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spk05: Good morning and welcome to the Rentalytics conference call to review fourth quarter and full year fiscal 2023 financial results. At this time, all participants are in a 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. Please go ahead.
spk11: Thank you, Michelle, and thank you all for participating in today's call. Joining me today from Reno Lake Spread Formal Marks are James McCullough, Chief Executive Officer, Tom McClain, 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 within the meaning of the Private Securities Legislation Reform Act of 1995. Any statements made during this call that relate to expectations or predictions of future results and events or performance are forward-looking statements. Examples of these statements include, without limitation, the potential benefits, including economic savings of kidney intellect, the commercial prospects of Kidney Intellects, 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, friends in our market and potential benefits of government policy change, the impact of COVID-19 at other world events in our business, our expectations for hiring, product development, strategic partnerships and collaborations, reimbursement decisions, clinical studies, and regulatory submissions are business strategies and future growth, including plans, expectations, and opportunities for financing or operations, and revenue projections and guidance. 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 factor section of our annual report on Form 10-K that was filed today, September 28, 2023, with the Securities and Exchange Commission. All forward-looking statements made on this call are based on management's current estimates and various assumptions. Renolytics disdains 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, September 28, 2023. I'll now turn the call over to James McCullough. James?
spk04: Thank you, Peter. Good morning. Good afternoon. In short order around this quarterly period, we crossed major thresholds in reimbursement outcomes data and achieved an FDA de novo marketing authorization for kidney IntelliX. Our progress was further amplified by inclusion of kidney Intel X in the draft leading kidney care guidelines, Cadego for 2023. It is rare to see all of these milestones pass sequentially measured in months. And we believe that these are significant for the broader adoption and clinical acceptance of kidney Intel X for early prognosis of individuals with type two diabetes and early stage kidney disease in the United States and abroad on the growth equation. Achieving these collective milestones now allows us to set the commercial target of a 1% United States market penetration over the next three years in our FDA authorized indicated use population of 14 million adults with diabetes and kidney disease. We intend to do this through expanding hospital system partnerships, working closely with insurance companies covering kidney Intellex, and through our direct-to-physician sales force, whose expansion is continuing in specific areas in the United States under the new leadership of experienced sales executive Howard Duran. In addition, the international opportunity with FDA in hand is also quite promising, particularly given the large growth in diabetes globally. As a reminder, we have been disciplined in maintaining a $950 price point or greater in our growing portfolio of contracted insurance companies. This pricing was originally set by Medicare. Importantly, post FDA authority, we have reviewed our operating cost basis and are taking decisive actions to reduce our quarterly cash burn rate. This reduction in cash burn should become most apparent in the second half of fiscal 2024. and is being undertaken without compromising our sales focus on growing testing volume and revenue. These reductions are on top of our net year-over-year OpEx reduction of $11 million. We will continue to look for opportunities to optimize cash expenditure and increase our cash position, particularly through non- or less-diluted strategic partnering and potential international licensing opportunities. As far as we are aware, Kidney IntellX is now the only machine learning-enabled prognostic tool in chronic disease preventative medicine with an FDA authorization, established payment by a broad array of insurance companies, including Blue Cross Blue Shield groups, Medicare and Medicaid, and real-world evidence demonstrating improved outcomes in both diabetes and kidney disease. After a four-year FDA process, which included over 1 million patient calculations, three independent trained tests validate algorithm runs, we are proud Kidney IntellX has validated a novel pathway for artificial intelligence enabled in vitro diagnostic medicine. Several hard-won regulatory innovations, including validation of a nonlinear machine learning algorithm, use of electronic medical record features, new predictive biomarkers, and importantly, accurate and reliable prognosis from the earliest starting point in a chronic disease category all provide kidney IntellX with unique competitive positioning. Our view is these precedents solidified in a full regulatory process will be difficult to replicate without a considerable investment over a multi-year period. In short, we are very pleased with our established long-term competitive advantages. As I noted earlier, we are pleased to have announced that Senior Executive Howard Duran has joined Renalytics to lead the global business