Renalytix Plc

Good morning, and welcome to the Rinalytics Conference call to review the third quarter fiscal year 2024 financial results. At this time, all participants are in a listen-only mode. We will be facilitating a question and answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Peter DiNardo of Capcom Partners for a few introductory comments.

Thank you, Livia. Thank you all for participating in today's call. Joining me today for re-elect's formal remarks are James McCullough, Chief Executive Officer, and James Sterling, Chief Financial Officer, and Howard Doran, President, is on hand for our question and answer session. Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements made during this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements. Examples of these statements include, without limitation, the potential benefits, including economic savings of Kidney Intel X, the commercial prospects of Kidney Intel X, including whether Kidney Intel X will be successfully adopted by physicians and distributed and marketed, our expectations regarding reimbursement decisions, and the ability of kidney intellect to curtail costs of chronic and end-stage kidney disease, optimize care delivery and improve patient outcomes, trends in our market and potential benefits of government policy change, the impact of COVID-19 and other world events on our business, our expectations regarding product development, strategic partnerships and collaborations, reimbursement decisions, clinical studies and regulatory submissions, are business strategies and future growth, including plans, expectations, and opportunities for financing operations and revenue projections and guidance. These statements involve material risks and certainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a description of the risks and uncertainties associated with our business, Please refer to the risk factors section of our annual report on Form 10-K that was filed on September 28, 2023 for the Securities and Exchange Commission. All forward-looking statements made on this call are based on management's current estimates and various assumptions. Renalytics disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, May 15, 2024. I'll note that due to regulatory restrictions under the UK Takeover Code, when we can and cannot share at this time about the formal sales process, we are limited in the comments and information we can provide today. But suffice it to say that if there is material news to disclose about any developments, we will provide updates transparently as required. I'll now turn the call over to James McCullough. James?

Thank you, Peter. Good morning. Good afternoon. We have experienced a productive beginning to the 2024 calendar year. On February 8th, Medicare Contractor National Government Services issued a draft local coverage determination, or LCD, for kidney and telex. This follows an over three-year process, including two public hearings, submission of extensive outcomes utility and regulatory data, and a significant volume of claims submitted to Medicare, which have now been reimbursed. We expect a final coverage determination to be issued in the near term. On March 14th, Kidney IntellX was included in the final International Clinical Guidelines for Chronic Kidney Disease, known as CADIGO. Guidelines are followed by doctors, hospitals, and insurance payers throughout the world and are a critical milestone for establishing broad use of an advanced diagnostic tool such as Kidney IntellX. Also in March, we disclosed the formal sale process for the company after receiving an approach from a large, well-capitalized diagnostics company. Since this approach, additional potential acquirers have now joined in the discussions. While restricted on what we're able to say, we expect the sale process to be competitive, given our substantial regulatory outcomes data and reimbursement achievements, and now the inclusion of Kidney IntellX in clinical guidelines. In March and April, we completed common stock equity financing rounds, which extended our runway and provide us with further optionality to maximize shareholder value, whether as a standalone business entity or as part of a bigger business enterprise. In April, we officially launched our FDA-authorized KidneyIntelX.dkd product version and are now receiving commercial test orders. This will rapidly supplant the original KidneyIntelX laboratory-developed test, or LDT. KidneyIntelX.dkd pricing remains the same at $950 per test, and we have established broad insurance reimbursement on a distinct CPT code for KidneyIntelX.dkd in the clinical lab fee schedule. We have been steadily reorganizing the company through expense reduction and a hard turn to focus on sales growth, culminating with the appointment of Howard Duran to the position of president at the end of April. Difficult changes were made to conserve cash by optimizing our organization on sales, with a year-over-year headcount reduction of 50% and an overall OpEx reduction of approximately 40% year-over-year. That is close to a 60% overall expense reduction from peak, and we continue to look at near-term options for further expense reduction without impairing our ability to grow revenue. Renalytics has now become a sales and marketing play into a wide open market with 14 million diabetic kidney disease patients in the United States. The global population of diabetic kidney disease patients is much larger, with many companies now reaching epidemic disease levels. We are in discussions with potential international distribution partners to reach these patients now that Kidney IntellX is FDA authorized and in the international clinical guidelines. Towards the end of 2023, we hired and trained a small direct-to-physician sales force in the United States, which has just completed the first full quarter of operations in March. The sales force is composed of experienced performers in the diagnostic industry, and I am pleased to report that we are already seeing a change in the breadth and volume of individual physician test ordering. The new sales force has achieved a 33% increase in direct to primary care test order rates quarter over quarter, a growth 10, which while early, we are seeing continuing into the current fourth fiscal quarter. In calendar 2024, we have implemented a series of ordering process improvements around the FDA product launch, which took place in April. Specifically, We have improved our customer-facing offering to ease physician ordering and increased patient access to blood draw services. Our market focus is on a limited number of territories, such as New York, where there are large populations of patients with diabetes and kidney disease, and where we have achieved comprehensive insurance coverage for kidney and telex. These territories pose the best near-term opportunities to foster adoption of kidney and telex while accelerating test sales. We believe FDA authorization in combination with a local coverage determination if and when issued and clinical guidelines inclusion makes Kidney IntellX the only choice for preventative precision medicine prognosis in this large chronic disease population. Finally, we have received several questions regarding FDA's April 29th published final rule on laboratory developed tests or LDTs. While we felt the final rule was more flexible than language proposed in the original drafting, it is clear that diagnostic testing is entering a new era of tighter regulation and exacting standards that will require everyone launching an advanced innovative test such as Kidney IntellX to consider the significant capital investment and long timelines required for a full FDA review process. By achieving FDA authorization for Kidney IntellX, This has increased the high barriers to entry around our business and technology. Particularly for diagnostic technologies that address very large markets such as chronic kidney disease and are capable of setting new clinical standards of care, we believe FDA regulation is becoming the default pathway to achieve comprehensive insurance reimbursement. Without regulation, very difficult to get paid in the future. We believe our decision to invest heavily upfront in real-world outcomes data and a full FDA de novo review process were the right ones and add significantly to the franchise value of KidneyIntellX.dkd and the KidneyIntellX artificial intelligence-enabled platform technology. I will now turn it over to James Sterling, our Chief Financial Officer. James.