Renalytix plc

Good morning and welcome to the Renalytics conference call to review fourth quarter and full year fiscal 2022 financial results. At this time, all participants are in listen-only mode. We will be facilitating a question and answer session toward 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, Michelle, and thank you all for participating in today's call. Joining me today from Rinalytics are James McCullough, Chief Executive Officer, Tom McClain, President, Michael Donovan, Chief Medical Officer, 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 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 intellects, the potential for kidney intellects to receive regulatory approval from the FDA, the commercial prospects of kidney intellect if approved, including whether kidney intellects will be successfully adopted by physicians and distributed and marketed, our expectations regarding reimbursement decisions, and the ability of kidney intellects 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 for hiring, product development, strategic partnerships and collaborations, reimbursement decisions, clinical studies, and regulatory submissions, our business strategies and future growth, including plans, expectations, and opportunities for financing operations and revenue projections and guidance. These statements involve material risks and uncertainties that could cause actual results or events to material differently 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 20F that was filed on October 21, 2021, with 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, October 31, 2022. And with that, I'll turn the call over to James McCullough. James? Thank you, Peter.

Good morning and good afternoon. From our first funding in November of 2018, Renalytics was built to generate extensive data evidence and comprehensive reimbursement for early risk assessment in kidney disease with our advanced prognostic tool, Kidney IntellX. In both of these categories, we have had significant wins, which are widening the opportunity to grow market share and drive real change in patient care. We have now expanded Blue Cross Blue Shield coverage to our third state, And as was in our SDC filing last week, kidney and telex billings are now being paid by the Medicare system. Medicare in the United States covers approximately 64 million beneficiaries. Tom McClain will speak in detail about payment and insurance shortly. We are reaching a tipping point where in certain population centers with a large prevalence of diabetes and kidney disease, a super majority or greater than 70% of individuals will have some form of insurance payment for kidney and telex testing. Supermajority coverage is a critical feature for kidney and telex implementation at the front end, primary care level of medicine. To put the sheer size of this health problem in opportunity and perspective, some 40 million Americans are estimated to have existing kidney disease today. Over half of the adults with diabetes will develop kidney disease. Costs here pile up quickly. An October report in the Journal of American Medical Association citing Medicare dialysis costs at over 80,000 in their first year alone on dialysis, while privately insured patients are costing close to $200,000 in their first year alone. This is simply unsustainable. And unfortunately, a large portion of individuals suffering from this preventable course of kidney failure are from economically disadvantaged groups. kidney disease has become a raging center of health inequity in the United States with disastrous consequences for communities. Our chief medical officer, Michael Donovan, will summarize data now being published, which shows doctors using Kidney IntellX are much more likely to prescribe new medicines early, conduct timely referrals to specialists, and initiate important blood pressure controls to prevent their patients from suffering the consequences of progressive kidney disease and dialysis. In this quarter alone, Four new presentations are being given next week at the American Society of Nephrology Kidney Event Week, and one of our real-world evidence programs on 1,658 patients has just been accepted for publication, showing positive changes in patient management and outcomes. In the period ended to September 30th, we posted our first million-dollar quarter. For the month of September alone, we recorded a record 527 kidney and telex patient reports issued. And while month to month results will continue to vary, we are encouraged to see testing volume beginning to emerge from disparate sources, including individual physician groups located in different states where insurance payment has now been established. We continue to have productive discussions with FDA under our breakthrough device review. We have been fortunate to use this past year to recently submit additional data on over 1,000 patients that further confirms the performance of kidney Intellix and risk discrimination for patients with diabetic kidney disease. We now believe we are approaching the completion of the de novo regulatory process. And while there is no guarantee of success until FDA has made its final determination, we are optimistic based on both the quality of the analytical and the clinical evidence provided, and the high level of engagement we have had with FDA. Our current expectations are for a decision to be made in the first quarter of calendar 2023, ending March, but there can be no guarantee on this timeframe. Also, as clarity builds for kidney and telex insurance, we have been able to reduce our cash burn by focusing on regional markets with developing supermajority payments. We have also reduced third-party vendor contracts, made selective headcount reductions, and slowed our rate of hospital integrations. If our business progress continues as expected, we could very well be in a position in the coming quarter or two where we have mitigated risks for insurance payment, regulatory approvals, and utility validation of kidney and telex. And while it's been nothing short of a roller coaster getting here with market conditions, we cannot forget that Renalytics is achieving its major milestones and objectives in a very short period of time, four years from our founding financing round in November of 2018, and just over a year from our commercial product launch. I will now turn the call over to our president, Tom McLean, who will detail progress with insurance and commercial rollout. Tom? Thank you, James.

