Operator
Good morning, and welcome to the Rinalytics Conference call to review the third quarter fiscal year 2024 financial results. At this time, all participants are in a listen-only mode. We will be facilitating a question and answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Peter DiNardo of Capcom Partners for a few introductory comments.
Peter DiNardo
Thank you, Livia. Thank you all for participating in today's call. Joining me today for re-elect's formal remarks are James McCullough, Chief Executive Officer, and James Sterling, Chief Financial Officer, and Howard Doran, President, is on hand for our question and answer session. Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements made during this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements. Examples of these statements include, without limitation, the potential benefits, including economic savings of Kidney Intel X, the commercial prospects of Kidney Intel X, including whether Kidney Intel X will be successfully adopted by physicians and distributed and marketed, our expectations regarding reimbursement decisions, and the ability of kidney intellect to curtail costs of chronic and end-stage kidney disease, optimize care delivery and improve patient outcomes, trends in our market and potential benefits of government policy change, the impact of COVID-19 and other world events on our business, our expectations regarding product development, strategic partnerships and collaborations, reimbursement decisions, clinical studies and regulatory submissions, are business strategies and future growth, including plans, expectations, and opportunities for financing operations and revenue projections and guidance. These statements involve material risks and certainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a description of the risks and uncertainties associated with our business, Please refer to the risk factors section of our annual report on Form 10-K that was filed on September 28, 2023 for the Securities and Exchange Commission. All forward-looking statements made on this call are based on management's current estimates and various assumptions. Renalytics disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, May 15, 2024. I'll note that due to regulatory restrictions under the UK Takeover Code, when we can and cannot share at this time about the formal sales process, we are limited in the comments and information we can provide today. But suffice it to say that if there is material news to disclose about any developments, we will provide updates transparently as required. I'll now turn the call over to James McCullough. James?
James McCullough
Thank you, Peter. Good morning. Good afternoon. We have experienced a productive beginning to the 2024 calendar year. On February 8th, Medicare Contractor National Government Services issued a draft local coverage determination, or LCD, for kidney and telex. This follows an over three-year process, including two public hearings, submission of extensive outcomes utility and regulatory data, and a significant volume of claims submitted to Medicare, which have now been reimbursed. We expect a final coverage determination to be issued in the near term. On March 14th, Kidney IntellX was included in the final International Clinical Guidelines for Chronic Kidney Disease, known as CADIGO. Guidelines are followed by doctors, hospitals, and insurance payers throughout the world and are a critical milestone for establishing broad use of an advanced diagnostic tool such as Kidney IntellX. Also in March, we disclosed the formal sale process for the company after receiving an approach from a large, well-capitalized diagnostics company. Since this approach, additional potential acquirers have now joined in the discussions. While restricted on what we're able to say, we expect the sale process to be competitive, given our substantial regulatory outcomes data and reimbursement achievements, and now the inclusion of Kidney IntellX in clinical guidelines. In March and April, we completed common stock equity financing rounds, which extended our runway and provide us with further optionality to maximize shareholder value, whether as a standalone business entity or as part of a bigger business enterprise. In April, we officially launched our FDA-authorized KidneyIntelX.dkd product version and are now receiving commercial test orders. This will rapidly supplant the original KidneyIntelX laboratory-developed test, or LDT. KidneyIntelX.dkd pricing remains the same at $950 per test, and we have established broad insurance reimbursement on a distinct CPT code for KidneyIntelX.dkd in the clinical lab fee schedule. We have been steadily reorganizing the company through expense reduction and a hard turn to focus on sales growth, culminating with the appointment of Howard Duran to the position of president at the end of April. Difficult changes were made to conserve cash by optimizing our organization on sales, with a year-over-year headcount reduction of 50% and an overall OpEx reduction of approximately 40% year-over-year. That is close to a 60% overall expense reduction from peak, and we continue to look at near-term options for further expense reduction without impairing our ability to grow revenue. Renalytics has now become a sales and marketing play into a wide open market with 14 million diabetic kidney disease patients in the United States. The global population of diabetic kidney disease patients is much larger, with many companies now reaching epidemic disease levels. We are in discussions with potential international distribution partners to reach these patients now that Kidney IntellX is FDA authorized and in the international clinical guidelines. Towards