volume improvement will be 2027. But more to come. Let's see what we come up with. And when we talk in the next call, we'll have a much better idea of what we're looking at for 2026 with avocados. Operator: [Operator Instructions] And we have reached the end of the question-and-answer session. I would like to turn the floor back over to CEO, Harold Edwards, for closing remarks. Harold Edwards: Thank you. I'd like to point out that as of this afternoon, we have updated our investor deck and it is now available on our website at limoneira.com. I'd like to thank you all for your questions and your interest in Limoneira. Have a great day. Operator: And ladies and gentlemen, this concludes today's conference, and you may disconnect your line at this time. We thank you for your participation. Have a great day.
Operator: Good day and thank you for standing by. Welcome to Idorsia's TRYVIO Investor Q&A Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to Idorsia's Chief Executive Officer, Srishti Gupta. Please go ahead. Srishti Gupta: Thank you, Nadia. Good afternoon and good morning, everyone, and welcome to our webcast to discuss TRYVIO and its role in the treatment landscape for difficult-to-control hypertension. After decades of limited progress in hypertension research, we are now entering an exciting new era, led by TRYVIO, the first innovation in hypertension in over 2 decades. It is the first and only hypertension therapy to target the endothelin pathway. Ahead of the European Society of Cardiology, ESC, meeting, we published an on-demand investor webcast, sharing our perspectives on TRYVIO's ability to address a significant unmet need and difficult-to-control hypertension. Since then, we've engaged with leading hypertension experts at both ESC and the American Heart Association's Hypertension Scientific session. We've also met with many of you in the investor community as the back-to-school season kicks off in the U.S. Today, we'll address the key questions we've been hearing in those discussions and then open the lines to take your questions on TRYVIO. Joining me are Martine Clozel, our Chief Scientific Officer and a recognized leader in the endothelin system; Alessandro Maresta, Global Medical Affairs Therapeutic Area Head for cardiovascular, renal and metabolism; Michael Moye, President of Idorsia's U.S. Operations; and Julien Gander, our Chief Legal and Corporate Development Officer. Next slide, please. Before we begin the Q&A, please note that our remarks today include forward-looking statements informed by our research, physician feedback, advisory boards and market insights. As always, we encourage you to consider both risks and opportunities when evaluating Idorsia. Next slide, please. TRYVIO in the U.S. and JERAYGO in Europe represents the first systemic hypertension treatment to target a new pathway in more than 30 years. This pathway is the endothelin pathway. That brings us to the key question investors are asking. Why is addressing the endothelin pathway such a meaningful innovation and differentiator in hypertension. Martine, can you share your perspective? Martine Clozel: Thank you, Srishti. Endothelin upregulation is a central driver of hypertension. It plays a role at very early stages of hypertension during the progression of hypertension and at the stage of end organ damage in hypertension. But endothelin upregulation has remained unaddressed until TRYVIO. The fact that endothelin regulation was left unimposed up to TRYVIO explains why so many hypertensive patients, despite their treatment or combination of sometimes many antihypertensive drugs, could not be controlled, and their blood pressure remained higher than the target blood pressure threshold. This was particular true for certain groups of patients whose hypertension is not obviously difficult to control: African-American, elderly, postmenopausal women, obese patients, and those patients with CKD type 2 diabetes, heart failure or sleep apnea, all of which are actually associated with endothelin upregulation. Endothelin probably also explains why the patients with difficult to control hypertension are at higher risk of death, strokes and renal failure, almost double the risk compared to well-known -- to well-controlled patients. Indeed, endothelin is a multifunctional peptide, via both its receptor, ETA and ETB, it promotes vasoconstriction, vascular and cardiac hypertrophy, fibrosis, inflammation, catecholamine release, aldosterone release and is increased by salts, thereby mediating high blood pressure, endothelial dysfunction and organ damage. Aprocitentan blocks the actions of endothelin via both its receptors and therefore, is a multifaceted drug. In healthy volunteers with no underlying disease, even doses 50x higher than the therapeutic dose up to 600 milligrams, TRYVIO had no effect on blood pressure. TRYVIO is only active on an upregulated endothelin system like in hypertension. We proved this in Phase II and in Phase III. The lack of interference with physiology explains its very good safety and tolerability in pathology. Srishti Gupta: Thank you, Martine. That's very clear. Endothelin plays a key role, it's not been tackled until now. And by targeting the endothelin system, TRYVIO is bringing a completely novel and different approach to patients with hypertension. Alessandro, let me turn to the PRECISION study. This was a registration trial with the design agreed upon with the FDA. Can you walk us through the key highlights from that study and what they mean for TRYVIO? Unknown Executive: Of course, Srishti. First of all, I would like to mention that the compelling efficacy and safety of TRYVIO is well established in labeling and further reinforced by its recent inclusion in the ACC AHA hypertension guidelines. So TRYVIO achieved a meaningful reduction in blood pressure within 2 weeks. This is very important in patients with resistant hypertension that are at risk of cardiovascular events, and the blood pressure was sustained over 48 weeks with a decrease of 19 millimeters of mercury by the end of the study. Talking about resistant hypertension, the design of the Phase III PRECISION study was especially rigorous with an 8-week running period, a standardized triple fixed dose background therapy with confirmation of compliance and inclusion of only of patients with true resistant hypertension. This trial enrolled high-risk subgroups where classical anti-hypertensive are least effective, including Black patients, all the adults, postmenopausal women, obese patients and those with chronic kidney disease, diabetes, heart failure or sleep apnea, all conditions, as you heard from Martine, associated with endothelin overactivity. Looking at safety. TRYVIO was well tolerated with only 2 treatment-related side effects, mild early and transient edema and a modest expected decrease in hemoglobin. No direct drug interaction observed a significant advantage for patients on multiple therapies like antihypertensive patients. Importantly, no signal we've seen for hyperkalemia, hypotension, headaches nor heart rate increase. Finally, the label that the FDA approved is based on the totality of the data for adults whose blood pressure remain inadequately controlled on other antihypertensive, a broader population compared to enrolled -- in the one enrolled in PRECISION. In addition, the label includes the relevance of lowering blood pressure for reducing the fatal and nonfatal risk of cardiovascular events, especially strokes and myocardial infarction. Srishti Gupta: Alessandro, people can follow the on-demand webcast to get more details on the data for TRYVIO. But as a cardiologist, can you perhaps give us some context on the current landscape for not well-controlled hypertension? Alessandro Maresta: Sure, Srishti. So today, paradigm in hypertension relies on a different classes of antihypertensive, of those addressing the renin angiotensin aldosterone system, calcium channel blockers and diuretics, which by the way, they stimulate the RAAS system. But if blood pressure remains uncontrolled, a mineralocorticoid receptor antagonist such as spironolactone can be added, but many patients do not tolerate it, mainly due to hyperkalemia, worsening of renal function, gynecomastia and in addition, we observed a high discontinuation rate. So despite all the classes of antihypertensive drugs, millions of patients remain uncontrolled and TRYVIO offer a solution with a completely new mode of action. Srishti Gupta: Thank you, Alessandro. That certainly highlights the significant unmet need that a safe and effective drugs like TRYVIO can address in the current landscape. What about compounds in development? Alessandro Maresta: Yes, Srishti, there are several products in development, but most of them are still targeting the RAAS system, including the aldosterone synthase inhibitors. These drugs are still in development, and we don't know yet what their label will look like. But what we know is that the studies were not as robust as PRECISION in enrolling true resistant hypertension patients. And there are safety concerns such as hyperkalemia, hyponatremia and decrease in renal function, particularly if combined with other drugs that are targeting the RAAS system. And this is where TRYVIO stands apart. It addressed the endothelin pathway, a fundamental driver of disease, that other treatments don't reach with a proven efficacy and a good safety and tolerability profile. Srishti Gupta: So TRYVIO is differentiated to the current and potential emerging treatments. Which patient populations do you see TRYVIO being used for? Alessandro Maresta: So if we take into consideration the new mode of action, the efficacy and safety profile and the FDA granted label, TRYVIO is the ideal choice for many patient groups. I can list for you some: patients with risk factors for hypertension, which will be difficult to treat because they are endothelin-dependent; black, elderly obese patient, patients with sleep apnea, type 2 diabetes, early heart failure and chronic kidney disease. Then we have patients that are not adequately controlled despite 2 lines of hypertensive therapies and patients who cannot tolerate certain classes of drugs because of their side effects. There are also the patients that we have studied so they're truly resistant hypertensive patients that are not controlled despite treatment with 3 or more therapies at their maximum tolerated dose. And then I would like to tease out the patients with chronic kidney disease stage III and IV and resistant hypertension because for these patients that have currently no alternatives. In all these patients, TRYVIO represented an obvious choice with very little competition. Srishti Gupta: Thank you, Alessandro. So there's a large addressable population of patients with hypertension that is not adequately controlled. Michael, given that the U.S. market is essential to realizing TRYVIO's full potential, can you walk us through the key drivers that support our $5 billion peak sales estimates? Michael Moye: Yes. Thanks, Srishti. Our forecasts are grounded in extensive market research and analytics to understand both the size of the opportunity and how physicians intend to use TRYVIO. Next slide, please. So today, of the 40 million treated patients in the U.S., there are roughly 26 million patients treated with 2 or more therapies. And 30% to 50% of those are inadequately controlled despite receiving treatment and therefore, eligible for TRYVIO according to the FDA label with the only contraindication being pregnancy and sensitivity to aprocitentan. This population is expected to grow, given the aging demographics, higher rates of comorbidities linked to endothelin function and increasing recognition of the severe consequences of uncontrolled hypertension. Importantly, these consequences are already reflected in the FDA indication that removes any need for a separate outcome study. We estimate that around 7 million patients as we move to the middle of the slide -- the 7 million patients are easily identifiable and are well defined a good area to focus on first coming into the market. Patients with endothelin-driven comorbidities often face restrictions with other therapies. Chronic kidney disease, as you've heard, is a prime example -- it's a prime example. Patients with hypertension and CKD are often treated with 2 or more agents yet few effective options exist. TRYVIO is approved for patients with an eGFR as low as 15 and has demonstrated excellent safety and tolerability with no hyperkalemia and no hypotension. Other identifiable groups include patients who can't tolerate certain classes of drugs and those with true resistant hypertension. So we now have real-world efficacy and safety outcoming the mirror of what we saw in PRECISION. These drive adoption and penetration assumptions. So as you can see, they range here from 12% to 22%. So our insights are informed by over 1,000 qualitative and quantitative interactions with multi-specialty physicians, including top hypertension centers. Physicians consistently recognized TRYVIO's efficacy, safety and its unique mechanism of action when they're addressing -- that address what additional RAAS blockade cannot. In comparison with emerging therapies, TRYVIO is viewed favorably by these physicians, particularly for patients with CKD and based on the impact on both blood pressure and uACR measures. And finally, the payers, which we know are all very important, have responded very positively, highlighting the robust primary endpoint of more than 15-millimeter drop from baseline, the statistical strength and the sustained efficacy through the duration of the PRECISION study as very compelling reasons for coverage. We have set a WACC at $775 a month and we're focused on a very favorable gross to net as a first-in-class differentiated therapy. TRYVIO is currently being reimbursed with reasonable utilization management criteria, which supports our commercial model. Srishti? Srishti Gupta: Thank you, Michael. Beyond the U.S., we also see an additional upside from geographic expansion. Aprocitentan has already improved at JERAYGO in the EU and the U.K., and there is significant opportunity in Japan and China. We also see that we can get further value through IP extension strategies, for example, with fixed-dose combinations with the SGLT2 inhibitors and indication expansion such as exploring renal protective benefits in CKD. Of course, realizing the full potential of TRYVIO will depend on securing the right partner, which is why we're actively engaged in these discussions at this time. Julien, could you share a little bit more about how we're thinking about partnering discussions? Julien Gander: Yes, happy to. Look, we've been very consistent in saying that we lead where we demonstrate scientific or commercial advantage and strategically partner where external expertise, scale or speed adds value. So specifically on TRYVIO, partnering TRYVIO remains a key strategic priority for us. We are actively engaged