From a commercial view, we are making significant progress with expanding payment and coverage for kidney Intellix testing. with increasing testing volumes and maintaining high-quality laboratory operations that are necessary to operate in the highly regulated laboratory services environment. The recent filing of the Medicare payment for kidney and telex testing is significant for healthcare providers, patients, and also for other payers. Our analysis of data available through the Kaiser Family Foundation indicates that Medicare beneficiaries account for 50 to 60% of the intended use population for kidney and telex. This has been validated in our real-world patient experience within the Mount Sinai Health System in New York City. It is important to understand that Medicare payment determination is made based on where the testing is performed, not where the patient lives or where the blood is drawn. So this includes patients across the world that are covered by Medicare. All kidney IntellX testing for Medicare beneficiaries is being performed in our New York City laboratory. As a result, National Government Services, the regional Medicare administrative contractor, or MAC, covering New York, reviews all Medicare claims and issues payment to Renalytics. In an SEC filing last week, we provided material information that we have been paid for Medicare claims for kidney intellect testing services with testing dates starting July 1st, 2022. Under individual claim review or ICR, a medical director from the MAC reviews each claim submitted for payment and makes a determination as to whether the claim is reasonable and necessary. This determination is based on the extensive clinical evidence we have submitted to the MAC and documentation related to the specific service performed. This is significant for the 50% to 60% of patients eligible for kidney IntellX testing who have Medicare coverage. We also believe this Medicare payment precedent for kidney IntellX will support additional coverage determinations from other insurance payers who rely on evidence of Medicare payment. Based on the significant increasing volume of Medicare claims for kidney and telex testing, we also submitted a request for a local coverage determination or LCD from the MAC. We have been notified that our LCD application is complete and it has been accepted for review. Similar to the current individual claim review process, the medical directors at the MAC will consider the previously submitted evidence to determine whether kidney and telex is reasonable and necessary. This determination is then published in a draft coverage policy and reviewed in an open public meeting. We are now awaiting notification of the public meeting date when their recommendation will be reviewed. This meeting could take place as early as the March quarter of 2023. The MAC has indicated that they will continue to pay under the current ICR process until the LCD review is completed. Beyond Medicare, insurance coverage and payment reviews are accelerating, and we would expect to secure additional coverage contracts including contracts with large regional and Blue Cross Blue Shield payers on a rolling basis through the remainder of fiscal 2023. As James indicated, our focus is on enabling kidney IntellX testing with super majority coverage or greater than 70% of insurance payment in large commercialization markets. Turning now to commercialization. As part of the cost reduction actions announced in 2022, we reduced our field sales force to 12 account executives for fiscal year 2023. Our sales team is focused on territories where the near-term opportunities for health system, individual practice, and VA sales are significant and broad payer coverage is likely. As James indicated earlier, testing at the Mount Sinai Health System increased during the September quarter. It is important to understand that Mount Sinai has developed a care pathway for early stage diabetic kidney disease patients that leverages the value of kidney and telex testing. This care pathway is being rolled out across the health system. In the quarter, through better coordination with Mount Sinai, testing increases are being driven by adding new practice locations to the care program, by optimizing the use of the care program in established practices, and by bringing care to the patient through a combination of home phlebotomy services and telemedicine. Our Chief Medical Officer, Michael Donovan, will discuss the positive results from the first 1,700 patients receiving care under the Kidney IntellX informed care pathway. This compelling clinical utility data will drive increasing testing volume at Mount Sinai and will be influential in launching or expanding similar programs in other Kidney IntellX integrated health systems. Those include Atrium Health, Singing River Health System and St. Joseph's Health. Our efforts inside the Veterans Administration Health System have continued to advance also. We're focused on clinicians in VA center facilities as well as clinicians in the community who also provide care for veterans. Specifically, The Veterans Administration Community Care Network, or VACCN, provides a direct link between the VA and community providers to ensure veterans receive timely, high-quality care. CCN uses industry standard approaches and guidelines to administer services, pay for services promptly, and manage the network to its full potential. During September and October, We introduced kidney and telex testing into two of the five VACCN regions in the United States. This is a highly scalable program. Based on that initial success, we expect to see volumes increase in November and December of this year. In addition, we have executed the first task order and the first blanket purchase agreements with VA centers in the west and in the southeast. In addition, we secured a prepayment for testing at a third VA center. Building on these initial successes, we are in the development stage for task orders and laboratory services agreements in other locations. We expect agreements with up to eight more VA centers through June of next year. While the initial testing commitments under the task order and purchase agreements are modest, the programs are designed to generate evidence of clinical adoption and patient care value before increasing volume commitments. Building on our experience at Mount Sinai, we've also developed an at-home testing program that can be offered to veterans by contract on a center-by-center basis to increase access to kidney intellect for those who have mobility or other issues preventing them from accessing a VA center. While these initial wins have taken 10 months to accomplish, the opportunity with the VA health system remains strong based on the higher incidence of diabetes and chronic kidney disease in this population. Demographic and health economic data for the VA from a study being conducted by the University of Utah and the University of Illinois Chicago will be published in 2023. This quarter, we also opened up a focus on the local primary care physician and endocrinology market to our sales account executives starting in late August. Under this program, our field reps are introducing testing to accounts meeting two criteria. First, a significant percentage of their patients are Medicare beneficiaries. Second, there's demonstrated adoption of innovative new therapeutic approaches to treat diabetic kidney disease. Our account targeting is already demonstrating value, and we expect to see test volumes increase in every territory during the current quarter and to the end of our 2023 fiscal year. Between health systems, VA, and direct to primary care physician sales, we expect every account exec will contribute a positive ROI in the current year. Finally, the company continues to demonstrate its compliance with the rigorous standards for laboratory testing performance that are required under CLIA, ISO, TAC, and FDA. That has been evidenced by a series of positive external and internal audits and regulatory certifications during fiscal year 2022. Our laboratory and client services teams continue to prioritize quality in processing samples and delivering test reports to clinicians and patients. I'd like to turn the discussion over to Michael Donovan, who will review the important new clinical utility data supporting test volume increases and payment. Michael?