the end of 2023, we hired and trained a small direct-to-physician sales force in the United States, which has just completed the first full quarter of operations in March. The sales force is composed of experienced performers in the diagnostic industry, and I am pleased to report that we are already seeing a change in the breadth and volume of individual physician test ordering. The new sales force has achieved a 33% increase in direct to primary care test order rates quarter over quarter, a growth 10, which while early, we are seeing continuing into the current fourth fiscal quarter. In calendar 2024, we have implemented a series of ordering process improvements around the FDA product launch, which took place in April. Specifically, We have improved our customer-facing offering to ease physician ordering and increased patient access to blood draw services. Our market focus is on a limited number of territories, such as New York, where there are large populations of patients with diabetes and kidney disease, and where we have achieved comprehensive insurance coverage for kidney and telex. These territories pose the best near-term opportunities to foster adoption of kidney and telex while accelerating test sales. We believe FDA authorization in combination with a local coverage determination if and when issued and clinical guidelines inclusion makes Kidney IntellX the only choice for preventative precision medicine prognosis in this large chronic disease population. Finally, we have received several questions regarding FDA's April 29th published final rule on laboratory developed tests or LDTs. While we felt the final rule was more flexible than language proposed in the original drafting, it is clear that diagnostic testing is entering a new era of tighter regulation and exacting standards that will require everyone launching an advanced innovative test such as Kidney IntellX to consider the significant capital investment and long timelines required for a full FDA review process. By achieving FDA authorization for Kidney IntellX, This has increased the high barriers to entry around our business and technology. Particularly for diagnostic technologies that address very large markets such as chronic kidney disease and are capable of setting new clinical standards of care, we believe FDA regulation is becoming the default pathway to achieve comprehensive insurance reimbursement. Without regulation, very difficult to get paid in the future. We believe our decision to invest heavily upfront in real-world outcomes data and a full FDA de novo review process were the right ones and add significantly to the franchise value of KidneyIntellX.dkd and the KidneyIntellX artificial intelligence-enabled platform technology. I will now turn it over to James Sterling, our Chief Financial Officer. James.
James
Thank you, James. Hello, everybody.
James
Today, we issued the financial results for the third quarter of fiscal year 2024, which ended March 31st. Our GAAP financials were filed today on Form 10Q. Figures I will discuss here are based on our GAAP financials and quoted in U.S. dollars, which is our reporting currency. For the third quarter, we recorded revenue of $535,000 compared to $724,000 for the third quarter of the prior fiscal year. As a reminder, the prior year comparative period included tests that were performed under the original $6 million contract with Mount Sinai, which has since concluded. Testing at Mount Sinai has since been run under a standard commercial billing model. 806 tests were processed during the quarter, of which 82% were billable. Encouragingly, testing locations continue to diversify away from what had been largely dominated by a single hospital system, with tests outside of Mount Sinai now accounting for nearly half of the total, up from about 30% 18 months ago. As James stated, We're experiencing increasing test order velocity from our direct-to-physician sales force and expect the FDA de novo authorized version of the kidney and telex test to be onboarded with other health system providers in calendar 2024, following its official launch last month. Last quarter, we reported that NGS resumed consistent Medicare payment for tests under individual claims review. allowing revenue recognition in that quarter of 318 tests billed to Medicare, including 205 tests from earlier periods. Payment from NGS has continued on a consistent basis. Operating expenses for the third quarter were $6.5 million on a GAAP basis, down 40% from $11 million for the prior year period. This reflects the significant actions we took to lower operating expenses, including a 50% reduction in headcount as well as vendor spend reductions. Certain of these steps followed our FDA de novo authorization, which allows us to focus spend on the sales and marketing organization. Through these efforts, we've reduced our cash burn to under $5 million per quarter, which is 40% lower than the fiscal second quarter and half the level of a year ago. Net loss for the third quarter of fiscal 2024 was $7.7 million, or 8 cents per share. This was down 36% from a net loss of about $12.1 million, or 14 cents per share, for the third quarter of fiscal 2023. We ended the third quarter with approximately $4.7 million in cash as of March 31st. This does not include the approximately 6.4 million net proceeds from the second tranche of the March pipe financing, nor the $1.5 million from the registered direct placement announced last month. We raised aggregate gross proceeds of $13.5 million in those financings. We continue to explore ways to carefully control operating costs without impairing our ability to grow test volumes and revenue. Operator, we can now please open the call for questions.
