Renalytix plc

Good day and thank you for standing by. Welcome to the Rinalytics AI third quarter fiscal 2021 financial results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Carrie Mendeville. Please go ahead.

Thank you. Joining me today from Renalytics are James McCullough, Co-Founder and Chief Executive Officer, Tom McLean, President, and James Sterling, Chief Financial Officer. Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements in the meaning of 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, statements related to kidney italics' ability to lower health care costs, improve patient quality of life, and set a long-term standard of care. Trends in our market and potential benefits as government policy change, the impact of COVID-19 on our business, our expectations for hiring, product development, strategic partnerships and collaborations, reimbursement decisions, clinical studies, and regulatory submissions, and our business strategies and future growth. These statements involve material risks and uncertainties 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 for our annual report on Form 20-F filed with the Securities and Exchange Commission on October 28, 2020. All forward-looking statements made on this call are based on management's current estimates and various assumptions. Reanalytics AI disclaims any intention or obligation, except as required by law, to update or revise any 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, June 16th, 2021. And with that, I'll turn the call over to James.

Thank you, Carrie. Good morning and good afternoon, and thank you all for joining for the third quarter fiscal 2021 results and our update on business progress. The opportunity for Renalytics and our shareholders continues to materialize as we cross additional key milestones in reimbursement, regulation, real-world evidence, and major distribution for our lead program, Kidney Intellects. In the past few months, we have announced a partnership with the University of Utah Health System to enable more than 1,700 clinicians to get EHR integrated kidney and telex access in the Southwest. We've announced a partnership with Atrium Health, Wake Forest Baptist Health that can provide kidney and telex access for care teams in 37 hospitals in more than 1,350 care locations in the Southeast. We've also received a 10-year contract from the U.S. General Services Administration for kidney and telex testing services, which applies to more than 140 U.S. government departments, including the important U.S. Veterans Administration. We published peer-reviewed data demonstrating performance in kidney and telex in a cohort of 1,146 type 2 diabetes patients with early-stage kidney disease risk. We've crossed the 40% threshold for contracted state Medicaid programs with 21 states now completed. And we've continued progress with private insurance coverage, including a June coverage determination for Kidney Intellex by one of New York State's largest not-for-profit insurance companies with over 1.5 million members. We expect the pace of milestone events to continue into the first half of fiscal 2022, beginning in this July, including a potential FDA clearance, additional major health system partnership announcements, beginning operations in the VA medical system, increasing our portfolio of real-world evidence data, particularly at the all-important primary care level, a potential national Medicare coverage determination, and an acceleration in kidney and telex testing volumes. With the recent Atrium-Wake Forest partnership and the new potential to onboard from 1,293 healthcare facilities in the Veterans Administration Medical System, we remain confident in our previous guidance of five to seven announced major health system partnerships in calendar 2021. Shortly, Tom McLean will detail our progress with reimbursement and plans for scaling operations on a region by region basis with our cornerstone health system partnerships and now the complementary opportunity provided by the General Services Administration contract. On to our regulatory partnership and operations progress. The Food and Drug Administration has reinitiated review of the Kidney Intellect's final submission under breakthrough device ahead of their previously targeted April 15th deadline following a sector-wide COVID delay. Our regulatory review team and outside advisors will continue to diligently respond to any remaining FDA questions until the conclusion of the breakthrough review. While we can make no guarantees on timing or outcome, we are gearing our internal plans based on an assumption that the FDA process will be complete in the second half of this 2021 calendar year. As we have discussed previously, clearance from FDA breakthrough device designation will set Kidney Intellex up for an immediate national Medicare coverage determination at $950 per reportable result under the Medicare coverage for innovative technology rule, also known as MSIT. MSIT is now scheduled for final implementation on December 15th of this year. As Medicare and Medicare Advantage cover a majority of the diabetic kidney disease patients in the United States, FDA clearance and Medicare coverage would have a material positive impact on our business. To the potential for a covered Medicare population this year, we can now add a significant