Thank you so much, Tom. So we continue to document real-world impact of kidney and telex on decision-making by primary care physicians managing their patients with diabetes and kidney disease. As part of our ongoing real-world evidence investigation, we recently evaluated over 1,600 patients with kidney and telex risk assessments at a six-month repeated time point and observed the following changes in patterns of care. 53% of patients identified as high-risk by kidney and telex had a clinical encounter in the first month compared with the current standard of care, which is every 12 months. Most importantly, 71% of this high-risk group had at least one management action taken within six months of their kidney and telex test, such as doctor ordering a consult for one of the specialty services or a modification change in their medications. We believe the observed behavioral adjustment at the primary care level based on the patient's risk for a progression decline in their kidney function, may form the basis for what future management would look like in managing patients with early stage kidney disease. Ongoing evidence development programs should continue to reinforce the role of kidney intelligence use over the coming months. Three of the more important observations were a two and a half fold increase in new referrals to specialty services for high risk patients, predominantly by primary care physicians. And a four and a half fold increase in the use of novel effective therapies, such as the SGLT2 inhibitors for high risk patients. Importantly, we also observed that more than a third of the 496 black patients representing 29% of the total cohort were classified as high risk by the kidney intellect. By comparison, the white patient population, representing 24% of the total cohort, or 406 patients, only 17% were identified as high risk. Finally, although still early in the course of the study, we did observe trends in reductions of HbA1c and UACR levels across the kidney and telex risk strata, and patients have received some change in management at six months post-testing. Data collection is ongoing, including anticipated longer-term outcomes associated with improvement in kidney function based on EGFR slope and reductions in UACR, along with approaching recommended blood pressure values and weight loss targets at 12 and 24 months. I'll now turn the call over to James Sterling, our Chief Financial Officer, for a review of our financial results. James?

Thanks, Michael. Good morning. Today, we issued our financial results for the fiscal year ended June 30, 2022, which will be detailed in our GAAP financials on form 20F, filed later today, and subsequently in our annual report under IFRS accounting. Figures I will discuss here are based on our GAAP financials and quoted in U.S. dollars, which is our reporting currency. For fiscal year 2022, we recorded total revenue of almost $3 million, $2.7 million of which was from kidney and telex testing, with the remainder being services revenue. This was an increase from approximately $1.5 million reported for 2021, of which just $400,000 was from testing revenue. Operating expenses for the year were $54.1 million on a gap basis, up from $32.5 million in fiscal 21, due primarily to higher headcount and higher R&D expense to fund studies. as well as increased consulting and professional fees to support our growth. Net loss for fiscal 22 was $45.3 million, or $0.62 per share. As previously reported, in April 2022, we issued amortizing senior convertible bonds with a principal amount of $21.2 million due in April 2027. Net loss on a fully diluted basis was 66 cents per share, taking into account the possible conversion of shares of the convertible bonds and reversal of the bonds fair value adjustment. This is compared to a net loss of $35.3 million or 49 cents per share in fiscal year 2021. We ended the year with cash and cash equivalents of $41.3 million as of June 30, 2022. As a reminder, in mid-August, we disclosed that we had executed changes designed to yield over $12 million in annual savings in fiscal 2023, with more in process. The full effects of cash burn rate reduction are expected to be realized in our fiscal second and third quarters, ending December and March, respectively. And we've taken since further steps to reduce expenditures and extend our cash runway. We anticipate that this should, depending on achieving certain assumed revenue, provide us with an adequate cash runway into the first half of fiscal 2024. Operator, could we now open the call up for questions?