in discussions with potential partners, which reflects the interest in the assets and the opportunity TRYVIO represents. While this process takes time, we're encouraged by the progress and look forward to updating you as we move forward. In the meantime, I can tell you, we continue to work very diligently and at high speed to maximize the value of TRYVIO. We've seen some of this in the past weeks and months. I think of the REMS removal, the collection of early, very positive real-world experience, the inclusion of TRYVIO in the ACC AHA hypertension guideline. And very recently, the recent initiative announced with Duke and Stanford University. Srishti Gupta: Thank you, Julien. Having addressed some of the key questions that we have received around TRYVIO, I think it's a good time to open the lines for additional questions. Nadia, can you please go to the next slide and open the line, please? Operator: [Operator Instructions] And we're going to take our first question. It comes from the line of Joris Zimmermann from Octavian. Joris Zimmermann: This is Joris Zimmermann from Octavian. I have two questions. One will be on partnering that you just highlighted, Julien. Is there any timelines you could give us? Or at least do you still expect to close a deal this year? And then the second question would be until you have found the right partner and signed an agreement, and given the limited resources you can currently deploy in the U.S., where will you put your focus in terms of the aprocitentan launch. Srishti Gupta: Thank you, Joris. Julien, will you respond to the questions? Julien Gander: Yes, very happy to. Thank you, Joris. Look, I mean you will understand that we cannot really comment on specific timelines. But what I can say, and I can ensure that the partnering aprocitentan is really a key priority for us. And to your point, we resource this project accordingly. We, of course, want to move very quickly and also considering the time advantage we have towards emerging therapies. But you will understand that actually, our focus is not only just speed, but it's also securing the right partners to maximize TRYVIO commercial success. To your second point, Idorsia is indeed has limited capacities, but I think considering these constraints, we've done a lot to make sure that the product is advancing, is prepared to be launched. And the product is commercially available, and we have very good early evidence, and we'll continue those efforts, and we are hoping to give you an update as soon as we can on achieving this goal of partnering. Srishti Gupta: Thank you, Julien. Michael, maybe I'll have you add to that with your presence at the AHA -- recent AHA meeting and some of the other work that we're doing on retail distribution. Michael Moye: Yes. Thanks, Srishti, and thanks for the question. Yes, we -- despite these -- the resource constraints, we are quite busy continuing our kind of launch and market prep. So Srishti, as you said, we're at the major congresses. So we have a really strong presence there. We're working with a lot of the top KOLs and a lot of the top hypertension centers. You heard about the Duke, Stanford relationship that come out. We are -- have really finalized a lot of the core materials. So we have a full digital presence. Our consumer and HCP websites are up and running. We've got print materials and things out there. And then the last couple of things. We're continuing our payer discussions, which continue to go really well. And then as Srishti made reference to at the end, the pharmacy distribution. So once the REMS was removed, we're able to move in addition to having a specialty pharmacy, we are quite literally right now coming online with full retail distribution across all retail pharmacies in the U.S. So yes, despite the resources, we're making great progress, again, across KOLs, congresses, payer discussions and pharmacy distribution. Srishti? Srishti Gupta: Thank you, Michael. Nadia, we'll take the next question. Operator: [Operator Instructions] We have a follow-up question from Joris Zimmermann from Octavian. Joris Zimmermann: Okay. Sorry. I hope I didn't jump the line now. But two more questions. I mean you talked about the patient populations and that you see a very broad target population. But maybe you can give us an idea based on this broader label that you got versus the study inclusion criteria, what are the kind of -- where do you see the quickest uptake in the market? Which type of patients do you think will be the ones that physicians consider prescribing aprocitentan first? And then also, maybe you could give us a little bit an idea of the hurdles that you foresee as well. Srishti Gupta: Joris, thank you for the question. Michael, would you like to walk a little bit through how we think about the targeting of the patient populations in the U.S. and how we might access them with the centers of excellence. Michael Moye: Yes. So when we look at that and we look at both our research and our interaction with the physicians, we're definitely seeing the data across all the subgroups has been one of the things that's jumped out of physicians. So you heard a little bit in our opening that clearly, the CKD is a differentiated piece and that we see that as a great opportunity. The other thing about the subgroups that we're seeing kind of across these multiple comorbid patients, you heard about patients challenge with hypertension management, black patients, obese patients, again, patients with CKD. The thing about the profile that continues to jump out is the fact that we don't -- we have efficacy and safety across all these subgroups. We don't have any real exclusions or contraindications and especially we don't have any drug-drug interaction problems, obviously, with these patients being on multiple medications. So when we think about those different subgroups and those comorbid patients that are at more risk, including the CKD patients, we see consistently the one pill, one dose, once daily, good tolerability, no drug interactions. That allows -- those factors are what the physicians are pointing out to us that allow us to treat these high comorbid risk subgroups. Srishti Gupta: Thank you, Michael. And Joris, in terms of your second question, I'd like to turn it over to Alessandro. Alessandro has been attending a lot of the KOL meetings in all over the United States over the last couple of months, meeting physicians, understanding how they think about TRYVIO. So Alessandro, can you talk a little bit about how you think about the hurdles that physicians are thinking about as they are deciding on prescribing TRYVIO. Alessandro Maresta: Thank you very much, Srishti. I think that, in my opinion, the best -- the most important hurdle is the new mode of action. The physicians are used to the RAAS system, are used to calcium channel blockers and now they need to realize and understand that there is a new kill of the block that is an endothelin receptor antagonist, and that endothelin receptor antagonist can be very, very beneficial in the subgroup of patients that I and Michael highlighted. So basically, I see this as the major hurdles because the results are really impressive. The safety profile is also very, very good. And we have a clear understanding on which are the patients that would benefit the most from this -- from TRYVIO. And last but not least, there are many, many patients that despite they add on 2, 3 or even 4 drugs, they are still not at goals. And these patients, they need -- they deserve treatment. So I don't see many hurdles in front of us. Srishti Gupta: Alessandro, thank you for that. And it underscores the importance for us of finding a partner who can help us on the broad outreach and the medical education required to enhance the importance of the end -- addressing the endothelin upregulation that occurs in a lot of hypertension. So this is definitely something we are thinking about and focused on as we move forward. Joris, thank you for the questions again. Operator: Thank you. Dear speakers, there are no further questions for today. I would now like to hand the conference over to your speaker, Srishti Gupta, for any closing remarks. Srishti Gupta: Thank you, Nadia. So this concludes today's call. Thank you for joining us and for your continued interest in Idorsia. Our next scheduled update will be on October 30 when we report our third quarter results and will provide a comprehensive update on QUVIVIQ performance. Operator, you may close the line. Operator: This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.
Operator: Good morning, and welcome to the Lucid Diagnostics Investor Conference call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Matt Riley, Lucid Diagnostics Senior Director of Investor Relations. Please go ahead. Matthew Riley: Thank you, operator. Good morning, everyone. Thank you for participating in today's conference call. Joining me today on the call Dr. Lishan Aklog, Chairman and Chief Executive Officer of Lucid Diagnostics.Before we begin please note that today's call will include forward-looking statements. These statements are based on our current expectations and assumptions and actual outcomes to differ materially. Today's remarks may include commentary regarding among other things, the September 4 contractors Advisory Committee meeting convened by MolDx participating Medicare administrative contractors the reconsideration of local coverage determination L39256 for EsoGuard, our reimbursement and market access strategy, potential regulatory and operational milestones and other matters related to our business and future performance. PAC meetings are advisory in nature and do not establish coverage determinations. Important factors that could cause actual results to differ are described in our filings with the SEC, including Part 1, Item 1A, Risk Factors in our most recent annual report on Form 10-K as updated by subsequent quarterly reports on Form 10-Q and current reports on Form 8-K. We encourage you to review these disclosures carefully. Except as required by law, we disclaim any intention or obligation to update or revise any forward-looking statements made on this call, whether as a result of new information, future events or otherwise. I would now like to turn the call over to Dr. Lishan Aklog, CEO of Lucid Diagnostics. Take it away, Lishan. Lishan Aklog: Thank you, Matt, and good morning, everyone. I appreciate you all joining us today. So as Matt said, we thought it would be helpful to hold an update call to discuss last week's MolDX CAC meeting in some detail. If you are one of the over 200 individuals who listen to the meeting, it should be no surprise that there is a broad agreement that it was an overwhelmingly positive meeting. Although going in, we were highly confident, we really believe in our data, and we knew that there was a broad clinician support for EsoGuard. It really far exceeded our own expectations. I participated in, or witnessed many such panels over the years, and I -- I'd be hard-pressed to say it could have gone any better. The 11 medical experts who participated in the meeting really expressed unanimous agreement on a variety of key matters, the urgent unmet clinical need, the strong body of clinical evidence supporting EsoGuard and really explicitly said that Medicare should cover it so they can offer it to their patients to detect precancer and that this was all consistent with established guidelines. They really positioned EsoGuard as the missing link that many of them have been waiting for literally for decades after they had already established this paradigm for preventing esophageal cancer through the early detection of precancer. Dr. Mike Smith, who's the Associate System Chief of Gastroenterology at Mount Sinai and the incoming President of the American Foregut Society, one of the leading societies focused on esophageal disease. He really summarized the sentiment quite well when he stated that EsoGuard is a no-brainer that it represents best practice, and it had a remarkably high benefit-to-risk ratio. So before we dive into the highlights of the discussion, let's spend a few minutes on the purpose of the meeting itself. I spent a lot of time during last month's earnings call on the entire LCD process and the history leading up to the CAC meeting, and I certainly won't repeat all that. But just briefly, MolDX has published a final local coverage determination in 2023 that clearly outlined coverage criteria for tests such as EsoGuard, but it was noncovered at that time since we didn't have sufficient data at that time to warrant coverage. As you may know, we submitted a request for reconsideration of this local coverage determination to the LCD and our complete -- what was now our complete evidence package in late 2024. This reconsideration and clinical evidence package was reviewed during the first half of this year. and the MolDx participating Medicare contractors, the MACs called this CAC meeting, Contractor Advisory Committee meeting as what we believe is really the final stage in the process of proceeding to a coverage of EsoGuard. The Director of the MolDx program, he chose to chair this meeting himself, I clearly explained the purpose of the meeting from the onset. He noted that the only things that can inform their review of the LCD process, their writing of policy in this context is peer-reviewed, published literature and the proceeds -- the information offered by medical experts during one of these public CAC meetings, a public meeting that's part of the public record. And he explicitly stated that the goal of the meeting was to have these experts provide primarily clinical context on the public record to supplement the peer-reviewed published literature. It's also critical to note, as he did, that the meeting was not simply put forth by the MAC that he's the Chief Medical Officer of Palmetto GBA, but it brought all of the MolDX participating MACs together, including Noridian, which is the MAC that has oversight over our laboratory in Orange County, California. Let me talk a little bit about why that's important that all the MACs were there. The MolDX program effectively operates by consensus. Even though the MolDX group that is housed within the Palmetto GBA MAC does the heavy lifting with regard to the analysis and much of the writing of the coverage determinations. Historically, all 4 of the -- now 4 of the MolDx participating MACs all typically put out identical local coverage determinations. So it's important at the tail end of this process after the MolDX group has done its work that all of the MACs come together for -- to achieve a consensus with regard to issuing a coverage determination. And that's why it was important that this was -- as noted, it was a multi-jurisdictional CAC meeting. The panels were all invited medical experts. They were a carefully selected group of 8 physicians, and they covered a broad spectrum of specialties as well as practice -- the type of practice that they operate