and wholly accretive population of diabetic kidney disease patients covered under the recently announced General Services Administration 10-year government-wide contract for kidney and telex testing. This payment contract was stated pricing of $950 per reportable result. It covers kidney and telex testing in the U.S. Veterans Administration, Department of Defense branches, including Army, Navy, Air Force, and Marines, and the Indian Health Services. Notably, our GSA contract is structured as an indefinite delivery, indefinite quantity, or IDIQ contract, providing for an unlimited quantity of services over the contract term. The GSA contract is a major win for renalytics and for patients with diabetic kidney disease under government physician care. and carries important strategic implications this year that Tom will discuss shortly. As we have stated since inception, we view insurance reimbursement as one of the biggest hurdles to our long-term growth. Achieving a government-wide payment contract, which mirrors our national Medicare pricing, represents a significant de-risking of our business model and will require us to accelerate build out of sales, customer service, education, and other supporting components for initiation of a 2020 rollout in select VA hospital systems. From a strategic view, the VA hospital provides kidney intellects with a perfect complement distribution channel to our three cornerstone integrated disease network partnerships, Mount Sinai University of Utah and Atrium Lake Forest. All of the health systems have significant diabetic kidney disease populations and share treating physicians with their nearby VA hospital facilities. At Mount Sinai, we now have approximately 120 physicians from primary care to specialist nephrology who have been onboarded to EHR integrated kidney and tele-X score ordering and reporting. By the end of this calendar year 2021, we expect to have onboarded an additional 500 physicians and will continue to expand customer service sales and medical science liaison personnel to support system-wide care. We are now recognizing revenue from testing at Mount Sinai and expect this revenue will grow in the second half of this calendar year, 2021, as more physicians are onboarded and COVID-related restrictions recede. Most importantly, as the real-world evidence continues to mount, our Kidney Intellex integrated care model approach with Mount Sinai is providing us with invaluable insights. The Mount Sinai Partnership is doing exactly what we thought it would when we designed the launch back in 2018. As a result, we are now able to move into a national launch phase with solid evidence as to what works and what doesn't to maintain kidney health on both an individual and a population health basis. Our announcement last month with Atrium Wake Forest for advancement of kidney disease, excuse me, kidney health, creates an anchor partnership in the Southeast region of the United States, also referred to as the Diabetes Belt. Atrium Wake Forest presents us with a major opportunity to integrate the Kidney IntellX care model with a fully developed population health program, supporting primary care, endocrinology, nephrology, and care teams serving patients in 1,350 care locations. At the core of the partnership is the ability to generate data that will be critical to optimizing care and improving outcomes using kidney protective medications, specialist referrals, and lifestyle changes. Mount Sinai, University of Utah, Atrium, Wake Forest, and soon to be the VA Health System will provide a powerful and deep real-world evidence generation program that crosses demographics, treatment regimes, and racial barriers. This evidence will build upon a growing body of recently published peer-reviewed evidence that supports the Kidney Intellect's care model's role in maintaining kidney health and slowing the advancement of kidney disease beginning at the primary care physician's office. As we have stated previously, our goal for the remainder of this year is to establish as broad a distribution channel as possible for the Kidney Intellect solution through both EHR integrated implementations and through our independent online secure ordering portal for those physician practices where Kidney Intel X is unavailable on an EHR integrated basis. Ultimately, we are building towards a footprint where any primary care or specialty physician in the United States is able to access easily the Kidney Intel X risk assessment and care support. We just signed an agreement with Quest Diagnostics Exam 1 which will now allow any patient to receive an at-home blood draw for their Kidney IntellX assessment in all 50 states. We believe firmly that broad, open access to Kidney IntellX early-stage risk assessment is key to stemming the kidney disease epidemic and maintaining population kidney health. Finally, we are now processing billable Kidney IntellX patient samples in both our Salt Lake City and New York City laboratory facilities. Our Salt Lake City laboratory should receive full CLIA certification in July of this year, at which time we believe we will have processing capacity in excess of any forecasted need through fiscal 2022. With that, I would like to turn the call over to our President, Tom McLean, to provide additional detail on reimbursement and commercial strategy. Tom?