As a reminder, to ask a question, you will need to press star 11 on your telephone. 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. Thank you. Just wanted to start on test volumes, 1,200 during the quarter, which is right around 100 a week. I think that's up slightly from last quarter. James or Tom, it would be helpful if within Mount Sinai, Wake Forest, and Utah, where you're most established there, can you just sort of talk to the volume ramp that you expect and just how much of it is going to be dependent on clinical data generation and reimbursement versus those things that are more tied to logistics and commercial practice, things like EMR and portal infrastructure, doc awareness, et cetera. Just trying to understand what the trigger points are from here and then what you actually need to get testing going at a higher level.

Yeah, thanks, Dan. I'll give a quick answer to that and turn it over to Tom. We obviously are seeing a pickup in volume as we get better and better at what we do. And I think it's certainly becoming less of a technical issue at this point and much more of an education issue. And then, of course, the single most important thing is establishing comprehensive reimbursement. So when we start to see Blue Cross Blue Shield plans tip over for support, and obviously now that we're on a Medicare pathway, that's going to start to widen the market, especially going into next year and going to help support volume increase. But I think at this point, we know pretty much how to implement and have got enough experience under our belt that it really comes down to now education and reimbursement. Those are the two major things. And obviously, if we end up with an FDA Denova marketing authorization, that's going to be an additional help as well. Tom, do you want to take up on that too?

I would only echo what you said, James. Coverage and utility data are very important to broadening adoption and increasing testing volumes. And both of those have been a strong focus for us over the last year and what we have been able to accomplish on coverage, importantly Medicare, because of the significance for the intended use population here. And the utility data, the publication that's forthcoming and Michael described is going to be very important. for building primary care physician understanding of how kidney intellects can benefit them and benefit their patients.

Okay, follow up question, I guess, would just be on Mount Sinai. James, when do you think you might be in a position to hit that 300 tests per week targets? And then within the VA, I think the comment last quarter was that testing was being set up in 59 of 171 health centers. What's the update there, and are you still thinking that testing will begin in eight plus of those by the end of the calendar year?

Yeah, on the Sinai piece 2023 calendar, so starting January to January should be quite productive, especially as we now shift to a full commercial model with comprehensive payment, right? And Without pointing to specifics, we are making some very real progress on securing additional private payer groups and public payer groups that have influence in New York State, especially New York City, which again is a bit of a lasagna plate of payer mix. But we're moving into a position now where we can actually start to get a super majority coverage we believe going into next year in Sinai and that's where now all of a sudden you start to expand a much larger patient population and that's going to help and you also start to get insurance payer push into that patient population for diagnosis prognosis and treatment in their best interest to do that rather than take the cost for late stage disease and part of the dialysis bill. So we do expect a push there. And that should all accrue towards an increase in testing volume across the board, specialty practices, primary care practices, different patient demographics. We're even looking at pulling in specialties outside of kidney disease, including cardiology. Everybody's got a vested interest in understanding what the state of the kidney is, which is the gateway to a lot of chronic disease management. So 2023 should actually be quite a very interesting year.

Okay, last one for me and then I'll just hop off. OJ, maybe the obvious one on the cash side, just given where the burn is today and where you think the cost structure is headed, how far out should we go before thinking that you need access to capital at this point?

So we've been comfortable saying we are in shape to get through or into at least the first half of fiscal 24. So cash spend, we indicated already and we reiterated today that we've reduced expenses already to the tune of $12 million a year annualized. And indeed, we've already done north of that with more available to us, pretty good flexibility to flex spend. And so... feel pretty good about the cash position to get us through operational milestones and at some point I would expect in fiscal 24 or thereabouts a next funding event. Okay, thank you guys.