under. Let's just go through them a little bit real quickly. If you look at the academic gastroenterologists on the list, I mean there's literally a who's who of international experts in the field and leaders, particularly in the areas of esophageal precancer and cancer. This included 3 physicians who are -- who have been instrumental in the authoring of guidelines in the area of esophageal precancer testing. Dr. Nicholas Shaheen is a very -- is an internationally renowned expert in this field from the University of North Carolina, and he's the co-author of the American College of Gastroenterology or the ACG guidelines, which are really at the heart of -- sort of at the center of how we view the target population of patients who should be tested. It also is the guidelines that were included within the criteria of the LCD verbatim as well as in other criteria such as the NCCN criteria. Other co-authors of guidelines included Dr. Prasad Iyer, who is a Professor and Division Chief at Mayo Clinic; Dr. Sachin Wani, also Professor of Medicine at the University of Colorado. They are both co-authors and Dr. Wani was the lead author on the American Gastroenterological Association. Also included other gastroenterology leaders in the field. Dr. Michael Smith, who's Associate System Chief of GI at Mount Sinai is the incoming President of the American Foregut Society. The American Foregut Society is the leading society that brings surgeons and gastroenterologists together who are entirely focused on diseases of the esophagus. And at that society, AFS has been very instrumental and supportive, as Dr. Smith mentioned during his comments in pushing payers, including commercial payers to provide coverage based on their own experience with it. Dr. Amitabh Chak from Case Western, also a professor there is the current President of the ASGE, the American Society of Gastrointestinal Endoscopy. So literally a who's who of academic Gastroenterology. I forgot to mention Dr. Steve Meltzer from Johns Hopkins participated as well. The group was supplemented by 2 pathologists, Dr. Booth from WashU in St. Louis and Dr. Gibson from Yale. -- and a surgeon, a GI surgeon, foregut surgeon, Dr. Christy Dunst, who offered -- she's the next President of the American Foregut Society. She's at Hoag Digestive Health Institute, and she's playing a central role in the Hoag Health System, bringing in EsoGuard as part of a comprehensive program across hundreds of primary care physicians within that group. And last but certainly not least, is Dr. Jamie Glover, was a primary care physician based in Colorado, who was a very potent advocate from a primary care point of view of endoscopic non-endoscopic screening in general as well as the EsoGuard test. And then Dr. Paul Panzarella also played an extremely important role. He was a private practice gastroenterologist in Orlando. So that was the panel. 11 folks were actually quite pleasantly surprised that they were able to get through 2 hours and 17 questions with that many panelists, but the moderator did an excellent job. It was really, by every measure, a very substantive 2-hour discussion. So let's talk a little bit about what they discussed. And before going into sort of specific commentary, we should -- just as a reminder, there are 2 main categories of data that's used as part of an evaluation of a test such as EsoGuard. And those are clinical validity and clinical utility. Clinical validity is the intrinsic performance. Does the test work? Does it find these precancerous conditions? And does it find cancer with a high level of accuracy? And that certainly was a central part of the conversation. The number, if you listen to the call that came up repeatedly was EsoGuard's 99% negative predictive value. Multiple physicians highlighted that number as a key determinant of why EsoGuard is a reliable rule out test. This was an extensive discussion on how reliable is EsoGuard as a rule out test. Focus here was that if you have a negative test, if you, the physicians who are participating here, have a negative test, can you feel confident that nothing further needs to be done in that patient that you've ruled out the serious conditions of esophageal precancer and cancer. And there clearly was. I won't go through all the quotes from the meeting, but there was clearly a strong consensus that, that was the case. I think Dr. Smith again summarized it pretty succinctly. He said the test is negative, you're done. And that's a really important -- the first step in the assessment of the data is demonstrating that this test, which is designed, as those of you who listened heard, as a rule-out test, it's -- the test was developed to have maximal negative predictive value, maximal sensitivity, and it certainly performs in that regard, and there was a full consensus that, that was the case. There was also similarly a discussion on the rule-out nature of this. And it was important to clarify that EsoGuard is a ruling test. It's not a rule out test. It's designed to rule out serious disease in the vast majority of patients who are within this well-defined group of patients of approximately 30 million patients who have these risk factors and have symptomatic heartburn and that it does so -- it avoids the need for endoscopy in the vast majority of those patients. But the rule-out test is the endoscopy itself, and there was a good amount of discussion that the EsoGuard enhances the rule-out test by increasing the yield of the endoscopy two to threefold. And so any questions around whether we were ruling things out with EsoGuard or how EsoGuard fit within this rule and rule paradigm was very clearly outlined and it was an area of significant discussion that -- where there was a strong consensus on that. Related to that was a very important consideration when one evaluates the accuracy and the evidence around diagnostic test. And that is what is the risk of a false negative and what's the risk of a false positive. And that's not always the same for tests that may have the same accuracy. What you do, what the situation, what risk the patient is exposed to if they have a false negative or false positive is not the same. And they -- again, if you had a chance to listen, they went into that in some detail. And the -- so let's just -- let's first start on the false positives. If you have a patient who has a positive EsoGuard test and they are sent for an endoscopy and they have a false positive, that patient was not exposed to any additional risk because they are getting a test that they otherwise would have received. So there's no incremental risk to that. And the physicians clearly stated that repeatedly, especially the gastroenterologist outlined that. That's different than other tests for example, test for -- to screen for lung cancer or test to screen multi-cancer detection test for blood, where a false positive can lead to invasive procedures that otherwise would not have been performed, biopsies and other head-to-toe kind of scans that can lead to risk to the patients. It also was highlighted that these -- we're detecting primarily precancer here. So a false positive test doesn't trigger the same type of anxiety that potentially can in tests that are primarily focused on cancer. So the whole question of the risk of a false positive and the essentially 0 -- well, extremely low or 0 risk of a false positive given that endoscopy is safe even if it is invasive, was very well established by the panel. The same is true about the risk of a false negative. If you have a test that's primarily focused on detecting cancer, and you miss one, that carries significant risk. The risk of -- especially if your test is an alternative to a test that the patient would otherwise have received. And as the panelist described with a lot of clarity, that is not the case with EsoGuard. These are typically patients who would not have undergone any testing. And so a false negative is -- even though the false negative -- the likelihood of a false negative is only 1% or so. So that is a low-risk false negative because, a, the patient wouldn't have received the test anyway. So there's no incremental risk to having had this test. But most importantly, the fact is that essentially all of those patients are going to be precancerous patients. The likelihood of missing a cancer. First of all, EsoGuard has, to date, not missed a cancer, 100% sensitivity there. And the likelihood of missing a cancer in that 1%, the likelihood that, that 1% would be a cancer is vanishingly low, and they outlined that quite clearly. Another area within the clinical validity data that was part of a question that was brought up, and we think importantly brought up by MolDX was around the ability of the test, the accuracy of the test across the spectrum of conditions that we're looking for. This relates to the issue of short segment versus long segment, Barrett's esophagus. And that was a central part of the discussion. And the highlight there is that EsoGuard performs equally across the spectrum. It has a high sensitivity and negative predictive value for cancer for the later-stage precancers, dysplasia for early-stage precancer, so-called Barrett's esophagus, nondysplastic Barrett's esophagus for metaplasia and even in those patients who have just a small patch of abnormality as little as 1 centimeter, so-called short segment Barrett's esophagus. And various physicians, Dr. Shaheen and Dr. Smith both highlighted that, that is, in fact, critical. Dr. Shaheen pointed out that the vast majority of the disease of the patients that we're trying to find and put into surveillance so we can detect the later-stage precancers and treat them before they develop cancer that the vast majority of that disease is, in fact, short-segment disease. And Dr. Smith followed up with some statistics on that, which is that up to 70% of the target population that you're trying to identify has short segment disease. And that 50% of the cancers have short segment -- 50% of the cancers arose in a patch of disease that would qualify as short segment disease. So what was clearly established during this meeting by the experts is that a test to be appropriate for use and to be -- to have sufficient clinical validity here has to have excellent performance across the spectrum from short segment disease all the way to cancer, and there was a strong consensus that EsoGuard does, in fact, have that. So that's clinical validity. And actually, in some ways, that's the more straightforward part because that's very much just baked into the data, and that is -- it was an opportunity for these expert clinicians to highlight the areas there. Frankly, the area of the data category that was really most important to discuss during this meeting was the other bucket, the clinical utility data. And the reason for that is that unlike a study for a drug or some other studies where you can sort of -- where all of the data is essentially included in one big sort of hairy randomized clinical trial, a lot of the evidence in these kinds of tests are -- represent sort of a chain of evidence around the utility of the test, how does the test perform in a real-world use and what utility is it offering even if it -- even if it's sort of established to be highly accurate. And a meeting like this is actually quite critical to have the clinicians sort of work through that chain of evidence to establish the overall clinical utility. And I thought everyone sort of would agree that they did really an excellent job of that. The questions started, a good chunk of them, the first 4 questions were actually not related to EsoGuard at all. What the moderator wanted to establish was why has this paradigm, which the gastroenterologists, including gastroenterologists on the call who are actually writers of the guidelines that urged endoscopy for now a couple of decades in this target in this well-defined target population. Why did it fail as a screening test? Why do only approximately 10% of eligible high-risk patients that they undergo endoscopy during this decades of recommendations from guidelines. And they nailed this. I mean they really established a wide set of reasons as to why this is the case. Dr. Glover was quite articulate in describing the difficulties that physicians, family physicians have in getting patients to agree to invasive testing, the hassles, the expense, the invasiveness et cetera, as obstacles -- intrinsic obstacles to getting people to use that test such as endoscopy for this type of screening application. So all sorts of issues around patient compliance were clearly identified. There was some excellent conversation around endoscopy deserts about the fact that in rural North Carolina, where Dr. Shaheen practices or in rural Colorado, where some of Dr. Glover's patients come from, just simply don't have the endoscopy resources, sufficient physicians who could perform these tests even if they did refer them to that. Dr. Panzarella pointed out that as in private practice GI that he couldn't -- even if -- even if the primary care physician sent them all these patients who are recommended for testing that he simply could not incorporate them into his practice. So all of the physicians across multiple specialties, academic GI, private practice GI surgery and primary care all agreed that there was a significant unmet need that they had already established the paradigm. The paradigm is completely straightforward. They know who these patients are. They are patients who have a symptomatic heart burn and have 3 out of 6 well established risk factors. When you have that, you have about a 10% chance of having a precancerous condition and that those patients should undergo screening. And as they progress from early precancer to late precancer, they can undergo an ablation procedure, which can eliminate the progression -- prevent progression to cancer. Everybody agrees on that. What they also agreed is that there's a missing link that they needed, which is a non-endoscopic approach and that EsoGuard is that missing link and provides the opportunity to now pull people into the pipeline so they can get tested and we can proceed to find this disease. The chain of evidence continues from that. So you start from, okay, there's this unmet need. Do physicians use the EsoGuard test appropriately to send the appropriate patients to endoscopy and those who don't need it away. And that data is published. There's published data on that, but they highlighted the fact that, yes, EsoGuard provides near perfect concordance with -- the physician referrals have a nearly perfect concordance with the results of the test. What I mean by that is that 100% of the patients who are who are positive on EsoGuard get referred for endoscopy. Dr. Glover and Dr. Panzarella, both concurred that, that was the case in their existing practice. And as importantly, essentially none of the negatives, 99% do not -- of the negatives do not get referred for endoscopy. That's a very important consideration. I