effort, including U.S. direct-to-physician sales efforts. As of September, our direct-to-physician sales force is now active in several territories in the United States, in Texas, Florida, New York, and North Carolina, all where the rates of diabetic kidney disease are high, where we have existing or anticipated hospital partners, and where our insurance coverage in many cases exceeds 90% of the FDA-authorized indicated use population. We believe a number of pharmaceutical and medical device industry players would benefit from kidney and telex-driven patient prognosis and supported care management in the diabetes market. Recently, published data has shown that primary care physicians using kidney and telex are four times more likely to prescribe GLP-1 agonists, and SGLT2 inhibitors early on to diabetes patients at significant risk of kidney function decline. By identifying kidney care disease patients at risk early by using Kidney Intellex, the potential increase in new drug therapy use, particularly at the primary care level for pharmaceutical players, is compelling. Ongoing publication of both our own and third-party Kidney Intellex outcomes and utility data are critical for establishing a new broadly used preventative standard of care. At Renalytics, we have invested heavily in real-world evidence generation since we began full operations in late 2018. As we presented in this quarter, Kidney IntellX outcomes data has exceeded our expectation by showing an association with clinical actions that in under 12 months led to observable changes in the core measure for diabetes health and kidney health. Raising funds to fuel these clear commercial opportunities is essential. particularly now that we have reduced risks associated with a successful service product launch and adoption. To maximize our flexibility to fund business growth, we filed an S3 shelf registration statement to give us the ability to source capital at the right time. Again, we will continue to explore less dilutive and non-dilutive capital funding sources, particularly now that we have a unique product proposition post-FDA authorizations. I will now turn over to Tom McClain, our president, to discuss reimbursement activities and accomplishments during the period. Tom?
spk07: Tom McClain.
spk04: Sounds like we're having a communication with Tom with your communication issue. I'll go ahead and read Tom's script for the moment. What Tom is going to say is following much hard work to accomplish the momentous task of achieving FDA authorization, we now believe that the kidney IntelliX deployment road ahead of us is wide open to accelerate test adoption. As James indicated, kidneyintelex.dkd is now the only prognostic in vitro diagnostic test for assessment of chronic kidney disease progression with FDA authorization. Since we announced this at the end of June, our ability to engage in conversations with partners and payers has been elevated to a new exciting level. Following the announcement of FDA authorization, the Medicare administrative contractor responsible for test claim payment coming from our samples processed in our New York laboratory convened a contractor advisory committee meeting or CAC meeting. A CAC meeting is recommended under the 21st Century Cures Act as part of the advancing the local coverage determination process. The purpose of the meeting was to discuss the clinical literature that supports advancing the development of a local coverage determination. There were a number of highly interactive discussions regarding the clinical utility of Kidney Intellex by independent physicians selected by national government services. We were pleased with the outcome of the meeting and supported the dialogue by submitting a summary of how the evidence addresses questions posed to the CAC panel during the meeting. In summary, and especially following FDA authorization, we continue to be confident in our ability to secure a coverage determination from Medicare. In keeping with our stated strategic goal of focusing our commercial efforts on regional areas where we can bring the benefits of our Kidney IntellX technology to large populations of adults, we recently announced expansion of insurance coverage in Texas. This was the result of executing a contract with Blue Cross and Blue Shield of Texas, the largest statewide healthcare plan covering 7 million members in all 254 Texas counties. This organization works with more than 140,000 physicians and healthcare practitioners and 520 hospitals. Furthermore, we also executed an agreement for insurance coverage of kidney and telex with Parkland community health plan, a Dallas based insurance plan with over 300,000 covered lives and service in seven counties. As a reminder, these regional agreements compliment coverage already secured and announced previously. whereby Blue Cross Blue Shield plans cover our tests across millions of covered lives in Illinois, Maryland, Virginia, Iowa, and South Dakota. It is unusual to achieve this level of comprehensive insurance reimbursement with such a short operating history. We expect our success with coverage will accelerate now that we have completed regulatory, real-world evidence, and clinical use milestones. Also, this level of insurance payment is an important validation of Kidney Intel X and a key component of the intrinsic value of the franchise for potential strategic partners. I would now like to turn the call over to James Sterling, who will discuss our financial results for the quarter and the year. James?