Please stand by for our next question. Our next question comes from Yi Qin with HC Wainwright. Your line is now open.

Thank you for taking my questions. Could you comment on what would be your target volume per quarter by the end of fiscal 2023? Thanks, Yi.

Appreciate the question. We don't want to dip into the area of forecast too hard, but it will be significantly higher than where we are today. And importantly, I think the real tipping point for us is, again, in my head, the comment of supermajority coverage. Once you start to have Medicare, Medicaid, Blue Cross Blue Shield, Medicare Advantage, and other private plans, especially in the diabetes population, now you're talking about the ability to test the vast majority of patients who are eligible for kidney and telex. Now it becomes an ROI equation, which is how many feet do we want to put on the street and how aggressively do we want to go at specific areas in terms of education, partnership, et cetera, to get to larger patient bases. So, you know, and I said this in my statement, but we could very well find ourselves in the March quarter having substantially mitigated reimbursement risk to the business model, regulatory risk, with the publications coming up showing that, you know, kidney IntellX really does work, and not just in a two-rat study, but in thousands of patients, across a pretty broad group of patients that we now have substantially completed the business case for Kidney IntellX to now move into broader scale use. And I believe that's a short-term equation, and that will allow us to expand much more assertively into certain high density populations. with an assurance that we're going to get paid. I think today we're getting paid on a majority of the testing that we conduct. That's going to continue to increase even through the balance of this year. So for me, the canary in the coal mine investor should be looking for additional filings on significant insurance payer coverage or payment. later this year and going into next year. Obviously, we have the FDA, which is going to render its decision, and you should be looking at that utility data, which is really where the rubber hits the road. What does Kidney IntellX actually do? How do physicians use it, and how does it affect the care pathway? And Michael detailed some of that, but we're very pleased with how Kidney IntellX is performing today. It's doing what we thought it would do. So we're actually in a very strong position when we take a look at the whole package around bending the curve on chronic disease management, especially in diabetes and kidney disease. And that's going to start to reflect in the market space, we believe, to your point, as we get into the end of next year.

Thank you. At which point would you feel comfortable to provide abbreviated guidance?

The old question. I think we're reaching that point. This has been a very difficult market, and we've had internal debate about this. I don't think it's going to be long from now. We're certainly starting to get confident in the ability to get paid for kidney IntellX and the ability to get paid for kidney IntellX in different areas. which is important. So we're moving into a more confident position there. Market volatility doesn't help. What we say at the end of the day or project, I'm not exactly sure how much effect that would have as opposed to just putting up the numbers and clicking off the fundamentals. So we've taken that position for now, which is Let's just click off the fundamentals, inform the market as they come along. But I'm hoping as we start to see interest rate moderation, hopefully early next year, capital markets get a little bit more friendly that we could start to provide guidance into fiscal 23 and fiscal 24, which we're very encouraged about. Got it.

Do you feel confident that you can get FDA clearance within calendar 2022?

I do. And, again, I always put the caveat that you can't call the timing. Okay. We are certainly reaching the end game. And this process cannot go on too much longer. And certainly the burden on FDA has changed, moderated with COVID. So we're starting to see processes picking up. And until you have FDA, you don't have FDA, full stop. But We have now submitted a substantial amount of validation data, performance data, analytical validation data, and we're now seeing the clinical use of Kidney IntellX across thousands of patients. So I also think that we have one of the best FDA teams, certainly the best FDA team that I've worked with in terms of outside consultants and internally. We've gotten very smart about the process. So at the end of the day, the risk of using kidney IntellX is not particularly high, right? You get referred, you get put on a drug early on, and this is all in a patient population that has existing disease. So we're only focused on patients with diabetes and existing kidney disease. We're not screening. So the risk of using kidney IntellX is very low. But the benefit is very high. So with all of the validation data we have, I believe we're well positioned to get a de novo marketing authorization in the March quarter. But again, let's see how the process goes.

Thank you.

Please stand by for our next question.

Our next question comes from Randy Baron with Pinnacle.

Your line is now open.

Hi, guys. Good morning. Can you hear me? Yes, we can, Randy. Okay. My first question is for Tom. Tom, congrats on last week's Medicare announcement. I mean, it's certainly a significant milestone, and today, obviously, talking about LCD being accepted for review. One thing that It certainly seems like what's glaringly missing to me on this call was a mention of a national coverage termination. For those laymen on the call like me, can you explain if Renalytics is going to be going for an NCD, and if not, kind of why not, without rehashing the script, like how else can you get paid at scale? Thanks.