said this on several previous calls that payers care about that. They don't want to pay for a test and then have you do the endoscopy anyway. And there was some actual interesting conversation around whether they should limit payment for endoscopy on someone who had a negative test. So that shows you kind of in the real world, how this is front and center on the minds of these patients. So that's the physician behavior part of it, physician referral part of it. Another very important part, which was a central part of the discussion as well, was how do patients respond. If a patient is referred for endoscopy, they don't get the endoscopy, then the test doesn't really have much utility, does it? So that was an important part of the conversation. And the fact is, again, there is published data on that. We've demonstrated that about 85% of patients with a positive EsoGuard study within a window of time that we assessed did they actually get the endoscopy that they were referred for. That's a very high number, higher than other types of tests in which a follow-up endoscopy is indicated and the physicians concurred with that. Dr. Glover, particularly the primary care physician was quite, again, potent on that and that she explained that most of our patients were reluctant to undergo endoscopy, but the positive EsoGuard patients she had to our -- it really facilitated her ability to get them to do so. Dr. Panzarella said, every single patient that he's had, who's had a positive has agreed to an endoscopy. So extremely important. They also highlighted published data in the literature that says historically, that rate of patients agreeing to have an endoscopy is poor. It's about 40%. So EsoGuard has intrinsic utility and that it at least doubles the likelihood that a patient who has a positive biomarker test on their own tissue is much more likely, twice as likely to proceed with the next step than someone who's just being recommended to test based on risk factors alone. And then the -- the next area is, okay, now you get the endoscopy, what is the value of EsoGuard. I already hinted at this. Again, lots of discussions around this, widespread consensus that EsoGuard enhances the value of the endoscopy, the rule out test. So again, here -- again, we have published literature, but the clinical context that they provided was critical. They all agreed that the 2.5 to 3x increase in the diagnostic yield of endoscopy was extremely important in the use of the -- of this invasive test and of those resources. So all of that lined up well. There was other conversations which were a little bit in the weeds, I won't get into that related to whether a large test from the -- a large study from the U.K. was generalizable to the U.S. in terms of demonstrating that if you do non-endoscopic testing in general, you can find a lot more disease. That study showed that practices that used it had -- we were able to find 10x as much disease. And the physicians highlighted that, that is certainly generalizable to the U.S. and EsoGuard would certainly do as good, if not better, than that 10x difference because EsoGuard is a vastly superior test to the test that was used in that study. In fact, Dr. Shaheen was one of the -- with the lead author in a study in the U.S. that demonstrated the poor performance of that test, the Cytokine device with an immunochemical test. So again, strong consensus on that. So that really -- a little bit in the weeds there, but it really represents that chain of evidence of clinical utility that really is at the heart of this meeting. Frankly, that's why we believe this meeting was called to get the physicians to flesh that out and to really lock down that chain of evidence on the intrinsic utility of the EsoGuard test and why it's really not just reasonable, but reasonable and necessary, which is the criteria for Medicare. Another important part that came up repeatedly kind of peppered throughout the meeting was guidelines. There is strong support by the major societies, the American College of Gastroenterology, the American Gastroenterological Association in their guidelines and practice updates on non-endoscopic testing such as EsoGuard as well as on the overall paradigm of this test. Once patients are identified who have esophageal precancer, everything from that point on, we like to talk about sort of EsoGuard hand the baton on to existing data has been well established by, frankly, many of the folks who are on this call. So the idea that once you know someone has this precancerous condition, Barrett's esophagus, that doing surveillance on them with endoscopies and intervening on them with ablation works. And that there is a full consensus around that. And the societies recommend that. And in fact, the payers pay for that. They pay for those endoscopies and that ablation. And so the fact that, that's well established within guidelines was crystal clear. The fact that it wasn't a coincidence that MolDX invited the actual authors of these guidelines to be there to testify to that fact. And as I mentioned, all of them -- all the major ones were present and reiterated that point. So all of that points to the -- what they're looking for is that there is a high or remarkably high benefit-to-risk ratio for this kind of test. So that is really the substance of the clinical data. But there was also extremely important element of this, which was around the clinical -- real-world clinical experience. That's why the MolDX group invited primary care physicians and a private practice gastroenterologist. And they very much explain their own experience and the value that EsoGuard has provided within their practice. Dr. Panzarella discussed how he utilizes the test in his own practice, actually not just from primary care physicians, but patients who are referred to him for endoscopy, and he can identify there's a lot of overlap between the risk factors of patients who are referred for endoscopy with those who -- sorry, referred for colorectal cancer screening and those who should undergo that, and he's incorporated that into his practice over the last couple of years. But I think at the end of the day, one of the major highlights was Dr. Glover, the primary care physician. I think as those of you who have been following us know that the vast majority of these patients never ever see a gastroenterologist and getting primary care physicians to buy into this paradigm and buy into this type of testing and to EsoGuard in particular, is extremely important, and Dr. Glover provided a very, very potent demonstration of that. She's -- she acknowledged that she's a skeptical physician and bases her decisions on adopting new technologies based on guidelines. And she offered a very powerful anecdote. She had her very first 2 patients once she had read the data, understood the guidelines and said that this is something that she knows her patients would benefit from, particularly because of the issues with compliance for referring for invasive tests that those first 2 patients, one of them was negative. She felt perfectly comfortable on the negative patient, telling them because of the high negative predictive value that they were good to go, that they didn't -- that she was confident that they did not have precancerous or cancerous skin addition. But the more potent story, of course, was one of those first 2 patients who was a positive on EsoGuard. That patient underwent endoscopy by one of her local gastroenterologists, and it showed initially high-grade dysplasia or a late-stage precancer which is great. Everyone was happy. Wow, it was great. We found this late-stage precancer. The right thing to do for that is to send them to an advanced endoscopist, gastroenterologist who can do the appropriate eradication treatment and make sure that, that high-grade dysplasia, which is at high risk for developing progress into cancer, it is eliminated. And so absolutely coincidentally, that patient was sent to Dr. Wani, who is one of the other panelists here. And Dr. Wani, as he acknowledged, took that patient and with the expectation that he would be going in to treat high-grade dysplasia, and he found that the patient had the earliest stage precancer known that we know, called a T1A cancer, a very small, little patch of cancer that hasn't even penetrated through the superficial layers. And he was able to remove that with endoscopy and cure the patient. And here's a -- again, one anecdote, but anecdotes can be powerful. Here's a patient in whom EsoGuard clearly found the earliest-stage cancer in a patient who we know at some point in time, was it a year, 2 years ahead, unclear, but would have certainly progressed to invasive cancer if this hadn't been detected early. So you can't find that in a published peer-reviewed paper. That's why this meeting was called. It was for those types of insights and that type of clinical context. And really, we believe that the clinicians hit it out of the park by providing real strong clinical context for what we really have always believed is very strong clinical data. So what happens from here? So this meeting, as Matt pointed out in the beginning, is an advisory meeting. It was meant for the MolDX directors, including Dr. Bien-Willner, who was leading the call from Palmetto as well as his colleagues at the other 3 to provide them with the context. And Dr. Bien-Willner at the very end, made it very clear what the goal is here, which was to get that clinical context and that he was grateful for their input and that -- and he said it would be helpful in their process of reviewing this request for reconsideration. So we were extremely happy by that -- those closing remarks. So from this point on, the next steps are very straightforward. It includes a -- the next step was the publication of a draft LCD, draft local coverage determination that is basically a response to a request for reconsideration that says, yes, we agree. The data is robust. The clinical context provided by the CAC meeting was excellent and sufficient, and we are proposing in a draft coverage to reverse the noncoverage aspect of this and provide coverage to EsoGuard. As we said before, that is the milestone because if they chose not to do that, they wouldn't publish a draft LCD. So the publication of a draft LCD is a firm indication that they are -- they intend to cover this. There is, as I mentioned before, a process that has to continue from that. There's a public comment period, a 45-day window that includes a public meeting, which -- where input is incorporated, and that results in a final LCD. And then subsequently, the EsoGuard test would be included in the articles and we have coverage. We stated this before, but there's a 1-year window prior to -- look back prior to the date of the final LCD where we can submit claims under the LCD and get paid. So we believe we're in those final steps. Now how long it's going to take? That's the $64 million question. We think we're pretty close. We're pretty soon. Everything about the process of how it was set up, the comments during the meeting from MolDX leadership gives us a high level of confidence that this is in the final stages that there's -- that they're strongly inclined to proceed accordingly. The analysts have put some time lines on what they think the time line is for us to receive a draft LCD, and we would concur with those time lines. So let me end there and just summarize by saying we weren't sure what to make when this notice went out, but pretty soon after, based on consultations with MolDX leaderships and others, we were happy actually that this meeting was put into place, and we expected it to be positive and to highlight and give a public forum for the quality of the data and the clinical context. We're extremely happy with the selection of the experts, and that was a really excellent group of diverse group of folks. And we went in quite optimistic. And as I said, the meeting really exceeded our expectations and really, we believe it puts us in a great position to move on towards Medicare coverage in the very near term. As we've talked about before, I won't go into much detail, but Medicare is important for us for 2 reasons. Although our current Medicare population of the patients we've been doing to date has been low. We've never really made any effort to find Medicare -- to find Medicare patients. Many of our patients tend to be on the younger side because we've had a high number of them within our Check Your Food to firefighter events. But we know about half of the patients in the target population are Medicare. As we said on our earnings call, we are moving towards trying to move that 10% number towards that 50% number and having the -- really even the prospect of near-term Medicare coverage is helping us do that. As we also discussed, certainly, when it comes to the larger commercial payers, Medicare is an important milestone. Medicare has established pricing, which we think is important and Medicare coverage really sets the bar for the larger plans. We still think we will continue to have success with the regional plans while we're waiting for Medicare coverage, but Medicare coverage is extremely important for us on the commercial side as well. And we -- I think we'll look back at this meeting as a real inflection point in our pathway to provide broad patient access and to really be in a position to ramp up our commercial activity to take advantage of this really large total addressable market. So with that, I'll ask the operator to open it up for questions. Operator: [Operator Instructions] With that, our first question comes from the line of Mark Massaro with BTIG. Mark Massaro: Thanks so much for helpful discussion of the CAC meeting and congrats on a really positive toned meeting. One of my first questions is it really stuck out to me that there was consensus around only about 10% of these eligible patients are getting screened with standard of care endoscopy. If I have this right, I think that compares to around 40% to 50% of eligible people to get screened for colorectal cancer. So just at a high level, Lishan, you talked about EsoGuard having a remarkably high benefit-to-risk ratio. But if I have this right, if you could get 10% of people screened to anywhere near where colorectal cancer screening is at 40% to 50%, that would potentially represent a four to fivefold increase from where we are today. So I'm just trying to frame that. Am I on the right track in terms of just... Lishan Aklog: Yes, 100%, Mark. I mean actually, I think your numbers may be a little bit low on the colorectal side. I've heard numbers that even at the point of introduction of colorectal stool DNA testing that, that number was at 50% or maybe even a bit higher, and we're higher than that based on the volume of testing patients who undergo colorectal screening. So I would say even it's probably higher than that, that we're at 10% and colorectal is 60%, 70% or more. And even that 10% number, that there is a strong consensus