Thank you, James. The successful launch of a risk assessment test like Kidney Intellects requires an established care pathway, clinician education, payer coverage, and patient engagement. As James mentioned, the milestones we've achieved in 2021 are building a strong foundation for the rollout of kidney and telex testing across the U.S. From the beginning, our primary focus has been on reimbursement. We have worked on alternative reimbursement pathways to provide multiple shots on goal and are securing payment from three cornerstone institutions. Those are number one, Medicare, number two, the Veterans Administration, and number three, through regional contracting with private payers, including Medicare Advantage and Medicaid patient coverage. Collectively, those three institutions cover healthcare costs for the vast majority of individuals with chronic kidney disease in the United States. So starting with Medicare, we are pursuing both the MSID-enabled national coverage determination pathway and the local and more traditional local coverage determination pathway through regional Medicare contractors in New York and Utah, where our laboratory facilities are located. Potential FDA clearance in 2021 will contribute to our success with both of these pathways. With MSIT becoming effective December 15th of this year, we would expect a national coverage determination for kidney and telex, to become effective at the beginning of 2022. If MSIT does not become effective in December, coverage under a local coverage determination pathway is expected in the summer of 2022. Again, Medicare and Medicare Advantage plans account for more than 50% of the patient population being tested with kidney IntellX. With regard to MSIT, we were pleased to see the medical industry and a bipartisan caucus in Congress rallying around MSIT following the implementation delay, and we applaud their efforts to clarify MSIT eligibility. These clarifications will interrogate the relevance of an MSIT-covered device to the Medicare population as well as the appropriate real-world evidence development surrounding the utility of that device. With over 60% of Medicare beneficiaries at risk for kidney disease progression, and because we have already planned and published large multi-center, international, real-world evidence studies with leading population health specialists and primary care clinicians, we believe Kidney Intellect should exceed any appropriate clarifications to MSIT eligibility during the coming period. In fact, in the first week in July, Medicare will publish its annual rule update, representing an opportunity to address specific MSIT implementation questions. We expect MSIT final implementation will take place as announced on December 15th. Moving on to the VA, as Jane discussed earlier, under our federal government GSA contract, we are able to offer kidney and telex testing in VA centers, military bases, Indian health services facilities, and through other government managed healthcare programs. Notably, our GSA contract is structured as an IBIQ, that is indefinite delivery indefinite quantity contract, providing for an unlimited quantity of testing services over the 10-year contract term. The Veterans Administration has been a leader in chronic kidney disease or CKD care management. They were the first to establish clinical guidelines for CKD, and they have led in CKD care innovation with risk assessment being a key part of their recent updated guidelines. Significant for kidney and telex adoption, the VA has standardized care based on these updated guidelines using defined performance metrics that all physicians in the system follow. This creates a unique opportunity for adoption of a novel covered risk assessment test like kidney and telex. And finally, on regional contracting, our partnered health system approach is leading to regional payer agreements that also include Medicare Advantage and Medicaid patient coverage. Working with regional payers and health system providers, we are developing novel value-based care models to improve patient outcomes and lower health care costs. Renalytics is uniquely focused on early-stage kidney disease patients. Securing these regional payer coverage agreements will also make it easier for other health systems in that area to adopt kidney IntelliX testing. Also of great strategic importance to Renalytics is our continued progress with contracting with the state-run Medicaid programs, serving the healthcare needs of an estimated 55 million people, about 2 million of which have existing diabetic kidney disease. So far this year, we have added several new contracts with Medicaid programs and are currently contracted with 21 states, representing roughly 40% of the total Medicaid population in the U.S. We expect the number of contracts to grow this year and have engaged in more in-depth discussions with leading Medicaid programs around value-based care arrangements. These value-based care arrangements would, we believe, result in an innovative approach to diagnosing and managing high-risk populations of diabetic kidney disease patients. We should be able to provide more specifics on the potential significant value of of the partnered Medicaid care mode in the near future. And finally, we continue to make progress with private healthcare insurance coverage for Kidney Intellex. For example, in June, Kidney Intellex was issued a coverage determination by one of New York State's largest not-for-profit health insurance companies with over 1.5 million members. New York State remains a region with large concentrations of diabetic kidney disease patients and a core model for early adoption and real-world evidence generation with Kidney IntellX. I'd now like to turn to our commercial strategy. We plan to implement a region-by-region pathway to expanding our market opportunity in the US. We will approach our Kidney IntellX deployment focused on four geographic regions. the Northeast, the South Atlantic, the Midwest, and West. We've announced health system partnerships already to provide the foundational relationship in three of these regions. In calendar years 2021 and 2022, we will build out from those health systems focused on patients in Medicare, VA, and Medicaid-enabled care. To support this regional strategy, we recently announced key additions to the commercial team focused on developing health system and payer relationships and leading the sales effort in individual PC offices and PCP offices, excuse me, and VA health centers. We also have developed an educational partnership with the National Kidney Foundation to develop and deploy doctor and patient directed educational programs. These programs will introduce the importance of early stage risk assessment and risk-informed care paths. With these milestones achieved in 2021, our clear expectation is that our payer-driven regional deployment strategy will create significant commercial and revenue opportunities for 2022 and 2023. Importantly, these programs and deployment will include real-world evidence development and health economic impact analyses that are core to securing long-term payer coverage determinations and driving regional health system adoption of kidney Intellix testings. I would like to now turn the call over to James Sterling, our Chief Financial Officer, to provide more detail on our financial results. James?