Thanks, Randy. There's a lot of confusion around Medicare. I was at a conference last week where CMS provided some important context around payment. And they were clear. They have three very distinct and separate payment methodologies. And the first is what you referenced, national coverage determinations. Separate are local coverage determinations. And then there's this claim by claim adjudication. But what their director of the coverage program for Medicare was clear about are numbers. There are currently 300 national coverage determinations. The local coverage determinations, which come from these MACs, number in the single thousands. But individual claim review, claim by claim adjudication, still accounts for the majority of Medicare payment in the United States. Basically, it's not a sequential process. Once you have coverage that's efficient for the scale you're at, you are done with Medicare. In our case, coverage under a local coverage determination, it relates to the location of the laboratory that runs the Medicare patient sample. So, a local coverage determination by the MAC for the New York City lab, if we were continue to run all of our Medicare samples through that New York lab, that's national coverage for us. There isn't a next move on to a national coverage determination that's required here. And the reason that we're doing the LCD, as I indicated, is the volume of kidney and telex claims is going to be significant. That makes the payment process much more efficient. for that Medicare administrative contractor in New York. So short answer is a national with a local coverage determination, we would be done. There isn't a need to move on to a national coverage determination.

Did that answer? Yeah, no, that's a good answer. But let me ask you a dumb question. Is there a collar or limit of the amount of tests that you could push through the New York MAC?

No, no, it's national. so all the all the new york mac does is administer medicare for laboratories or providers that are located in their region the budget is the medicare budget there isn't a limit as to each max what they can pay and they're paying for claims for people in california people in territories like Puerto Rico and people in New York. So they are the regional contractor quote unquote, isn't a national payer for any service that's provided in their region.

Okay. That's great. Let me, um, let me shift to OJ, OJ. I'm just trying to reconcile kind of the company's aspirations for, you know, minimizing cash burn versus what happened in the quarter just ended. Seeing as the September quarter is done, what were cash levels at September 30?

We're not previewing that. As far as we're going to go in previewing September is the revenue line. Not ready to give more guidance on what September looks like.

Let me ask the question this way. Was the September burn down to that 9 million, nine and a half million aspiration.

September burn was definitely down. I don't want to put a number on it, but it'll, it was slower than what you've seen recent historicals.

Okay. Both Tom and James talked about return on investment for the test reps. How many tests on average for your 12 reps are needed to get to that threshold?

I gotta be careful. And I, and I, I, a good question i get why you're asking it i'm just worried that it trips into forward-looking guidance which we're not giving uh to to give specifics there so let me hold off on okay let me let me ask the question this way what's your average compensation per sales rep not ready to provide that either um it's it's it's market rate comp they got a base and uh a uh a bonus-based performance, but as far as giving you specific numbers.

Okay, so you can just comment directionally if I'm right, but if an average salesperson gets $200,000 at $950 a test, that's 200 tests times 12 times $950, that gets me to like $2.5 million. Is that directionally how I should look at it?

Yeah, I don't see why that's not a fair way of looking at the picture, sure.

Okay, great. And this last couple of questions for you, James.

You know, Randy, before you go on there, these are actually good questions. The reps get paid different depending on level of experience, location, et cetera. But I actually like that direction that you're going in.

Well, and especially since you guys opened the door, it seems like a pretty obvious change. James, let me just do my last couple to you questions. And I just want to make sure I didn't miss this. Are there any remaining open items requested by the FDA for anything else? At the moment, no. That's great. Okay.

And then I don't think I heard... Just to put the caveat on that, okay, because I want to be very, very careful and respectful of the FDA process and very humble, right? It is a complicated process. We are... doing a de novo authorization and it's a proper de novo authorization. There are a reason there are no substantial examples of risk assessment tests at the front end of a disease this big. So when FDA does opine and we would like it to be successful, that's going to be obviously a significant statement of achievement because we will now be putting a new class of prognostic tests on the table. So it is a proper de novo authorization. And the way the FDA process works, while we believe we have satisfied what FDA is looking for, doesn't mean that as we continue to conclude the review process that additional questions will not appear or there will not be additional discussions. But we're certainly confident that we put together a very strong package.

Okay, and then just last really quick two ones for me, James. I'm just curious on partnership. We've talked about it in the past. Do you expect any updates or completion of any partnership in this calendar year?