spk10: Good morning. Today we issued the financial results for our 2023 fiscal year, which ended June 30th. Our GAAP financials were filed today on Form 10-K. and will be followed shortly by our annual report under IFRS accounting. Figures I will discuss here are based on our GAAP financials and quoted in US dollars, which is our reporting currency. We recorded total revenue of $3.4 million for fiscal year 2023, which was up about 15% over fiscal 22. During fiscal 2023, we recognized services revenue of nearly $300,000 upon completion of two services contracts, including our projects with AstraZeneca. For the fourth quarter, we recorded revenue of $520,000 compared to $830,000 for the fourth quarter of the prior fiscal year. As we noted on last quarter's call, revenue has been impacted by the successful transition to commercial payment for testing at Mount Sinai. While total testing volume has remained relatively steady, certain clinical trial tests that were billable under the prior contract at Mount Sinai are no longer billable under the commercial model. Upon completion of study enrollment, we expect the percentage of billable tests to increase over the latter part of fiscal 2024. Operating expenses for the fourth quarter were $9.8 million on a gap basis, significantly reduced from $13.2 million for the prior year period. This reflects the result of actions we previously took to lower operating expenses through program, vendor, and employee reductions. Net loss for the fourth quarter of fiscal 23 was $11.1 million, or 11 cents per share. This compared to a net loss of $5.2 million, or 7 cents per share for the fourth quarter of fiscal 2022, which included a foreign currency gain of $5.1 million. Excluding the foreign currency gain, net loss for the year-ago period would have been $10.2 million, or 14 cents per share. We've continued to maintain a tight focus on controlling expenses. As a result, for the year ended June 30th, net cash used in operating activities was about $33.4 million, and this was down 27% from $45.9 million in the prior fiscal year. We ended the fourth quarter with approximately $24.7 million in cash as of June 30th. And as James mentioned, we're in the process of taking steps to further reduce our operating expenses to extend our cash runway. Operator, we can now please open the call for questions.
spk05: To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. The first question comes from Daniel Aries with Stifel. Your line is open.
spk12: Thanks for taking the questions. Paul on for Dan here. Just wondering about the sequential cadence looking forward into 2024 fiscal. So could you give some color on what you're looking for in Q1 out of Q4 and from there, you know, how does that play out through the year?
spk01: OJ, you want to start with that?
spk10: Yeah, that's fine. So we indicated in the RNS or the press release this morning that Test volumes have stayed fairly consistent through the period and into this first quarter. Billable volumes, billable portion of that, just about half of our 1,200 or so quarterly testing volume. And I do expect that to increase over the course of the fiscal year, both as a function of higher volumes as well as a higher proportion percentage of billable testing among the tests that we do, not giving specific guidance on a quarter-by-quarter basis yet at this time.
spk12: Sure, sure. And then just for the follow-up, in terms of the Lake Forest EHR integration that you're working on, do you see like a big inflection point in terms of how that cadence will roll out over the year or is that more of a you can start scaling some volumes before that's fully integrated and it'll be a little smoother?
spk04: So we've been working with Wake Forest for a while and things are going quite well. There are a lot of physicians using Kidney IntellX At the moment, we're switching that over to a commercial model later this year. The integration into a major system like Atrium Wake Forest through Epic is a key proof point for us. We've already done that in Mount Sinai. Everybody's asking, OK, that's great with Mount Sinai. Let's see it in another large system. Well, this is it. So Wake Forest Atrium is quite large, larger than Mount Sinai. Having Kidney IntellX fully integrated into Epic and available for many practicing physicians now to order online is going to be a key milestone for us. And being able to do this with an independent Epic integration, so we're doing this directly in conjunction with Wake Forest IT Group, it's been a tremendously successful process. We've learned an awful lot since we first did this with Mount Sinai. And I do very much believe in fiscal 2024, it's gonna start to produce evidence of increased testing use. And I'm very excited to see this system come online. I do believe that with a fully integrated Kidney IntellX in Epic, in a system like Atrium Wake Forest, you now open up the possibility for practice alerts to come out, especially now that we've passed through all of these significant milestones from outcomes data to utility data to FDA inclusion in the draft guidelines, expansive reimbursement. All of these milestones collectively add up to something that a large healthcare system can feel quite confident that kidney and telex should be part of standard of practice. and should be something that should be broadly used across their primary care physician networks to be able to understand risk in diabetes and kidney disease and help mitigate outcomes and also cost. So the Wake Forest Atrium deployment for us is a very high priority, and everyone should stay tuned. We'll have more news on that coming up shortly.