Good morning. During our fiscal third quarter, which ended March 31st, we recognized $550,000 of services revenue related to work performed for Mount Sinai and nearly $100,000 of testing revenue representing the initial month of revenue from kidney and telex testing in March. We recorded $169,000 of costs attributable to those revenues. We did not post revenue in the prior year period. Our operating expenses were $8.5 million for the quarter, compared to $2.7 million in the prior year period. The increase was mainly driven by higher headcount as we continued to scale the company for rollout of the Kidney Intellix platform in the United States. Net loss was $8.8 million, or 12 cents per share, for the fiscal third quarter as compared to $700,000 or one cent per share for the third quarter of fiscal 2020 on a GAAP basis. We ended March 31st with cash and equivalents of $70.1 million. We're now happy to open up the call to questions. Operator.

Thank you. As a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from Dan Arias with Stifel. Your line is now open.

Good morning, guys. Thanks for the questions. James, maybe just to start with Mount Sinai, can you just add a little bit of color to the rollout and the ramp that you're seeing there and the expectations that you have? I appreciate the number on onboarding docs. I'm just curious if you're seeing that the number of docs using the test is growing rapidly. And then along those lines, how many of the Sinai sites are you live in and drawing from at this point? And are you starting to have a line of sight on the timing associated with capturing that 6 million, I believe, in revenues that those guys have kind of signed on for? Do you have any sense for what you would be picking there?

Yeah, thanks, Dan. And all good questions. I think, you know, we've got to be, obviously we've got to be careful because we're not going to forecast until we're down the road. But we did specifically talk about the number of doctors we expect to be onboarded this year, which is well into the hundreds, which is a significant ordering base. And I think that investors can expect to start to see evidence of that scale-up now in the second half of the year. Obviously, You know, going late last year and going into this year, we've had a number of COVID-related delays. We've been having difficulty even getting into the hospital system with the lockdowns. All of that is starting to ease. We're now having in-person meetings, which is an absolute pleasure. It's amazing coming off the Zoom culture what you can actually get done when you sit around a table with people and start to work through specific problems. I think the most encouraging thing for me is that population health is very much on board with the system-wide rollout. We're starting to get all the support that's needed to the physicians. So I'm quite optimistic about the second half of this year starting to address that $6 million contracting number. And obviously this quarter we're putting down evidence that we're now recognizing revenue growth. from testing, which is a big deal. It takes you a long time before you can onboard physicians, get them up and running, reorder rates, and you can actually start from an accounting basis to recognize revenue. So we're pleased with what's going on. And again, I have to emphasize this. The integration with Mount Sinai is doing exactly what we wanted it to do. It is a very high-quality information source looking at all the multi-factors associated with utility, adoption, reorder rates, uptake, et cetera. It's providing us with a very, very clear picture. It's clearer than any picture I've had in my career history going into a diagnostic launch. And that obviously is very valuable for sustainable uptake and ramp. So second half of this year, as we represented in the previous quarter, is really where we do expect to see that adoption accelerate.

Okay, helpful. And maybe just along those lines, you're thinking about the Sinai experience in the context of Wake Forest and Utah. I mean, what should our expectations be when it comes to a ramp there? Do you think that that process takes longer than what you've seen at Sinai because they're less familiar or shorter because you're kind of able to learn from the Sinai experience and work through some of these integration kinks? Or at the end of the day, do you think the curve just sort of looks more or less like what you're seeing at Mount Sinai today?