We are making progress, and I do expect completions of partnerships. Can I commit to this calendar year? No, I can't commit to this calendar year. Would I be surprised if we did announce a partnership this calendar year? No. But I can tell you that what's interesting as we continue to make significant milestone progress with insurance, there are a lot of people taking notice, especially in a market this big. So it's not every day you come across a fully validated prognostic at the front end of the market without any direct competition that is now being paid for. Insurance payment, as we said from the beginning, is one of the ultimate validations. Because when somebody starts paying for something, you know that they've analyzed it, they've thought about it. Does it really add value? And when the wallet's open, you know you've created a product that has value. So there are a lot of people watching that at the moment. And I think as the insurance landscape continues to unfold this year and next year, that's only going to strengthen our hand.

Yeah, and this is my last thing. I mean, that last comment you said about you're getting paid. I'd love your high-level view on valuation of Renalytics currently. I mean, it certainly seems, like you said, this is a company that's getting paid, and you're valued. At least to me, it seems less than a series kind of C venture company, which would be three to five years away from that milestone. How do you think about that? I'm going to hop out. Thanks so much.

I mean, I've been doing this a long time. I've never been in a position where we're this close to a regulatory decision where we have validated across multiple insurance carriers, including Blue Cross Blue Shield, where we now have millions of patients with insurance, and I'm still valued at a venture valuation. Again, as I said, we could literally be in a short term having de-risked regulatory reimbursement utility, which typically takes many, many years to fulfill. So I am, while I understand where the market volatility is, I am surprised with this level of validation that we're putting on the table, you know, where the company is currently valued. But again, I'm biased as CEO, but I would say that we are significantly undervalued for the achievements that we put on the table.

Thank you.

As a reminder, to ask a question, please press star 1-1 on your telephone. Please stand by for our next question. Our next question comes from Mark Massaro with BTIG. Your line is now open.

Hey, guys. Thanks for squeezing me in here. So I guess I wanted to just clarify and Also congratulate you on the progress on Medicare that you announced last week. But just to kind of verify, you will continue to get paid under the ICR process until the LCD process is completed. So I guess just to kind of... you know, dot the I here. This would likely go on for a series of months until you know whether or not... So I guess my question is really around if you have a positive draft LCD, that's a good thing. Then if it goes final, you know, you'll continue to get paid. But what happens if you get a negative LCD? Will you... a proposed non-coverage decision, will you still get paid until the final is rendered?

So, if there is a positive local coverage determination, what that does is it more routinizes the review of every claim. that it reduces the need for a medical director to review each claim. If there was a negative coverage determination, that would say that the medical directors who are reviewing the claims under the ICR process no longer see the test as reasonable and necessary. I guess it would say that when they went back and looked at the data again, that they had changed their mind. If they did that, then they would either reduce or stop payment of claims under ICR. So the data that's in both processes is the same. It's all of our clinical data. And it's so, Mark, I don't know if that answered the question.

Yeah, that is certainly helpful. And I know that's a complex question. The fact that you have started getting paid for the ICR pathway, my suspicion is that that builds confidence that you, well, I guess my question is, does that build your confidence that you think you'll likely get a positive draft LCD?

I can't speak for where they're going to come out, Mark, but all of the data that will be considered in the local coverage determination process was submitted and reviewed by the MAC in the effort that led up to payment under the individual claim review process. So as the approach that we took, was we submitted all of our analytical clinical validation and the utility data that we had. We met with the medical directors on multiple occasions. So we went through that whole process before submitting claims for consideration under ICR. There isn't, I mean, we've done everything that you would do under an LCD. the only additional information that we will be able to review in the open meeting will be the publication of the utility data that Michael Evans shared with you today. So I would say they've looked at everything and are continuing on a claim-by-claim basis to say testing is reasonable and necessary, which is the hurdle for a local coverage determination as well.

Okay, great. And just my last question here. I know you were asked about the NCD pathway. I understand you have a lab in Tampa and you have a lab in Utah as well. Can you just give us some directions as to if you're in conversations with potentially other Medicare contractors or do you expect to wait this NGS process out first? before you move other conversations with other MACs forward?

Our focus right now is on the fact that we're running 100% of our Medicare testing through the New York lab. We would see the value in having a backup, a second laboratory facility in the future. That could be with... a coverage process with another MAC in the future, or it could be that we open up another laboratory in an NGS region. But all of our Medicare testing right now is being run through the New York City location. Okay, great.

Congrats on all the progress.

Mark, we can finally answer these questions, including I love having this discussion on reimbursement now.

I appreciate the call.

Please stand by for our next question. Our next question comes from Chris Glasper with Singer Capital Markets. Your line is now open.