spk12: Great. That's helpful. Thank you. And congrats on all the progress. Thank you.
spk05: Thank you. Please stand by for the next question. The next question comes from Chris Glasper with Singer Capital Markets. Your line is open.
spk06: Yeah, morning, guys. Just a couple of questions, please. Firstly, can you just give us a little bit more color on the target penetration that you've outlined? I'm assuming that's cumulative over three years. And then second question, really, just, again, quantifying a little bit of detail around the further cost savings that you're expecting to make. Thanks.
spk04: Yeah, we'll start with the cost savings, and then, O.J., please comment on top of me. You know, market conditions are fabulous today. as everybody knows, and market volatility is high. This is not an easy environment. So we're taking cost reduction very seriously. We've already started to take specific steps so that we can lower our quarterly burn rate. We do not want to compromise our revenue generating capacity. So it's really a focus and a shift of priorities with a very heavy weight towards commercialization. which is good and appropriate at this stage of the company now that we're on the other side of FDA. So we will continue to look for ways to narrow that burn rate. Obviously, other ways that you can narrow the burn rate is to increase the revenue, and we're working on that as well, specifically with the introduction of the direct-to-physician sales force We talked about Atrium Wake Forest. There are other things in the pipeline that will give us additional exposure in select regions. So, we're really focused now on select regions where we have high rates of diabetes and high rates of kidney disease and high rates of insurance coverage for kidney intellect. So, these are optimal areas for us to expand and grow now. So, it's really a focusing of the company at the right time at the right place. And we'll continue to look for ways to optimize cash use. as we go forward, but obviously we're taking cash burn rate very seriously. And I'm sorry, I lost the first part of your question. I was focused on the cash burn rate. What was the first part?
spk06: Just around the 1% target penetration rate within three years.
spk04: Yeah, we've discussed this heavily internally. We've looked at historical examples of companies that have been successful and what their growth rates are once they have reached the threshold of crossing through reimbursement, regulatory outcomes data. They're starting to be included in the guidelines. What is a realistic way to look at business growth? And we've modeled what I think is an achievable target, which is a 1% penetration in our FDA authorized use. That's 14 million patients. over the next three years. Exactly how that's going to roll out, let's see. But I think that that is very realistic given the value proposition of Kidney IntellX and given the fact that we are achieving and exceeding our own targets for comprehensive insurance coverage across the spectrum. Again, we have to stay focused early on. But this is a model that can now be scaled with the addition of additional hospital systems, depending on where the capital markets are and how we can invest properly in expanding Salesforce. But we're all doing this on an ROI basis. So we want to start to see now very much return on investment for capital invested in specific regions that become productive. And as they become productive, we can now look at expanding to additional regions where we have high insurance coverage. But the 1% target over the next three years, I think, is a very realistic goal, especially because kidney and telex is the only game in town. There is no other early-stage AI-enabled prognostic with regulatory authorization and comprehensive reimbursement. So we view this as our market to establish a new standard. And we've done all of the hard work to put ourselves in this position. So that's where we came up with the number. And it's not without precedent. So we're looking back at other historical, again, historic examples of diagnostic services and products that have reached these key points of de-risking across multiple milestones.
spk06: Understood. Thanks very much.
spk05: Please stand by for our next question. Our next question comes from Mark Massaro with BTIG. Your line is open.
spk08: Hey, guys. Thanks for taking the questions and congrats on the milestones achieved in the calendar year. The first question I have, so obviously you obtained FDA approval for kidney intellects, DKD. In the press release, you noted that the DKD or the FDA approved version has not yet been launched. Can you maybe clarify when you expect to launch the FDA cleared version and mechanically, like what needs to happen? Is it the label? Is it messaging, marketing? It would be helpful to learn what's needed to go ahead and commercially launch the FDA-cleared version.