Well, the real answer to that is we have to deliver it and we have to demonstrate it to the investment community. That is the intent this calendar year. to demonstrate it in multiple locations. What I can say is that obviously Mount Sinai was always going to be the hardest. I've said this before. If you can make it in New York, you can make it anywhere for a variety of reasons. It's a very complicated environment, and so it's rich with learning experience. The experience we've had so far with the University of Utah and Atrium Wake Forest is actually easier. There are mechanisms that we can immediately move into that we didn't have with Mount Sinai. The operating environments are much easier, which is fascinating. And I think that, well, again, I want to be careful because we have to demonstrate it. But I think we have learned an enormous amount over the last year And there are mistakes that we've made that everybody makes when you initially get into this that we're not making now with new onboarding of medical systems. And there are lots of points that we hit from the very beginning with the executive teams at these health care systems which are much more refined. The legal framework, the supporting framework, you know, to be able to have Mount Sinai and now University of Utah as a reference point to new institutions. For example, the University of Utah IT team talked directly without us on the line to the Mount Sinai IT team. And there was a lot of comfort generated from there. So my anticipation is, in fact, I'm actually quite confident that subsequent onboarding will be much smoother we'll be able to get to the populations quicker and the entire structure of the setup going into integrate and reach out to the primary care physicians is going to be much more efficient than what we experienced as to be expected when you do your first rollout. So again, we're talking, we've guided the market to between three and six months to onboard an institution and actually begin live testing and and I'll stick to that timeframe for the moment. But certainly our experience, again, with the Sinai system has been absolutely invaluable and will prevent us from making key errors in the future and gives us an incredible insight when we talk to new institutions, which is quite exciting.

Yeah. Yeah. Okay, very helpful commentary. Maybe just one more for me, and then I'll get out of the way. Just on the commercial team, I mean, it's pretty clear that the MCIT pathway and the VA deal have kind of changed the calculus for you guys a little bit in terms of needing a sales force. So I guess where are you at this point with the commercial build-out? I think you had talked about 50 to 100 reps initially. So where should we be thinking about? finishing the year there and how are you prioritizing VA testing opportunities that you could hunt down versus existing systems and getting things going there and then just new accounts hunting down new health systems, new payers, et cetera?

Yeah, the VA is obviously a major inflection point. As I've said from the beginning, our biggest risk is reimbursement. How do you get paid? And to have payment now secured, And our national Medicare price is obviously a big deal. So VA is very high on the priority list. And I think in terms of ramping into a commercial support team, which includes all of the standard functions like sales, like medical science liaison, customer support, things that we've been careful to build because we don't want to drive up a high recurring fixed overhead. I've said this from the very beginning. of the company inception, stay away from that fixed overhead until you have either direct line of sight on payment or you've already secured payment. And I'm pleased that the payment infrastructure is ahead of what I thought it would be right now. The government services contract being an example, national Medicare pricing, a distinct CPT code, and now private insurance coverage coming in. So I'm, I'm in a position where we're now beginning to build all of that infrastructure around. We're not going to put a number in terms of feet on the street. We can do that in a little bit. But the important thing now is we're concentrated on geographies around the integrated disease network. So in the northeast, for example, it's Mount Sinai Health System. And we had a quote from the head of internal medicine at the Bronx VA as an example of approximate VA medical center, which is a very easy reach for us. And Mount Sinai and the Bronx VA have the same physicians that are practicing in parts in both systems. So applying a Salesforce customer service medical science liaison into that region now gives you a lot of leverage because they can focus on the Mount Sinai system and on the Bronx VA, for example. And I think that's a very powerful compliment. It gives us a lot of distribution. It allows us to leverage the fixed overhead that we're spending on the commercial team against a high concentration of patients in our indicated use diabetic kidney disease. And then, of course, we have other partners that we expect will get involved In supporting the basic education message, which is critical, you need to risk stratify if you have diabetes and chronic kidney disease early. That's a baseline message that needs to be put out to the primary care physicians who are treating 85% of these people. It's a baseline message that needs to be put out to the patients. just from educating at that early stage in these concentrated geographies gives us a lot of leverage in terms of the capital we need to deploy against the human resources to support this adoption building. And we're gonna do the same thing in the Southwest with University of Utah, the Mountain West, which also has contiguous VA hospital systems. And we're gonna do the same thing now in the Southeast. And again, Investors should expect we have other anchor large healthcare system partnerships, which again will have contiguous VA healthcare facilities that we can now concentrate resource deployment to make sure that we get adoption, uptake, education, et cetera.

Okay. Very helpful comments. Thank you.

Thanks, Dan.

Thank you. Our next question comes from Tycho Peterson with JP Morgan. Your line is now open.

Hey, thanks. I'm going to piggyback off the last question. I'm just wondering if you can help us size the opportunity around the GSA contract. I mean, I know you talked about 950 per test, 140 government departments, but how are you thinking about how material that opportunity could be over the next couple of years and how quickly it could ramp?