there. But honestly, our personal opinion is that number is actually on the high side. If you look at the target population and you look at the number of endoscopies, upper endoscopies performed a year, just all of them. You just look at administrative data and you just look at all the numbers there. it doesn't add up actually that it's even 10% because we know there are 30 million people who are recommended for -- by the most strict guidelines by the ACG guidelines, 10% of that would be 3 million. There are only about 1 million-plus upper endoscopies. And the vast majority of those are not screening endoscopies. The vast majority of those are people undergoing upper endoscopy for evaluation of their refractory heartburn or other -- esophagitis or other conditions. So we'll go with that 10%. It's perfectly fine, but we think that real number is actually much, much lower than that. And so you're right, the increasing that 10%, let's just say, to 30% in the coming years would have a massive impact. I didn't -- I forgot to quote Dr. Panzarella, but he pointed out and said he liked sports metaphors and pointed out that the number of people who die from colorectal cancer could fill a football stadium, but the number who die from esophageal cancer would fit a basketball arena, and that's a lot of patients. And so going from 10% to 30% would represent thousands of lives saved a year. And so I don't -- I think, again, the experts nail that with regard to the huge benefit-to-risk ratio that we have the opportunity to perform. And I think as you're hinting at here, even higher opportunity than even in colorectal cancer because -- for a couple of reasons. One, because there was already significant penetration of endoscopy -- colonoscopy there. And frankly, another reason is that colorectal cancer picked up early and Stage 1 actually is curable while Stage 1 esophageal cancer, the vast majority of time is not curable. Mark Massaro: Yes, that makes sense. Another thing that stuck out to me was Dr. Jamie Glover talking about how it's really just general health anxiety, which I thought was interesting. And the reasons for noncompliance to endoscopy procedure burden, some of these folks, especially people that are obese or smoking, there's a laundry list of things for them to do. The PCP doesn't have enough time to go through the laundry list. The patient feels stressed out that they can't manage all of the things on the laundry list. So I guess one of my questions is how do you try to get -- and this might be a marketing question, but how do you try to promote getting screened for esophageal cancer or Barrett's when there -- the population that you guys are testing has multiple risk factors, right? And it also occurred to me that some of these patients, of course, you've been talking about this for years, have no symptoms of GERD. -- right? And so how do you position this test such that the PCP can prioritize this test because it's almost like, in some ways, this might be competing with colorectal cancer screening or lung cancer screening or other types of tests on the laundry list that need to be done in a given patient encounter. Lishan Aklog: Okay. So a lot to unpack there, but great question. So first of all, let's just -- let's put one thing to rest, which is the asymptomatic patients because as you know, that came up, right? And you're right. And the panelists acknowledged that there are a large number of patients who either have well-controlled symptoms on PPI medications or just have no symptoms at all. And the questions asked by the moderator did attempt to tease that out, if you remember, like, well, your guidelines right now only refer to symptomatic patients, but we're going to miss half these patients. And I thought the panelists did an excellent job of saying, yes, but you got to start somewhere. The symptomatic patients are going to be easier to get them to proceed. we'd love. And certainly, at some point in the future, we've talked about this on multiple calls that we do expect that there'll be an expanded clinical opportunity in patients who are asymptomatic. As you know, Mark, there's an $8 million grant funding an NIH study right now that's looking at that, and the pilot data from that looks pretty promising that patients who are asymptomatic have almost the same prevalence of precancer and EsoGuard works equally as well in those. So that's for the future. So right now, the focus is on those who have symptoms. I think as it relates to kind of the dynamics within the primary care office, let me just talk about that a little bit. I think from a marketing and a commercial point of view, we don't have any concerns about that. We've been marketing this to primary care physicians at a low -- kind of at a low level for many years now. And it's just not an obstacle. When we walk in and say, our team walks in and said, reminds them of the relationship between cancer -- between heartburn and cancer and the guidelines and the availability of a non-endoscopic test, getting them to move from that to, okay, let's look at our EHR and let's find the patients who fulfill this and let's get them tested. It's not a hurdle to get them to agree to start doing that. But there are some details there that are important that actually came up, particularly, as you mentioned, with Dr. Glover. The issue is not so much prioritizing it because primary care physicians are actually quite good at running through the checklist and like, okay, when is your next mammography? Should we do stool DNA testing? Do you need a colonoscopy? Should you get a PSA? -- that's kind of their bread and butter of what they do. And so adding this to that list is not -- in terms of the conversations and discussion is not hard. But what she clearly pointed out is that if the -- if what they're asking their patients to do is an invasive upper endoscopy that she gets nowhere with that. She has no -- the patients are just reluctant to get that. And then as I mentioned, there were all the other factors that interfere with their ability to implement that. So the notion of offering patients pre-cancer testing is something that is easily incorporated in the practice, but the utility comes from EsoGuard being non-endoscopic and straightforward and something that patients are willing to have. I think Dr. Panzarella might have mentioned this if he hasn't -- this is true, that the patients that he refers for EsoGuard and EsoCheck, the cell collection part, they universally agree to do it. There's just -- there's a high compliance with getting people to do that. I think as you know, that's actually not always the case with regard to other even noninvasive tests like stool DNA testing. The other part, which I'm glad you brought this up that came up because the MolDX, the MACs and Dr. Bien-Willner were very interested in the implementation side of things. And it was critical to -- again, the 2 of them provided that highlight that it's been easy for them to incorporate this into their practice. Dr. Glover pointed out that she is looking forward at some point to having her and her team perhaps offer the test themselves, but the fact that Lucid clinical personnel who are highly trained make themselves available to do the test on whatever interval of time, she can collect sufficient patients to do that, greatly facilitates the ability to do that. Dr. Panzarella concurred, right? He's a GI practice. He's done it. He's actually did mention, but he's done it himself. He himself had the test. So he can do them in between. But one of the things that is strong -- that facilitates that is that the Lucid clinical team comes once a month to his practice to test people. And actually, this is in Florida, where some of you who followed us know we have a mobile van and the mobile van pulls up to his practice and tests patients once a month. So the logistics, the implementation part, which was an area of questioning here. It's important for the MAC directors to hear that, it was a very critical part of the clinical utility and why we have, frankly, no concerns. Sorry, one other thing that they mentioned is a hurdle. I believe Dr. Smith did, and I forget one of the other physicians did as well, is like one of the reasons why they're not doing this more is they don't have coverage. Dr. Smith has done a bunch of -- has participated in a bunch of testing by overseeing firefighter events here in New York City, but the obstacles for him to bring it into his large -- into a large medical center where he's the associate system chief has been one of those is coverage. And he pointed out that they need to have coverage in order for them to implement it broadly within their practice, and that's why his group, the AFS has been a very strong forceful voice in that. So once we have coverage, I really, really sincerely don't see any meaningful obstacles to us getting primary care physicians to use this and to drive patients into this paradigm of testing. Mark Massaro: Okay. Great. And maybe one last 2-parter for me, and then I'll hop off. There was a lot of discussion, as you pointed out, about these endoscopy deserts, patients having to drive like 1.5 hours, 2 hours to get a scope and EGD. Do you have a sense for the location of these -- because presumably, you could set up a shop to help provide an alternative to people having to drive a couple of hours for an endoscopy. And then my second part question, I think it was Dr. Smith talked about how EsoGuard could be used as a point-of-care test in primary care physicians in offices. I thought this was really interesting. And so really, my question is, where do you see the bigger opportunity? Is it primary care? Is it GI offices? Is it both? Lishan Aklog: Yes. Okay. Let's -- maybe again just because that's how my brain works. Let's go backwards. So it's all of the above, right? You saw that on this call. You saw a primary care physician has incorporated in her practice. You saw a busy private practice gastroenterologist who's incorporated in his practice, and you saw Dr. Dunst, who's leading a team to incorporate it within a large health system with 200 primary care physicians. And you saw another physician leader who is frustrated that he can't bring it into his practice because of lack of coverage across one of the largest systems in the Northeast in Mount Sinai. So it's all of the above, but the patients are not seeing gastroenterologists, right? So the focus is on primary care physicians, but that includes the kind of the Dr. Glover model of solo or small practices where a lot of patients get their care, but it also includes the Dr. Dunst and Dr. Smith model, which includes health systems that have primary care physicians network that you can move within and getting them to be done there is relevant. That's what Dr. Smith mentioned with regard to point-of-care testing is happening today. That's not -- there's nothing new about that. That's -- he sees the value in that, in that we can -- we don't need to send patients to a tertiary center or to a specialist to have the EsoGuard test done. It can be done as a point-of-care test within a physician's office, including a primary care physician's office. If the primary care physician wants to have their own personnel trained to do the cell collection, great. Our team will go in and train them to do that. If the primary care doctor wants our team to offer that, same thing. Great. We'll offer that as a service using a mobile van or using our satellite model where our nurses come in on regular days to do testing. If they want to do a hybrid, that's fine, too. If they want to transition from us to doing more of theirs, which some of the practices are talking about, all of that is within the realm of possibility. And so that gets to the heart of, I think, your first question, which is around the rural -- the endoscopy deserts mostly in the rural areas. Yes. So there are large areas of the country where there are -- we know this about all specialists. There's nothing unique about that for endoscopy. If you're in much of America, once you get into experts and beyond, where there's still a large population, finding a specialist is often difficult. Often it requires a significant drive and the ability to have testing within a primary care office or, let's say, an internal medicine practice there as opposed to having to have people drive to go see a specialist is extremely important to provide broad patient access. And we have real-world examples of this. I'll give you one in particular. When we started in Arizona, we started with some physical Lucid test centers. And there were several of them and people would come, get referred to our physical centers to get tested by our nurses. And that worked fine. And the catchment area there was maybe 45 minutes, people would be willing to drive, but that was probably about it. And a lot of people within 45 minutes of a metropolitan Phoenix, but that still doesn't cover a lot of folks. Frankly, the way this whole idea of having patients go -- having our nurses go to the physician offices and offer the cell collection there arose from an unmet need where there are patients throughout rural Arizona, Globe and like I think Lake Havasu and other places where physicians are like, yes, I'd love to do this, but my patients are not going to drive to Phoenix. So our team said, well, okay, we'll come to you. And so now they have scheduled testing days at these rural or somewhat more remote practices outside of metropolitan areas, and it works great. The nurses show up. We try to get the physicians to fill up a day. Our nurses can do up to 30 of these in a day, and that would be sort of an ideal day. And it's very economical for us, and it gives us a much broader geographic range in order for us to be able to provide wide access. And so all of that, that whole model is well worked out and will be critical once we get broader coverage to put our foot on the gas and expand the use as discussed. So hopefully, that answers all -- that was a multipart question, but hopefully, that covers that. Mark Massaro: It does. Thanks so much, congrats guys. Operator: And your next question comes from the line of Kyle Mikson with Canaccord. Kyle Mikson: Congrats on the positive CAC meeting tone was great. Maybe just taking a step back and thinking about the -- any kind of prior comments that were made just thinking about what's kind of changed here because that's sort of the key going forward. Lishan, could you just speak to how the group's comments? I know a lot were KOLs, obviously, different from prior MAC feedback and responses to the comments after the original LCD, how that -- why you're more confident now? Lishan Aklog: Yes, yes. Well, it's because there were different meetings. So I think what you -- I assume what you're referring to, Kyle, is the first CAC meeting that occurred in 2021, in the fall of 2021. That meeting occurred after we had submitted our -- both our pricing and coverage dossier and after we had