spk04: Yeah, thank you. It's a very important point. And Kidney IntellX DKD and Kidney IntellX, we view as effectively the same product or the same service, same biomarkers, same laboratory procedures. But you do have to... for example, build reimbursement around Kidney Intellex DKD. We have done, we are doing that successfully right now. So one of the key points is we need to make sure that we have Medicare payment established for Kidney Intellex DKD. All of the sales literature and educational literature needs to conform with now regulatory, regulated language. The sales force needs to be trained specifically on that language. In terms of some of the integrations we've done, we also have to shift again to the specific regulated language around Kidney Intel XDKD in the electronic medical record system. So it's not trivial, but it is a process we're familiar with and we have a lot of expertise and we've been just putting one foot in front of the other. We'll be in a position to actually launch the FDA product, the FDA service, actually, most likely sometime early in the March quarter of this year. And, Tom, I don't know, are you connected at this point? Because you may want to amplify some of that. Yeah. I am here, James, yes. That's good, because I'm going to go horse, taking over both sides of the script. Yeah. Do you have any additional commentary on Mark's question on the availability of Kidney Intel XDKD in the process to put out the FDA service?
spk09: Yes. So, the timing of the launch is driven by the Medicare process, which will be completed with a price effective. for 2024, and the process updates, the marketing materials that are needed for the launch, and everything required contractually is underway now so that when the conversion to the FDA test happens, it will be simple and straightforward and accomplished on a date certain.
spk08: Excellent. That's great color. So you were also included in the draft CADIGO guidelines. Is it your expectation that you'll be in the final guidelines? And can we expect that roughly by the end of the calendar year 2023?
spk04: Yes, we can. We're very excited about that. And it is actually this quickly quite thrilling for us to be able to be included in such a prestigious guideline. I think this is either the 10-year or the 20-year revision on Cadego. Cadego is the leading guideline in the kidney space. It takes a lot of data generation, which we've invested heavily in. Certainly, it doesn't hurt to have a full regulatory process behind you, Uh, so, uh, we think this is quite a significant, uh, event. Uh, we also expect, uh, that there will be other guidelines activities as well, uh, coming up, uh, hopefully in the near term, you can never tell. Uh, and we, we say this with all humility, uh, but the goal ultimately is to be included in multiple guidelines around the diabetes, kidney disease, primary care framework. And obviously these are all independent committees doing independent evaluation work. You don't have any control over any of this. But what you can do is produce evidence and have third parties produce evidence in multiple categories. And there's no shortcut here. And it's not cheap. You have to produce real evidence from a health economic standpoint. you have to produce outcomes data. And as you know, outcomes data is now becoming a critical feature in reimbursement. In fact, I would go so far as to say if you don't have outcomes data, you're going to have a tough time getting comprehensive reimbursement. And generating outcomes data is a very special thing to do, requires a lot of expertise, especially in a chronic disease from an early stage where A lot of the outcomes endpoints take several years to become apparent. And then, of course, you need utility data. Are we changing behavior? Are we providing something that has benefit to, in our case, really primary care? Because it is at the front end of medicine where you get the most preventative aspects. So we're really approaching kidney disease for the first time from a very early stage at the front end of medicine where therapeutics have the most benefit, as little damage is done as possible to the organ. Patients have better outcomes. The costs can be reduced the most. If you wait until the patient progresses to late-stage disease, which is a lot of what's happening right now in terms of uncontrolled progression, you can't realize benefits in terms of outcomes, utility, and health economics. So we're starting at the preventative medicine angle. and we're generating an enormous amount of data. And there are third parties that are now using Kidney IntellX across their networks that are also generating and publishing on outcomes and utility. These are the types of things that can help support guidelines committees to look for inclusion. So we're very happy. I have never been able to achieve this many milestones this quickly. in the product life cycle in under five years. It's rare to see that done, and I think that's really a testimony to the team that has designed a lot of these real-world evidence to show how kidney IntelliX can impact care in a number of ways and health economics in a number of ways. I'll stop there, but it's very exciting to be included in the draft guidelines. And yes, we do expect that the final guidelines will be published before the end of the year.
spk08: Excellent. And then last question is a two-pronged one. You know, you had your CAC meeting. I believe it was with NGS in New York. Can you just give us a procedural update of where we are in your quest to obtain an LCD from either NGS or, you know, one of the other local contracting MACs. And then also, you know, there have been other blockbuster diagnostics that have had FDA approval that have obtained national coverage determinations. Can you just give us maybe an update on, you know, just maybe reiterate, do you do you still think that you're qualified to obtain an NCD? And is that a pathway you guys are pursuing? And also procedurally, what needs to happen there to get a sense of how achievable an NCD or LCD might be?