Hi there. Good morning, guys. Just a little bit more color, if we may, on the testing volume that you've generated in the first quarter of this year. So if you've done north of 1,200 tests in the quarter, of which a short 1,000 were from Mount Sinai, can you just give us a little bit more color on where the balance has come from, how many health systems are ordering, whether that's regular repeat orders or one-offs at this stage? Thanks.

Tom, you want to take that one?

Yeah, I'm searching. So, on the testing volumes, the increased volumes that we're generating, it's for initial testing with kidney and telex. And we are – I think I understood the question correctly. We are looking at expanded indications for kidney and telex repeat testing, and that will be set for the future.

Okay. So, just – Just a bit more on that. I'm just trying to get the sense of how many different systems are now effectively live in addition to Mount Sinai.

So we have a clinical study that is ongoing at the Wake Atrium system, and that is for clinical testing with kidney and telex. We expect that that will convert into commercial testing. before the end of the fiscal year. We also have just gone live with the Singing River Health System in Mississippi, and that testing will go live. And a number of other tests are coming from commercialization within individual primary care practices, which are being focused in areas where we also have insurance coverage in place.

Yeah, got it. That's helpful. Thank you. And then just, I think, I'm not sure the question on the VA was answered from Dan first up. So just a little bit more color on where you are with the rollout and the VA and whether you're going to hit a target of having eight systems live by the end of this year or by the end of fiscal year.

Going back to, yes, so on the count, we had announced that we had live testing in one VA center today. I provided an update that we have a task order with the second center. We have a blanket purchase order with a third, and we have an advanced purchase commitment from a fourth. So those are four centers with kidney and TELEX testing. And I went on to confirm that we expect up to that eight by the end of the fiscal year. Correct?

Yeah.

Great. Did that answer? Good. Yeah. Okay. Yeah. Perfect. Great. That's helpful.

Thanks, guys.

As a reminder, please press star 1 1 on your telephone to ask a question.

One moment for our next question.

Our next question comes from Jens Likvist with Embastic. Your line is now open.

Oh, hi, guys. Hello, Jens.

Yeah, just a question on... On the U.S. dialysis market at the moment, there was a proper warning from Fresenius Medical Care this morning and also from DeVita, I believe, last week, flagging both downgrading guidance really against the factor of cost inflation and stop shortages. I'm just wondering, is this adverse market backdrop, is that an opportunity for you? I guess it could be that it could facilitate perhaps the adoption of technology focusing on early stage intervention. Or is the market at the moment, you know, is it simply a glut of late stage kidney patients that have to take priority? I'm just interested in your thoughts on that. Thank you.

Very good question. The Renalytics business model is insensitive to the economics of the general economy because most of our payment is coming from very large insurers and the government. And what's interesting and what I've noticed anecdotally is there is a large interest from different state organizations Medicaid and different large insurers around controlling cost and the best way to control cost with disease is to get in early and treat it and the biggest problem and this this is not unique to kidney disease but it's the poster child and is we've let these huge populations with existing disease just slowly upstage to later disease and then fall into a very expensive medical program. My breath was taken away with that JAMA publication that I referenced that was talking about close to $200,000 in the first year alone of dialysis for private insurance companies, $80,000 from Medicare. And, uh, the fact that I believe the statistic was 52% of patients with diabetes will eventually develop kidney disease, the majority. So to me, this is a no-brainer. And it's all about diagnosis, prognosis, and treatment. This is why kidney IntellX is so critical to controlling state government budgets and getting a handle on what is a completely unsustainable situation, which is Who's got kidney disease we need to treat now and who doesn't? And we have the technology to do it with Kidney IntellX. We're now getting paid for it. We have the regulatory pathway. And now the utility data is emerging to show that if you are a primary care physician and you are equipped with Kidney IntellX advanced prognosis, we are now demonstrating behavior change. Awareness is going up. We're seeing new drug prescription early. We're seeing timely referral to physicians. We're seeing more intensive blood control management. This is all coming down to roost. And so my feeling is, regardless of the economic environment, everybody needs to embrace risk assessment early on in this chronic disease condition. that's how ultimately we're going to control cost and everybody's sensitive to cost right now and so we're getting a lot of inbound questions from insurance payers on this and i think the health economics are bearing out and what's going to happen when we start when we continue to publish utility data showing that kidney intellix is effective but that's really going to give us the boost in terms of adoption I can't comment on Fresenius and DeVita's profit warnings. I don't know if you have any insights into that, Tom.

I don't, James. But a good question, Jens. Thank you. Thank you, Jens.

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