So I'll let Tom talk more about the VA, but the VA medical system is fascinating. Unfortunately, it tends to skew the patient population that's treated towards our indicated use. And so the opportunity for kidney Intellix is actually quite rich. And we obviously have to execute on it, but the addressable markets of diabetic kidney disease patients runs well into the hundreds of thousands. So it is not a small market. And at 950 per reportable result, with an IDIQ indefinite quantity tenure contract gives us a lot of room to be able to support the VA in terms of rolling out system-wide risk assessment and we have a very specific strategy around that we're not going to talk in too much detail but again we start with the regional focus so we have an integrated diseases network like Mount Sinai we're already up and running and integrated we're hiring into that to support the Mount Sinai deployment That can also be shifted and added onto for the regional, the nearby regional VA systems. And we expect from there, we actually move all the way up to a national level in the VA medical system for a complete integration. That's going to take a couple of years, but we can start with individual hospital systems and move just like we have with Mount Sinai and Wake Forest and University of Utah into a fully EHR integrated and deployed Kidney IntellX across the country. Tom, do you want to add some additional color to that?

Sure. I'd be happy to, James. I think just giving an example of the regional deployment strategy, if we look at University of Utah Health as an example, that 50% of the faculty inside University of Utah Health have appointments at the local VA facility. So for us, the initial launch into the VA through clinicians who are already familiar with kidney and telex testing is going to be a big advantage. So that's contracting on a VA center by VA center basis for deploying kidney and telex. The next step would be to leverage those opportunities into regional commercial agreements with the VA, and that would be the VISNs, the regional networks that are established across the U.S. There are 18 of those. And as James said, longer term, we have spoken at a national level with the VA about their care guidelines and they're going through a major EHR conversion right now to the Cerner system. That has a long lead time to it, but through the regional and the local processes or the partnerships that we will be undertaking, we're putting the foundational elements into that so that we are also working towards the opportunity to be incorporated into Cerner and into the care guidelines longer term. on a national level, but those local and regional deployments will prove that value proposition.

Okay, that's helpful. And then, you know, on the health systems, obviously you're going to hit your target this year of five to seven deployments, but as we think about next year, I'm just curious, you know, how much, you know, the scale-up potentially could be. I mean, where do you think you'll be in terms of you know, capabilities to implement next year? I mean, could you do 2x, 3x, 4x, that number? I'm just curious, you know, how you think about your capacity to scale up, you know, additional health systems heading into next year.

Yeah, if we include the VA medical systems, it could be substantial, tough to forecast. And I also... The most important thing is the quality of the rollout. I don't think we will have trouble attracting additional health systems. And it's clear the inbound traffic that I'm getting, the questions I'm getting from other major systems who are all struggling with how do we manage our chronic kidney disease population is continuing to increase. The validation of kidney intellects is increasing as we announce, you know, a wide variety of systems onboarding. So I don't think we're going to be rate limited by the number of systems that we can bring on. We just have to make sure that we build carefully and we make sure that we continue a very high quality of rollout. That's my biggest concern. I don't think we're going to be in a position where we're needing to find additional systems. In terms of the scalability, What we're finding already as we've added University of Utah Wake Forest atrium is that there's so much that's translatable again from the Mount Sinai model. So we're getting quite confident that we know how to do this. We know how to do it well. And we're seeing less and less new stuff that's associated with onboarding one of these major systems. Each one has its own quirks, and there are different business models and care models in each one of these systems. There are ACOs. There are fee-for-service. There's culture. The care culture is slightly different here in the Southwest than it is in the Northeast. So there are nuances, but the basic legal framework, the basic IT framework, the education framework, uh, the personnel support framework, uh, we're starting to get a really good handle on. So could we onboard, you know, two, three, four times the number of systems in 2022? I think so. Uh, we just have to make sure that the personnel base catches up to that. So we're still, we're still a young company and we really didn't start operations until 2019. And, We're obviously growing our employee base as reasonably and quickly as we can. But obviously these are all high class problems. But I do think ultimately this is broadly scalable across institutions. And importantly, now we're introducing the ability for any independent physician to be able to order whether or not they're integrated into a large medical system EHR. So we are launching an independent portal, and that's very important. It's important to our payer partners because they want to make sure that we have the broadest reach possible for primary care physicians, whether or not they're part of an EHR integrated system care model. The other thing is that we're going to be focused on expanding access. This is a logistical issue for as many patients as possible. That's why we put in the the exam one quest diagnostics ability to take a blood draw from any patient's home. You can send a phlebotomist out to actually take a blood draw in their home. These are all important things about expanding access. So we do believe this is scalable. It really, our focus right now is building the personnel base to support into such a broad population.