actually already received pricing from MolDX -- but before we had any data, all we had at that point was a single paper, the original paper in Science Translational Medicine, and we had expressed our intent to go out and expand our clinical evidence. So the purpose of that meeting was to say, okay, we have an area of testing here that looks extremely promising. It's an area we're probably going to have to -- we're going to have to deal with at some point. And the contractors were basically saying the MolDX program was basically saying, should we even get into this space at all? Or should we just wait until somebody has sufficient data and then they can come back to us at all? Should we bother drafting an LCD to help guide those who are looking to advance tests in this situation? So that meeting is a little bit different. It was a little less organized to be blunt. Dr. Bien-Willner did not moderate that one. So it's a little bit -- there was some conflation between surveillance and -- sorry, between risk stratification and screening. There was at least one common member, Dr. Meltzer was on that call, one of Dr. Iyer's colleagues from Mayo Clinic was there, but it was similar. There were only 4 panelists at that. But that was actually a very positive meeting because even though some of the logistics were a little bit difficult, the widespread consensus from that meeting was, yes, we believe in non-endoscopic testing as an important biomarker testing as an important advance. And yes, you guys should take the time to proceed along this way and not simply wait for somebody to come and show up with a full clinical evidence package. So with nothing -- that CAC meeting, we believe, is what triggered their decision as a group of MACs to actually proceed with the LCD process at all and to actually write a draft LCD that came out 5 months later. And that one met a few problems and required some comments and those problems were all fixed and that ended up in a final LCD. So many aspects of the conversation from this meeting and that meeting were very similar in the -- in addressing the unmet need, the failure of endoscopy, the -- all of the underlying information around the kind of the brutal nature of esophageal cancer and the paradigm that these gastroenterologists have established and the societies have established, all of that was quite common. But the purpose of that meeting is should we get started? -- in this at all. And the answer from that meeting was yes. And this meeting was -- they were obviously already done that. This meeting is like, should we get this thing wrapped up honestly, that's how I would view it. And so it went beyond simply is there a need for this? They already established that by publishing the LCD and establishing the coverage criteria. It was included, is there clinical validity and clinical utility actually in EsoGuard. And so that's how I would correlate those 2 meetings. Great question. Kyle Mikson: Okay. That was great. I think what the -- I feel like the education and usage was -- has matured basically in those 5 years, 4 years or so. So that's a good commentary. Now just on the -- clearly, during the meeting, the EsoGuard was spoken as being like an effective rule-out test given the high NPV. Dr. Panzarella, Chak, Shaheen, Glover, they all kind of spoke about this, obviously, it was one of the questions. The current LCD, though, does mention a test should be highly specific. And given EsoGuard's specificity has never been above, let's call it, like 82% or so, do you think that's something that will have to improve over time? And could that -- being a rule-out test rather than a fully rule-in rule out, would that limit the market opportunity or the ability to widen the funnel for TIs or endoscpist? Lishan Aklog: Okay. Great. So let me -- again, just in my practice here, the answer to the last question is no, it doesn't limit it. And that was, frankly, the point of a multipart question about making the distinction between rule-in and rule out, right? So the question -- so the whole point of that conversation, and you saw how Dr. Bien-Willner kind of navigated that conversation around -- and I was happy that he did this, making a distinction between rule in and rule out and focusing on NPV and PPV although specificity, obviously is mentioned, but specificity is what drives your PPV. And the way these rule-in tests are designed are to -- sorry, rule-out tests are designed are to rule out patients have a maximal sensitivity and a maximum negative predictive value. Dr. Shaheen mentioned, look, it's got to be 98% or higher for this to work. You can't have a false negative rate that's much higher than 1% or 2%. And then there was plenty of discussion around what is a sufficient specificity and resulting positive predictive value for a test like this that's designed and operates and its utility is based on its ability to rule out tests and that the 30-ish -- right around 30% positive predictive value is really actually very good in that for a variety of -- by a variety of metrics, one of them being that as was discussed, it increases the yield of the standard of care endoscopy by 2.5 to threefold. The positive predictive value of an endoscopy, the gold standard, as they mentioned, is 10%, right? Because that's what the prevalence of the population. So if you just do endoscopies on patients like they had recommended for the last couple of decades, you're going to have a 10% positive predictive value. The specificity of endoscopy is not good. this test increases that by 2.5 to threefold to 30%. And as you balance NPV versus PPV, that's very good. The PPV also is quite strong when you look at the positive predictive value of other tests that are focused on identifying cancer, whether it be lung cancer testing or mammography, even colorectal cancer testing. This is really a very good PPV. So that goes to the heart of the question specifically. As it relates to the market opportunity, no, this test is -- the whole paradigm here is to hand patients to find these patients that we're not finding and hand them over basically pass the baton on to the existing paradigm of surveillance endoscopy of nondysplastic early-stage precancer and ablation and intervention for late-stage precancer to prevent cancer. That's the paradigm. And this test as a rollout test with a PPV that increases the yield of the endoscopy serves that purpose today. There's no gap in that market opportunity. The market opportunity that we've quoted is based on the 30 million patients who are indicated for testing and every single one of them is indicated for testing would qualify for testing under EsoGuard under this paradigm. Now look, in the future, you're right. In the future, there is always opportunities to improve the test. When you design a test like this, your first shot is what was done with this test by Dr. Markowitz and Dr. Chak and their team at Case Western, which is to get the maximal NPV and a very good PPV. But over time, you -- and we already have -- we're already working on this. You look for ways to say, "Hey, are there ways for us to improve the specificity and increase the PPV even further. And there is a way to do that. And there's a history of this. This is exactly what Cologuard did from Cologuard to Cologuard Plus don't know, 8 to 10 years between those 2 products, they came up with improvements. The improvements in sensitivity and negative predictive value, frankly, are not that much. A little bit -- a few points on advanced adenomas and cancers. The big improvement was more on specificity and positive predictive value to -- from a more of a health care economics point of view to really cut down the number of endoscopies and so forth, the yield of endoscopy even further. So that's true. The era long term, I think Dr. Shaheen may have touched on this, the ultimate holy grail goal sure would ultimately be to have a completely non-endoscopic approach to rule in and rule out. And we may reach that point as these biomarkers improve where you can do the test and feel comfortable that you roll people in and you rule people out and the patients who are being rolled in are going to have -- are going to be heading into a definitive treatment. That certainly is the ultimate goal. But the current breakdown NPV and PPV is excellent and serves the purposes of the current market opportunity extremely well. Operator: [Operator Instructions] Our next question comes from the line of Mike Matson with Needham. Michael Matson: Congrats. It was clearly a very positive meeting. So there was an interesting question that came up on the call from someone at CMS or I guess maybe it was one of the MACs, I'm not sure, but they said something about -- they were asking something about not allowing EGD in patients that have a negative EsoGuard result. Did I hear that correctly? Lishan Aklog: Yes. But it was interesting. Again, it gives you guys a bit of a -- I thought it was interesting. It doesn't really have any impact on us, frankly, but it does give you a little impact -- a little inside view, inside baseball view on how payers think about this stuff, right? So the question was really, well, if you guys are so confident that a negative, which you should be, that a negative EsoGuard test rules out disease, then we shouldn't pay for the endoscopy of a test -- if a patient is negative. It's effectively what the director, I believe, from CGS was asking. And that's a perfectly reasonable question. I mean we're fine with that. We have -- we're highly confident. It doesn't affect us at all. We've shown that a negative EsoGuard test results in 99% concordance for physician practice, they don't refer those patients to endoscopy. And so they're just saying, we shouldn't have to pay for that, right? But there was a little bit of pushback, but -- and the pushback was reasonable, not because the gastroenterologist had any concern about the false negative, the negative predictive value. They were just concerned that as bureaucracy go, if there was sort of some kind of blanket exception to anyone who's undergone an EsoGuard test can sort of never get an endoscopy. They were worried that you would inadvertently pull in other patients who clearly need endoscopy for other reasons, not for screening, but for other reasons, for evaluation of refractory GERD, for esophagitis, for EE, -- there's just a whole sorts of other things. And they were just nervous that such a criteria would be -- would have inadvertent consequences. And frankly, that's something that the payers will work out with the GI societies as it relates to that. But it has no impact on -- frankly, on us or on EsoGuard. Michael Matson: Okay. Got it. And then just wondering, does MolDx consider economics at all? In other words, I guess, what if they're like, well, this is a good test and it all makes sense to cover it, but we're worried that the $1,938, dollars is just too much or it's going to end up costing the system too much money. I mean it's hard to make that argument, I guess, when you consider the fact that they'll be preventing a lot of endoscopies potentially in some of these patients, which are clearly more than that. But just wondering if they weigh that stuff at all or if it's really... Lishan Aklog: So the straight answer to your question is no. So Medicare is not allowed to consider economic factors in making coverage determinations. They're only allowed to base their coverage determinations on what's "reasonable and necessary". That's the criteria. So they are not. But a couple of -- it's a great question because it does a couple of additional points there. One is that they're the ones who came up with the 1938 price. Remember, that's Medicare's price. And it's the same group. It's the same MolDX group that recommended that price. So at the beginning, 5 years ago, when we started this process, we submitted in addition to a coverage dossier, we submitted a pricing dossier, and they did a full analysis of what would be a justifiable cost based on the -- on a variety of factors and came up with that price. So the health care economic impact is not a factor in their decision with regard to coverage. However, it is with commercial payers. And so we have a very robust talk track and arguments that we can make on the health care value proposition for EsoGuard testing. And it's good. So it's not -- we have modeling that demonstrates that EsoGuard testing even though endoscopies are not widely used and certainly a cynical payer can -- there's this very, very crass and cynical argument that death is sort of cheap, right? But it really isn't because patients who are diagnosed with esophageal cancer, 80% of them die. But before they die, they spend a lot of money, which is now pushing a couple of million dollars before they die to the health care system. So it's actually quite expensive. So our modeling is quite straightforward. It shows that with the typical parameters and parameters that other payers can adjust on their own based on their own patient populations that EsoGuard testing is a net economic positive. One of the things that we've learned in our -- just -- I'll use this as an opportunity to highlight something, we have extensive conversations now with the commercial payers. And in their case, as I said, the issues of economics come up. And one of the things that's been very gratifying in our recent conversations is that they don't do what you sort of said, to kind of take the cynical approach, which is -- we're not paying for these endoscopies anyway. So we're not going to kind of give you credit for avoiding endoscopies in 70% to 80% of these people because we're not paying for them anyway because the patients are not getting them. That actually hasn't been the conversation that we actually have been quite pleasantly surprised now that we're kind of in the meat of these policy discussions now, and that's only been true for the last few quarters because now we have the full data package to engage in these conversations that to the contrary, we've gotten strong feedback that, yes, there's an economic value in the fact that you're avoiding endoscopies that should be performed in these patients based on guidelines. So that's very encouraging as it relates to our ongoing conversations. So that's a bit of a long-winded answer. I thought I'd throw some of that in there. But the straight answer to your question is Medicare does not take economics into consideration. Michael Matson: Okay. Got it. And then just finally, I don't know if you're able to answer this, but because of the 1-year look-back window, assuming you get the MolDX coverage, how many Medicare tests or claims do you have that would fall within that period? I mean, I guess you don't know it depends on when this happens. But then also, let's just put aside the number, how does the mechanics of it work if you had 1,000 tests that were in the window and you submitted all of them? I mean would you kind of get it all at once? Or would it be spread