spk04: Yeah, very good questions. Tom, if you're connected, I'll let you take that one.
spk09: Sure. So we need either a local coverage determination or a national coverage determination. And as you observed, with Medicare, we're pursuing all pathways. With regard to national government services, which oversees or pays for any test samples that are run in our New York laboratory, they recently convened a CHC panel meeting As we said, external experts, it's part of the LCD process. And when something is as innovative as kidney IntellX under 21st century cures, the contractor wants to make sure they make the clinical community aware of the evidence and seek their evaluation of the evidence as part of moving the LCD forward. As we said, we're very pleased with the outcome. In particular, as you know, Kidney IntellX is intended for use by primary care physicians, and the community-based primary care doctor on the call spoke very highly of the value that this risk assessment would have on ability to deliver appropriate care for patients. NGS will now take that into consideration. With what we believe was an important endorsement for the value of the test, they would draft the local coverage determination, review it with CMS, which is required, and then release that local coverage determination and hold an open meeting. So that is where we are in the cycle. We would expect it would be possible to see something early in calendar year 2024 based on the timing of the CHC meeting. With regard to other contractors, we do have a laboratory in Tampa, Florida that is under the jurisdiction of Hearst Coast, which has also been a contractor that pays for innovative diagnostics under individual claim review. We will submit initial claims to First Coast to begin that process, and we will also submit an application for a local coverage determination. And that just gives us more support, more opportunities to get local coverage determination adoption. At a national level, as you know, under breakthrough designation, There are some devices that are given parallel review. We have been under informal parallel review, which means that we have been working with CMS at a national level as we've gone through the FDA review process. As we came to the conclusion of the FDA review, we are able to submit for a national coverage determination. Typically, with diagnostics, CMS looks to the local contractors to make those determinations. But after receiving FDA approval, we did meet with CMS and let them know of our intention to apply for an NCD. We will do the submission for that, we believe, within the next two to three weeks and wait to have feedback after they're able to review our dossier. And then we also continue to monitor a new rule, which is T-SET, which would provide coverage to breakthrough devices that are FDA approved. The industry hopes that that rule can be finalized by the end of 2023. And we would expect that Kidney IntellX would be eligible to also submit for a national coverage determination under that T-SET rule. Again, the important criteria there is that we are an FDA-approved breakthrough designated device.
spk08: That's super helpful. There are quite a few avenues ahead of you, but thanks so much for all the color. Thank you.
spk05: Please stand by for our next question. The next question comes from Jens Lindquist with Investec. Your line is now open.
spk00: Hi, guys. Just coming back to the Kodago guidelines for a moment. I assume you've seen at least part of the draft report. Now, can you share any color, unless you've been sworn to silence by the Kodago committee, on the recommended positioning and use of kidney intellects in the revised guidelines in terms of eligible patient groups, potential repeat use, etc. And is this consistent with your own view on how to best deploy the test? And second, on the question raised earlier by Chris Glasper, can you be just a bit more specific on the art of the possible, please, with regards to cost reductions? Broadly, what proportion of OPEX would you see as realistically effective? variable without jeopardizing the medium-term performance of the business. Are we talking about single-digit or potentially double-digit million over the current year? And then finally for OJ, what's the reason for the unexpected increase in payables? Please, how can we see that unwind over the coming couple of quarters? Thank you.