And in terms of the ongoing integrations, I didn't hear you mention DaVita. Can you just touch on how that's going? I think you talked about launching in three markets this year on the last call. Is that still on track?

That is still on track. There are so many things to mention. We had to be, with the time allotted, selective about what we thought. put on the table, but our partnership with DaVita is moving forward, and we do expect to be putting news out on that this year.

Okay, and then last one for me, just on pharma. You know, I'm curious, you know, what the interest in the pipeline looks beyond the AstraZeneca agreement, and, you know, how far are you away from kind of recognizing pharmaceutical services as kind of a separate line at a

I'm glad you asked that question. Pharma for me is actually a growing area. We have, again, an increasing inbound interest from a number of different pharmaceutical companies, large and small. I think that that is going to be very fruitful. In general, we are entering the age of precision medicine therapeutics with pharma. The HDLT2 inhibitors have been a phenomenal success in terms of efficacy and treatment. Everybody needs a way to stratify risk early for treatment, and everybody needs a way to look at mechanism from a biomarker level at kidney disease, which is not just kidney disease, right? It's a whole sequence of disease. And there are different types of kidney disease. And kidney IntellX ultimately is a precision medicine in vitro diagnostic that is able to characterize the disease in many different ways. So I think pharma is going to play a major role in kidney IntellX development. It's one of the reasons that we signed the broader agreement with the Jocelyn Diabetes Center to get a hold of such a really a prolific set of biomarkers that Andre Kraleski has been working on at Jocelyn for decades. We believe that that will play very well with new drug development and characterizing drug response. You should expect to hear more about the Kaniga-Flozen trial. That's the SGLT2 inhibitor trial that was set up by Hansen. And, of course, we now have access to that, and we're taking a look at a whole series of parameters. We press released on the first one. There will be additional news coming out of that particular study with Kidney and Pelex. So pharma is, again, a wholly accretive effort and area to, you know, just pulling and onboarding systems for adoption. And I think one last thing I'll say about that is, What's becoming clear is that now that we have several major systems in a geographically diverse area that are integrated and we have access now to data flowing out of these institutions around the care pathway, remember this is comprehensive, so we're not only looking at early risk stratification, we're looking at drug prescription, we're looking at care navigation, we're looking at clinical workflow. This is developing a very comprehensive picture around how kidney disease is managed from an early stage through the different clinical channels and how it's risk assessed. And that network should be incredibly valuable to pharma as it understands how to treat these large populations with new drugs that are rolling off. So we do expect to have a pharma services revenue line, which is going to be growing. And obviously, having AstraZeneca as a cornerstone partner, we couldn't ask for a better partner. Their renal division is, you know, world-leading and comprehensive, and it expands across multiple indications. Okay. Thank you. Thank you, Tygo.

Thank you. Our next question comes from Mark Macero with BTIG. Your line is now open.

Hey, guys. Thanks for taking my questions. So, you know, I think it was a week ago you press released the hire of three vice presidents, one of VP Sales East, VP Commercial Partnership, VP of Marketing, a director and a senior manager. So clearly, you know, you're gearing up on the commercial side. I know Dan asked you, you know, to what extent you might scale a direct effort and you weren't ready to comment. But maybe can you just speak to the activities of the new hires, you know, what they're doing, speak to maybe any funnels they're building, and maybe some structure around folks that might work with them.