out, do you think multi... Lishan Aklog: Yes, yes. So let me answer the last part. The mechanics are straightforward. Once you have final -- once so we can submit the 1-year look back -- and this is from the horse's mouth because I inquired on this in my conversations with the leadership directly. So the 1-year look back is dated from the date of the final. You start submitting after you get the final, there's this last step where CMS Central is a little bureaucratic step where you end up in the sort of list of articles, so where our code is actually listed after the final LCD. And that's when you start submitting. Once you submit, the mechanics is straightforward, you get paid. simple as that. Whatever the 1-year backlog is, you get paid. Medicare is actually a pretty good payer in terms of their -- they don't have long lead times. So when you submit, you typically get paid rather quickly. The number of patients, a little bit hard to say. I'll see if Dennis is willing to maybe flesh that out a little bit because we have this program now where we are pushing our team to target Medicare patients. So over the coming months, the kind of the success of that and whether we're at 10% versus 15% or 20% or pushing higher than that will determine the number of claims outstanding claims that, that 1-year backlog look back will have. And so you can kind of do the math. Look at the percentage -- look at our total volume, look at the percentage of the volume that is Medicare, you can project what that would be in the coming months. And then Medicare will pay at the Medicare rate and pay promptly at said Medicare rate once we're -- once this whole thing is final. Dennis, I don't know if you'd like to flesh that out a little bit more. Dennis McGrath: Yes, I can give you some perspective. If it were the 2024 year would have been somewhere between $6 million and $8 million. In the first half of this year, it's probably about $2 million. And as Lishan said, we're going to start focusing on Medicare patients. So if it's in the 2025 window that all of those claims will get paid, it will be higher than $2 million. So that's probably as general as we can probably make it. Operator: And your next question comes from the line of Jeremy Pearlman with Maxim Group. Jeremy Pearlman: Just one quick question. So it seems like the meeting went really well. But just to play devil's advocate, let's just say I've heard crazier stories, you don't get the positive draft letter. -- is there an appeal process? How -- what would be your steps unfortunately, that came about? Lishan Aklog: Yes. Look, I mean, I think it's fine to be -- to play devil's advocate. Nothing is certain when you are -- when things are out of your hands. I'm not sure it's worth kind of speculating what that is. Yes, there are lots of that to appeal to make that case. It's not really worth speculating on what that would be. We're really confident. It's just it's a matter of when, not if. I'll just point out. I mean let me just point out one other -- there's lots of reasons. Hopefully, I've articulated why we're confident of that. I can't predict the timing precisely because that relates to internal logistical aspects here. I would say that the fact that the director of the program moderated this meeting and everyone could sort of see his demeanor through the meeting and in his closing remarks says a lot about the fact where this is on the kind of the priority list. I think some of the other analysts who are heavily focused on diagnostics will point out that, that is not typically the case that typically the running of these meetings is delegated to other medical directors. So look, I mean, this is just our opinion. We not -- we have no inside information on this, but it would certainly indicate that there's a priority here and that, that can move -- that it will move expeditiously. And the outcome it's pretty hard to find another example. Again, I'm quoting some of your colleagues here of a test that's recommended in guidelines that has in a meeting of nearly a dozen medical experts across specialties, including the ones who wrote those guidelines unanimously offering clinical support for the public record, which was the design of the meeting. The purpose was to get their opinion on the public record. It seems pretty hard to fathom that we won't end up where we believe we're going to end up. Operator: And your next question comes from the line of Ed Woo with Ascendiant Capital. Edward Woo: Congratulations on the meeting as well. I have another quick question. So there won't be any consideration in terms of your current coverage reimbursement rate from Medicare that's already been disclosed. There won't be any changes or discussion into that? Lishan Aklog: No. This is entirely -- coverage and payment are completely different pathways. The payment rate has been established based on -- we went through the -- just to get in the weeds, we went through the CLFS process many years ago that culminated in MolDX recommendation of this price of 1938. That price is locked in. And this process is completely -- the coverage process is completely separate from that. Great question, but thanks for a chance to clarify that. Edward Woo: Thank you very much and I wish you guys good luck. Operator: I'm showing no further questions at this time. I would like to turn it back to Dr. Lishan Aklog for closing remarks. Lishan Aklog: Well, great. Thank you, everybody, for taking the time. I guess we're an hour and 20 minutes into this. So there's clearly a lot to talk about. As always, just great questions to get the weeds on some of this. But hopefully, it provides you with sort of a foundation as to why we believe this was an extremely positive meeting and why we're incredibly optimistic about the near-term prospects here and what that means for EsoGuard for our ability to offer this and expand access to it and for Lucid as a company and for its commercial potential moving forward. So hopefully, you got a sense of that and understand the underlying reasons why that underpin that confidence. And let's go. We're looking forward to moving forward. So I appreciate you all taking the time on this one-off call. And for those of you who have been patient enough to stay to the end, hopefully, it was informative and worthwhile and look forward to kind of keeping you abreast of this through our news releases and other channels that we've talked about. So thanks again. I really appreciate the time. Feel free to reach out to -- just sorry, one more logistical thing. The meeting will have a recording. So anyone who didn't listen to the meeting, we're not sure. typically, it gets posted within a couple of weeks of the meeting. We can -- if you're looking for that link, you can reach out to Matt Riley, can provide you with that link when it becomes available. We do have an unofficial transcript for anyone who might want to read through that. I would encourage you to contact Matt as well. And we're very grateful to our analysts who've already written some very useful summaries on the -- really on the substance of the meeting, which is hopefully helpful as well. So thanks again, everybody, and have a great day. Operator: Thank you. And ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good day and thank you for standing by. Welcome to Idorsia's TRYVIO Investor Q&A Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to Idorsia's Chief Executive Officer, Srishti Gupta. Please go ahead. Srishti Gupta: Thank you, Nadia. Good afternoon and good morning, everyone, and welcome to our webcast to discuss TRYVIO and its role in the treatment landscape for difficult-to-control hypertension. After decades of limited progress in hypertension research, we are now entering an exciting new era, led by TRYVIO, the first innovation in hypertension in over 2 decades. It is the first and only hypertension therapy to target the endothelin pathway. Ahead of the European Society of Cardiology, ESC, meeting, we published an on-demand investor webcast, sharing our perspectives on TRYVIO's ability to address a significant unmet need and difficult-to-control hypertension. Since then, we've engaged with leading hypertension experts at both ESC and the American Heart Association's Hypertension Scientific session. We've also met with many of you in the investor community as the back-to-school season kicks off in the U.S. Today, we'll address the key questions we've been hearing in those discussions and then open the lines to take your questions on TRYVIO. Joining me are Martine Clozel, our Chief Scientific Officer and a recognized leader in the endothelin system; Alessandro Maresta, Global Medical Affairs Therapeutic Area Head for cardiovascular, renal and metabolism; Michael Moye, President of Idorsia's U.S. Operations; and Julien Gander, our Chief Legal and Corporate Development Officer. Next slide, please. Before we begin the Q&A, please note that our remarks today include forward-looking statements informed by our research, physician feedback, advisory boards and market insights. As always, we encourage you to consider both risks and opportunities when evaluating Idorsia. Next slide, please. TRYVIO in the U.S. and JERAYGO in Europe represents the first systemic hypertension treatment to target a new pathway in more than 30 years. This pathway is the endothelin pathway. That brings us to the key question investors are asking. Why is addressing the endothelin pathway such a meaningful innovation and differentiator in hypertension. Martine, can you share your perspective? Martine Clozel: Thank you, Srishti. Endothelin upregulation is a central driver of hypertension. It plays a role at very early stages of hypertension during the progression of hypertension and at the stage of end organ damage in hypertension. But endothelin upregulation has remained unaddressed until TRYVIO. The fact that endothelin regulation was left unimposed up to TRYVIO explains why so many hypertensive patients, despite their treatment or combination of sometimes many antihypertensive drugs, could not be controlled, and their blood pressure remained higher than the target blood pressure threshold. This was particular true for certain groups of patients whose hypertension is not obviously difficult to control: African-American, elderly, postmenopausal women, obese patients, and those patients with CKD type 2 diabetes, heart failure or sleep apnea, all of which are actually associated with endothelin upregulation. Endothelin probably also explains why the patients with difficult to control hypertension are at higher risk of death, strokes and renal failure, almost double the risk compared to well-known -- to well-controlled patients. Indeed, endothelin is a multifunctional peptide, via both its receptor, ETA and ETB, it promotes vasoconstriction, vascular and cardiac hypertrophy, fibrosis, inflammation, catecholamine release, aldosterone release and is increased by salts, thereby mediating high blood pressure, endothelial dysfunction and organ damage. Aprocitentan blocks the actions of endothelin via both its receptors and therefore, is a multifaceted drug. In healthy volunteers with no underlying disease, even doses 50x higher than the therapeutic dose up to 600 milligrams, TRYVIO had no effect on blood pressure. TRYVIO is only active on an upregulated endothelin system like in hypertension. We proved this in Phase II and in Phase III. The lack of interference with physiology explains its very good safety and tolerability in pathology. Srishti Gupta: Thank you, Martine. That's very clear. Endothelin plays a key role, it's not been tackled until now. And by targeting the endothelin system, TRYVIO is bringing a completely novel and different approach to patients with hypertension. Alessandro, let me turn to the PRECISION study. This was a registration trial with the design agreed upon with the FDA. Can you walk us through the key highlights from that study and what they mean for TRYVIO? Unknown Executive: Of course, Srishti. First of all, I would like to mention that the compelling efficacy and safety of TRYVIO is well established in labeling and further reinforced by its recent inclusion in the ACC AHA hypertension guidelines. So TRYVIO achieved a meaningful reduction in blood pressure within 2 weeks. This is very important in patients with resistant hypertension that are at risk of cardiovascular events, and the blood pressure was sustained over 48 weeks with a decrease of 19 millimeters of mercury by the end of the study. Talking about resistant hypertension, the design of the Phase III PRECISION study was especially rigorous with an 8-week running period, a standardized triple fixed dose background therapy with confirmation of compliance and inclusion of only of patients with true resistant hypertension. This trial enrolled high-risk subgroups where classical anti-hypertensive are least effective, including Black patients, all the adults, postmenopausal women, obese patients and those with chronic kidney disease, diabetes, heart failure or sleep apnea, all conditions, as you heard from Martine, associated with endothelin overactivity. Looking at safety. TRYVIO was well tolerated with only 2 treatment-related side effects, mild early and transient edema and a modest expected decrease in hemoglobin. No direct drug interaction observed a significant advantage for patients on multiple therapies like antihypertensive patients. Importantly, no signal we've seen for hyperkalemia, hypotension, headaches nor heart rate increase. Finally, the label that the FDA approved is based on the totality of the data for adults whose blood pressure remain inadequately controlled on other antihypertensive, a broader population compared to enrolled -- in the one enrolled in PRECISION. In addition, the label includes the relevance of lowering blood pressure for reducing the fatal and nonfatal risk of cardiovascular events, especially strokes and myocardial infarction. Srishti Gupta: Alessandro, people can follow the on-demand webcast to get more details on the data for TRYVIO. But as a cardiologist, can you perhaps give us some context on the current landscape for not well-controlled hypertension? Alessandro Maresta: Sure, Srishti. So today, paradigm in hypertension relies on a different classes of antihypertensive, of those addressing the renin angiotensin aldosterone system, calcium channel blockers and diuretics, which by the way, they stimulate the RAAS system. But if blood pressure remains uncontrolled, a mineralocorticoid receptor antagonist such as spironolactone can be added, but many patients do not tolerate it, mainly due to hyperkalemia, worsening of renal function, gynecomastia and in addition, we observed a high discontinuation rate. So despite all the classes of antihypertensive drugs, millions of patients remain uncontrolled and TRYVIO offer a solution with a completely new mode of action. Srishti Gupta: Thank you, Alessandro. That certainly highlights the significant unmet need that a safe and