spk04: Yeah, we want to be careful about commenting on the guidelines. I think it's important to recognize that kidneyintellex.dkd is an in vitro diagnostic. That's very important. It's not an algorithm. It has an algorithm. It happens to have a nonlinear algorithm. We use random forest, which is a form, which is a machine learning enabled algorithm. So it is unique. And it took us a long time to figure out how to navigate the regulatory framework with FDA around this nonlinear algorithm. That was quite an achievement. And we knew we needed to use that to generate the performance or the perspective if we were going to start at the beginning of a chronic disease. So these are substantial innovations. And they required an enormous investment of time data generation and money and expertise, all of which mean that Kidney IntellX is quite unique, especially in terms of positioning to your question in the clinical space. So there are a number of innovations which go into an in vitro, an artificial intelligence enabled in vitro diagnostic with an FDA regulatory authorization. And then, of course, we get into the whole issue of bringing in electronic medical record features, which many people are doing in algorithms. And it's interesting, but try running it through FDA. And that's a totally different validating process and the level of validation required to get through a regulatory process when you're including electronic health record features with all the variables associated with that. which I can't go into into the call, but understanding how those variables impact the nonlinear algorithm output, understanding this entire equation is very complicated. And obviously if you can do it, it has significant advantages in terms of prediction and prediction from a very early stage of disease. So there are a number of innovations that went into Kidney IntellX as a product service. We think that those will be pointed out or at least put us in a very distinct category in the guidelines. And I'm not just speaking about Cadego. I think there will be future guidelines available to us in different disease categories and different clinical categories because Kidney IntellX is so unique. And it goes right to the heart of the matter, which is how do you predict risk early on in a chronic disease? A lot of this really hasn't been done before. Certainly not in a regulated format that's capable of being paid for broadly by insurance. And the level of validation required is enormous. And for us, the intrinsic value in having achieved this over a four-year period with FDA, again, puts this in a unique position. And I think that's going to pay dividends. In fact, we know it's going to pay dividends going forward because there's really no other way for the ability to do safe, reliable, and effective risk prognosis early on in a disease state in a regulated, reimbursed format. It's kidney and telex, and that requires years of investment and a lot of money, which we've been fortunate enough to be in a position to have so that we could invest in the real-world evidence, the outcomes data, the validation required to do this. So the franchise value here we view is quite significant. I'll stop there, but O.J., you want to take on the art of the possible on the cost side?
spk10: Sure. To start with the payables question, that's primarily a timing factor. There's an element of – a good bit of that is clinical trial-related payables. Those get invoiced in sizable chunks irregularly over the course of the year. That comprises a bit of the payable growth there. As far as the further cuts, so we eliminated $11 million over that in the past year relative to the year prior. And further cuts available is likely – we're likely looking at single-digit millions. I don't want to get into too much specifics, but we're still going through the detailed exercise of identifying where the cuts are and then presenting that to the board for approval and so forth. So, subject to that approval, I don't want to get into much more detail, but that's probably the general quantum there. Okay, that's good. It's very helpful. Thank you.
spk05: As a reminder, to ask a question, please press star 1-1 on your telephone. and wait for your name to be announced. Please stand by for the next question. The next question comes from Yu Chen with HC Wainwright. Your line is open.
spk03: Thank you for taking my questions. My first question is, could you comment on the test volume in VA Health System versus Moussa?
spk10: So cyanide still represents the majority of our overall volume, but it's getting closer to half, whereas previously it was a higher percentage. Obviously, when we started, it was almost entirely at Mount Sinai for a while. So seeing increases in independent primary care as well as the wake forest and atrium testing continues to increase. None of that atrium wake forest testing is available yet. It's all study tests. We do, as we talked about, we do expect that to transition to commercial testing over the course of this fiscal year. But Sinai, just over, a bit over half now, the total volume.
spk02: Is there a specific reason the VA health system is not generating high test volume?
spk10: And I'll let Tom jump in as well, but go ahead. I think there are lots of specific reasons.
spk04: The VA system turned out to be substantially more complex than we could have imagined. We are still making progress with the VA system, but I think for us, you know, we're resetting expectations around the VA as a business segment. I do think it will eventually become a significant contributor, but as we've said in previous calls, the complexity of operating inside the VA system has been a bit of a surprise.
spk02: Okay, so going forward, do you expect a steady growth in test volume from quarter to quarter, or do you think there will be variations or fluctuations?
spk10: Yes, I am anticipating growth from here. Go ahead, James.
spk04: No, go ahead, OJ. I apologize.
spk10: No, at the extent of it, so yes. It's been a pretty steady state the last few quarters and into this quarter. We are expecting a growth from here for a lot of the reasons that we talked about on this call, especially as we roll into the FDA version of the test later in this fiscal year. But that combined with changes that we're also making on the sales and marketing fronts.
spk03: Okay, thank you.
spk05: As a reminder to ask a question please press star 1 1 on your telephone. Again as a reminder to ask a question please press star 1 1 on your telephone. I show no further questions at this time. This concludes today's conference call. Thank you for participating. Have a great day. You may now disconnect.
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