Yeah, and again, we've been cautious about the overhead build until we had direct line of sight to payment, which has always been the number one risk from the beginning. We know how to build a new vitro diagnostic. We know how to develop a marketing program. We know now how to deploy through a partnership-based model, but we've always wanted to be careful about running up the fixed overhead, and we've been clear about guiding the street as to you know, where the revenue begins to pick up. And now with the government services agreement, we really have to start ramping up sales, service, and support to take advantage of that opportunity. And so the hires that you have seen come from quite a diverse background with some very interesting experience in value-based care. Obviously, government services are sales and marketing. We've recently launched a new website. We're starting to hone in on our message. That was not a light effort around the marketing component. We're continuing to develop so that we come out of 2021 with a very specific marketing, sales, and education component. And we will continue to hire at the vice president and director level to support that. As we roll out regionally, we will be adding additional sales, medical science liaison, customer support function. And I'm comfortable with that because we're not just throwing people into the wild. We have anchor partners. We have paying partners. And we can concentrate the resources on a geography-by-geography basis so we can maintain control over it. We can maintain the quality of message. We can get feedback, and then we can start to scale from there. Rather than scattershotting across the United States, I think that's a tough approach. So you should expect to see a build-out on the people that we've already hired, creating depth in each one of those divisional teams, the commercial team, the marketing team, the sales team, et cetera, and also the IT team. the product development team, the regulatory team, because even if we do get FDA clearance in the second half of this year, that's just the beginning of what will be sequential product development regulatory pathways that are opened, additional reimbursement pathways that were opened. And we're not stopping with our clearance at a breakthrough device designation. How rapidly that scales, let's see. I want to demonstrate revenue uptick in the second half of this year. I want to do it on the backside of an FDA, our first FDA clearance. And I want to be able to do it, again, in a quality fashion showing we can bring these enormous systems up online, these integrated disease networks, with corresponding VA systems on a regional basis. I want to show those working well. And I want to show that we are getting good physician response, reorder rates, and we are starting to see real-world evidence around the utility equation. So it's a good problem for us to have. And our recruiting infrastructure is obviously growing to be able to support that.

Okay, great. And maybe just my last question. Obviously, you've talked at length about Medicare, Medicare Advantage, Medicaid, and the VA. Obviously, those are very large patient populations for chronic kidney disease. Can you also talk maybe a little bit about some conversations you've had with some of the large commercial payers like the Uniteds, the Aetnas, the Blues? How important are they, and where are you in those conversations?

Yeah, and Tom may comment after me. They are important, but obviously the majority of our initial indicated use population diabetic kidney disease, which represents roughly 40% of the chronic kidney disease, the total chronic kidney disease market, is centered around government support. So Medicare, Medicare Advantage... Medicaid, these are really the cornerstones that we need to put in place. And once we do put them in place, and we already have established pricing and reimbursement, now you add recently the government services administration. We're looking at millions of patients coming out of 2021, which will have full insurance coverage from these different systems at $950 per reportable result. That gives us a significant amount of leverage when it comes now to filling out the rest of the private pay groups. So we are having discussions with a number of large payers. I think the health economics value proposition here, again, is one of the strongest that I've seen. We expect to provide an ROI for private healthcare system with Kidney Intel X between 12 and 24 months. That is quite attractive because the cost associated with missing just a few people who progress on through upstaging of kidney disease and then ultimately end up on dialysis is so high that it's an attractive proposition. So first let's anchor the entire market with Medicare, Medicaid, Medicare Advantage, the government services agreement, and then we will expect to see an increasing volume of private pay I was very pleased we can't name the payer, but in the New York region, which is obviously one of our launch groups, to be able to pull on a significant private payer into that regional cluster of coverage that we're developing. So, Tom, would you like to add to that?

Just to build a little bit on what James just described, In the same way, we believe there's power in the regional deployment model for kidney and telex testing and the synergies between large health systems and VA centers and what we can bring across those populations. We see the same synergies in approaching coverage that way. So when we talk about Medicare Advantage and Medicaid coverage, those are programs administered by those regional payers. And that includes an assortment of plan types, including Blue Cross Blue Shield plans and others. And what we've noted in the regional deployment, when we look at health systems, when we look regionally, While Aetna and Cigna are significant nationally, when we look at what drives coverage in a specific area like New York City, those national plans fall into the single digits. They don't move the needle in the same way on a regional basis that they do nationally. So on our market access strategy, we're keeping a very strong regional focus as well. To support all of that, we have a market access team. Their whole job is coverage agreements. We have a tactical plan for what that team needs to accomplish to support our commercial strategy as we go forward. We are in the position today where they have been successful in establishing a 14 non-government contracts, 15 with the contract that we just described in the New York metro region, and we will keep driving those numbers up as we go through the remainder of 2022 and 2023. Okay. Thanks so much. Thank you, Mark.

Thank you. I'm not showing any further questions at this time. I would now like to turn the call back over to James McCullough for closing remarks.

Well, thank you, everybody. I think we've said enough for this quarter. We're going to go back and put our heads down and continue to execute. Thanks so much for joining this call and we'll be speaking to you all shortly.

This concludes today's conference call. Thank you for participating. You may now disconnect.