effective drugs like TRYVIO can address in the current landscape. What about compounds in development? Alessandro Maresta: Yes, Srishti, there are several products in development, but most of them are still targeting the RAAS system, including the aldosterone synthase inhibitors. These drugs are still in development, and we don't know yet what their label will look like. But what we know is that the studies were not as robust as PRECISION in enrolling true resistant hypertension patients. And there are safety concerns such as hyperkalemia, hyponatremia and decrease in renal function, particularly if combined with other drugs that are targeting the RAAS system. And this is where TRYVIO stands apart. It addressed the endothelin pathway, a fundamental driver of disease, that other treatments don't reach with a proven efficacy and a good safety and tolerability profile. Srishti Gupta: So TRYVIO is differentiated to the current and potential emerging treatments. Which patient populations do you see TRYVIO being used for? Alessandro Maresta: So if we take into consideration the new mode of action, the efficacy and safety profile and the FDA granted label, TRYVIO is the ideal choice for many patient groups. I can list for you some: patients with risk factors for hypertension, which will be difficult to treat because they are endothelin-dependent; black, elderly obese patient, patients with sleep apnea, type 2 diabetes, early heart failure and chronic kidney disease. Then we have patients that are not adequately controlled despite 2 lines of hypertensive therapies and patients who cannot tolerate certain classes of drugs because of their side effects. There are also the patients that we have studied so they're truly resistant hypertensive patients that are not controlled despite treatment with 3 or more therapies at their maximum tolerated dose. And then I would like to tease out the patients with chronic kidney disease stage III and IV and resistant hypertension because for these patients that have currently no alternatives. In all these patients, TRYVIO represented an obvious choice with very little competition. Srishti Gupta: Thank you, Alessandro. So there's a large addressable population of patients with hypertension that is not adequately controlled. Michael, given that the U.S. market is essential to realizing TRYVIO's full potential, can you walk us through the key drivers that support our $5 billion peak sales estimates? Michael Moye: Yes. Thanks, Srishti. Our forecasts are grounded in extensive market research and analytics to understand both the size of the opportunity and how physicians intend to use TRYVIO. Next slide, please. So today, of the 40 million treated patients in the U.S., there are roughly 26 million patients treated with 2 or more therapies. And 30% to 50% of those are inadequately controlled despite receiving treatment and therefore, eligible for TRYVIO according to the FDA label with the only contraindication being pregnancy and sensitivity to aprocitentan. This population is expected to grow, given the aging demographics, higher rates of comorbidities linked to endothelin function and increasing recognition of the severe consequences of uncontrolled hypertension. Importantly, these consequences are already reflected in the FDA indication that removes any need for a separate outcome study. We estimate that around 7 million patients as we move to the middle of the slide -- the 7 million patients are easily identifiable and are well defined a good area to focus on first coming into the market. Patients with endothelin-driven comorbidities often face restrictions with other therapies. Chronic kidney disease, as you've heard, is a prime example -- it's a prime example. Patients with hypertension and CKD are often treated with 2 or more agents yet few effective options exist. TRYVIO is approved for patients with an eGFR as low as 15 and has demonstrated excellent safety and tolerability with no hyperkalemia and no hypotension. Other identifiable groups include patients who can't tolerate certain classes of drugs and those with true resistant hypertension. So we now have real-world efficacy and safety outcoming the mirror of what we saw in PRECISION. These drive adoption and penetration assumptions. So as you can see, they range here from 12% to 22%. So our insights are informed by over 1,000 qualitative and quantitative interactions with multi-specialty physicians, including top hypertension centers. Physicians consistently recognized TRYVIO's efficacy, safety and its unique mechanism of action when they're addressing -- that address what additional RAAS blockade cannot. In comparison with emerging therapies, TRYVIO is viewed favorably by these physicians, particularly for patients with CKD and based on the impact on both blood pressure and uACR measures. And finally, the payers, which we know are all very important, have responded very positively, highlighting the robust primary endpoint of more than 15-millimeter drop from baseline, the statistical strength and the sustained efficacy through the duration of the PRECISION study as very compelling reasons for coverage. We have set a WACC at $775 a month and we're focused on a very favorable gross to net as a first-in-class differentiated therapy. TRYVIO is currently being reimbursed with reasonable utilization management criteria, which supports our commercial model. Srishti? Srishti Gupta: Thank you, Michael. Beyond the U.S., we also see an additional upside from geographic expansion. Aprocitentan has already improved at JERAYGO in the EU and the U.K., and there is significant opportunity in Japan and China. We also see that we can get further value through IP extension strategies, for example, with fixed-dose combinations with the SGLT2 inhibitors and indication expansion such as exploring renal protective benefits in CKD. Of course, realizing the full potential of TRYVIO will depend on securing the right partner, which is why we're actively engaged in these discussions at this time. Julien, could you share a little bit more about how we're thinking about partnering discussions? Julien Gander: Yes, happy to. Look, we've been very consistent in saying that we lead where we demonstrate scientific or commercial advantage and strategically partner where external expertise, scale or speed adds value. So specifically on TRYVIO, partnering TRYVIO remains a key strategic priority for us. We are actively engaged in discussions with potential partners, which reflects the interest in the assets and the opportunity TRYVIO represents. While this process takes time, we're encouraged by the progress and look forward to updating you as we move forward. In the meantime, I can tell you, we continue to work very diligently and at high speed to maximize the value of TRYVIO. We've seen some of this in the past weeks and months. I think of the REMS removal, the collection of early, very positive real-world experience, the inclusion of TRYVIO in the ACC AHA hypertension guideline. And very recently, the recent initiative announced with Duke and Stanford University. Srishti Gupta: Thank you, Julien. Having addressed some of the key questions that we have received around TRYVIO, I think it's a good time to open the lines for additional questions. Nadia, can you please go to the next slide and open the line, please? Operator: [Operator Instructions] And we're going to take our first question. It comes from the line of Joris Zimmermann from Octavian. Joris Zimmermann: This is Joris Zimmermann from Octavian. I have two questions. One will be on partnering that you just highlighted, Julien. Is there any timelines you could give us? Or at least do you still expect to close a deal this year? And then the second question would be until you have found the right partner and signed an agreement, and given the limited resources you can currently deploy in the U.S., where will you put your focus in terms of the aprocitentan launch. Srishti Gupta: Thank you, Joris. Julien, will you respond to the questions? Julien Gander: Yes, very happy to. Thank you, Joris. Look, I mean you will understand that we cannot really comment on specific timelines. But what I can say, and I can ensure that the partnering aprocitentan is really a key priority for us. And to your point, we resource this project accordingly. We, of course, want to move very quickly and also considering the time advantage we have towards emerging therapies. But you will understand that actually, our focus is not only just speed, but it's also securing the right partners to maximize TRYVIO commercial success. To your second point, Idorsia is indeed has limited capacities, but I think considering these constraints, we've done a lot to make sure that the product is advancing, is prepared to be launched. And the product is commercially available, and we have very good early evidence, and we'll continue those efforts, and we are hoping to give you an update as soon as we can on achieving this goal of partnering. Srishti Gupta: Thank you, Julien. Michael, maybe I'll have you add to that with your presence at the AHA -- recent AHA meeting and some of the other work that we're doing on retail distribution. Michael Moye: Yes. Thanks, Srishti, and thanks for the question. Yes, we -- despite these -- the resource constraints, we are quite busy continuing our kind of launch and market prep. So Srishti, as you said, we're at the major congresses. So we have a really strong presence there. We're working with a lot of the top KOLs and a lot of the top hypertension centers. You heard about the Duke, Stanford relationship that come out. We are -- have really finalized a lot of the core materials. So we have a full digital presence. Our consumer and HCP websites are up and running. We've got print materials and things out there. And then the last couple of things. We're continuing our payer discussions, which continue to go really well. And then as Srishti made reference to at the end, the pharmacy distribution. So once the REMS was removed, we're able to move in addition to having a specialty pharmacy, we are quite literally right now coming online with full retail distribution across all retail pharmacies in the U.S. So yes, despite the resources, we're making great progress, again, across KOLs, congresses, payer discussions and pharmacy distribution. Srishti? Srishti Gupta: Thank you, Michael. Nadia, we'll take the next question. Operator: [Operator Instructions] We have a follow-up question from Joris Zimmermann from Octavian. Joris Zimmermann: Okay. Sorry. I hope I didn't jump the line now. But two more questions. I mean you talked about the patient populations and that you see a very broad target population. But maybe you can give us an idea based on this broader label that you got versus the study inclusion criteria, what are the kind of -- where do you see the quickest uptake in the market? Which type of patients do you think will be the ones that physicians consider prescribing aprocitentan first? And then also, maybe you could give us a little bit an idea of the hurdles that you foresee as well. Srishti Gupta: Joris, thank you for the question. Michael, would you like to walk a little bit through how we think about the targeting of the patient populations in the U.S. and how we might access them with the centers of excellence. Michael Moye: Yes. So when we look at that and we look at both our research and our interaction with the physicians, we're definitely seeing the data across all the subgroups has been one of the things that's jumped out of physicians. So you heard a little bit in our opening that clearly, the CKD is a differentiated piece and that we see that as a great opportunity. The other thing about the subgroups that we're seeing kind of across these multiple comorbid patients, you heard about patients challenge with hypertension management, black patients, obese patients, again, patients with CKD. The thing about the profile that continues to jump out is the fact that we don't -- we have efficacy and safety across all these subgroups. We don't have any real exclusions or contraindications and especially we don't have any drug-drug interaction problems, obviously, with these patients being on multiple medications. So when we think about those different subgroups and those comorbid patients that are at more risk, including the CKD patients, we see consistently the one pill, one dose, once daily, good tolerability, no drug interactions. That allows -- those factors are what the physicians are pointing out to us that allow us to treat these high comorbid risk subgroups. Srishti Gupta: Thank you, Michael. And Joris, in terms of your second question, I'd like to turn it over to Alessandro. Alessandro has been attending a lot of the KOL meetings in all over the United States over the last couple of months, meeting physicians, understanding how they think about TRYVIO. So Alessandro, can you talk a little bit about how you think about the hurdles that physicians are thinking about as they are deciding on prescribing TRYVIO. Alessandro Maresta: Thank you very much, Srishti. I think that, in my opinion, the best -- the most important hurdle is the new mode of action. The physicians are used to the RAAS system, are used to calcium channel blockers and now they need to realize and understand that there is a new kill of the block that is an endothelin receptor antagonist, and that endothelin receptor antagonist can be very, very beneficial in the subgroup of patients that I and Michael highlighted. So basically, I see this as the major hurdles because the results are really impressive. The safety profile is also very, very good. And we have a clear understanding on which are the patients that would benefit the most from this -- from TRYVIO. And last but not least, there are many, many patients that despite they add on 2, 3 or even 4 drugs, they are still not at goals. And these patients, they need -- they deserve treatment. So I don't see many hurdles in front of us. Srishti Gupta: Alessandro, thank you for that. And it underscores the importance for us of finding a partner who can help us on the broad outreach and the medical education required to enhance the importance of the end -- addressing the endothelin upregulation that occurs in a lot of hypertension. So this is definitely something we are thinking about and focused on as we move forward. Joris, thank you for the questions again. Operator: Thank you. Dear speakers, there are no further questions for today. I would now like to hand the conference over to your speaker, Srishti Gupta, for any closing remarks. Srishti Gupta: Thank you, Nadia. So this concludes today's call. Thank you for joining us and for your continued interest in Idorsia. Our next scheduled update will be on October 30 when we report our third quarter results and will provide a comprehensive update on QUVIVIQ performance. Operator, you may close the line. Operator: This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.