Frank Stokes: We do think there is a nice halo or pen action there. The clinical utility for the two tests is very similar. So once you illustrate to a health care practitioner the benefits of the SCC test to that group of patients, it is a fairly easy adjacency to demonstrate the benefit to melanoma patients and our melanoma test. So it is very similar clinical utility just for two different distinct groups of patients and your instinct is right. That’s a short step for the adjacency there.
Paul Knight: Thanks.
Operator: Our next question comes from Mason Carrico with Stephens. Your line is open. Please go ahead.
Mason Carrico: Hi guys. Thanks for taking the question. I’ll actually just keep it to one here. There’s been a lot of questions in past quarters on how you guys will shift around resources if decision Dx-SCC happens to lose coverage. I want to ask about the capital allocation strategy if coverage were to remain in place and cash generation was to remain elevated. How would you rank order your priorities in terms of organic investments if that was to play out? How would you think about sales team additions across the franchise? And what other investments would you prioritize if that happens to play out?
Derek Maetzold: I’ll start with that here and Frank can add just. So I think, we have plans that assume SCC coverage is maintained, but once the sort of cloud is lifted then we can execute those with higher level of confidence based upon what you just pointed out, which is cash generation opportunity, right? So I think, that we are probably close to where we should be in terms of our skin cancer dermatology-focused sales team. We — even with this most recent expansion going — on in the mid-30s, I guess, with TissueCypher, we probably are 60% — [EBITDA] (ph) at the end of the day. So we would certainly look at pulling forward some of those territory expansions. Although again, we also want to balance that against breaking too many relationships at the same point in time between existing customers with having them deal with new area managers, as hires versus the ones that we’re dealing with.
So that’s a balancing act there. We have certainly also held back on scaling our IDgenetix sales team and marketing team as well, do again kind of waiting and watching and also getting our peak comfortable with where we’re targeting our efforts and making sure that we’re getting the kind of response that we expect. So there are a number of areas there. I could see us to pull in capital in terms of just improving the rate of penetration of our existing tests without much of a change in the core-decision Dx-Melanoma, and SCC dermatology teams. I think below that level, there are probably some additional internal R&D activities that we’d be comfortable moving a little more quicker on that we haven’t talked about publicly, so we could see some deployment around internally developed pipeline test, although one could say part of that might also need to be weighed against the sort of additional clarity from the FDA kind of rule here in terms of how they are going to deal with new LDT tests.
So that’s something we would thoughtfully look at evaluate, understand what we do know — we don’t know. I think the last one there probably is saying, are there acquisition targets out there, we’d be more comfortable pursuing versus not pursuing. And obviously, in a couple of years, we’d like to turn around and say we have two or three marketed reimbursed tests in sort of the gastroenterology area. Those who come from internally generated assays, although it would be nice to find some additional tests that are out there that already have coverage now have been marketed because that could go and flip in right away. But again, that’s not necessarily a core rush. But if we look sort of out to maybe 2027 and turn around, it would be nice to have two or three tests that are clinically actionable and valued by our dermatology — I mean by our gastroenterology customers.
The same goes for sort of this mental health franchise call point. And at that point in time, of course, we would have expected to launch an inflammatory skin disease test or series of tests to the dermatology market. We are evaluating right now is that sort of a separate parallel sales force, so that makes most sense to our customers. Is that too confusing, so we should actually go to a much — to a much higher level of the number of dermatology sales representatives by covering three or four products to the same customers. So we have to work through what makes sense from a customer perspective and a confusion perspective. And so those the kind of things, I would say, in order of ranking, commercial expansion efforts, some R&D internal activities.
And then there are other things that we can bring in a company that have been developed by others again.
Mason Carrico: Got it. That’s helpful. Thanks Derek.
Operator: Our next question comes from Catherine Schulte with Baird. Your line is open. Please go ahead.
Catherine Schulte: Hi guys. Thanks for the questions. First, for MolDX, I think we’re [summing up] (ph) on the one-year mark from the squamous cell draft LCD at the beginning of next month. Have you had any additional conversations with them? And what do you think the likelihood is that they could reverse their decision in the final LCD?
Derek Maetzold: So we have ongoing interactions with the MolDx medical records as well as the other Medicare contractors as well, which I think we have always done that — we tried to anyway, I would say. So they are certainly aware of these newer publications that have come out that support the clinical use of our test obviously, from a standpoint of risk stratification as well as predicting response [indiscernible] adjuvant radiation therapy. Even our restratification table has more than doubled in terms of the number of patients under study and published studies. So hopefully, those kinds of published elements make an impact on them. I think the pumpkin-date according to the Medicare (ph) is 365 days and they just being posted.