Operator
Certainly. Ladies and gentlemen, to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, simply press star 1-1 again. Please stand by while we compile again a roster. Now, first question coming from the lineup, Dan Arias with Staple, Yolanda Silverman.
Dan Arias
Good morning, guys. Thank you. James, what's been the feedback from clinicians and payers on the guideline changes and the LCD? I mean, it seems like as much as anything else that's taken place for you guys, those should be what moved the needle on test usage. So can you just talk to how you see the impact of those changes? I'm sure the answer is they're going to be tremendously helpful, but what I'm really looking for is some discrete details on just where you expect to see the changes first as a result, the extent to which they might change, and if they're not going to change, what the remaining sticking points might be for those folks at the stakeholder level. Thanks.
James McCullough
Yeah, it's a very good question, Dan. Good morning. We continuously update our communication with payers, including national payers, and obviously we're in the final stages of LCD with the milestones. And that includes, obviously, FDA. It includes updated outcomes data. It includes the draft LCD, which is a significant milestone. And then, of course, guidelines. So we've had a continuous stream of updates going out to the payer community. I'll give you one anecdote. We talked to the CMO of a major insurance plan who said, LCD with guidelines, that's checkmate. So we expect that with the issuance of a final LCD, we've crossed the threshold for comprehensive payment throughout the United States. I can't see a reason why Given the health economics data, the benefits of Kidney IntellX, third-party real-world usage of Kidney IntellX, which has now been published on Outcomes, this thing makes a difference not only in kidney health as measured by GFR slope, but also in diabetes as measured by HbA1c. So this is advanced preventative medicine. It works. It works very well. for a variety of reasons. And it's working at a time when there are a whole sequence of new drug therapies, which are quite expensive, including SGLT2 inhibitors, GLP-1 agonists. And how are you going to figure out which patients are at risk early on to be able to prescribe these drugs? So Kidney Intellect sits right at the heart of the whole health economics equation in precision medicine, which includes early identification, diagnosis, prognosis, therapeutic treatment, and really is the gateway to controlling cost and outcome. And that has been evidenced now extensively in outcome studies, and that's one of the reasons we got put into the guidelines. So I do think we are very well positioned in calendar 2024 for comprehensive insurance coverage, and so far the feedback has been very good. There's never any guarantee, but we do feel that we're in a very good position. And the other thing I'll point out, Dan, is we're doing this in a very short period of time. It's always difficult when you get here because people want to see sales ramp. People want to see building of the business, but The reality is that to be able to produce longitudinal outcomes data, get through a multi-year FDA de novo marketing process, get into the guidelines, and start a commercial organization in five years is a very short timeline. So 2024 is going to be very interesting in terms of knocking through the rest of the insurance coverage.
Dan Arias
Okay. Yeah, I certainly hear you on five years being short at the corporate level, as you can imagine, investors. Less short for investors, that timeline is. So, I mean, to that point, 800 tests during the quarter, which is down from 1,000 or so last quarter. I think that was down from 1,300 the prior quarter. Very simply, when do you think we reverse trend and stay up on a test volume trajectory? And along those lines, to OJ's point on non-Sinai volumes, volumes that aren't coming from Mount Sinai, can you just talk about where we are with Wake Forest, St. Joe's, Utah, et cetera? Is there a point where just in aggregate those getting off the ground should start to be meaningful on a quarter-over-quarter basis? Thanks.
James McCullough
I think it's this year, and the reduction in total test volume is a function of us switching over to full commercial pay with Mount Sinai. This has been frustrating for me. Mount Sinai Health System is a fabulous partner. It is quite complex operating in that environment. That was our first launch customer. And as you know, we did that under a very specific environment with a defined contract to make the jump from that defined early stage contract under IRB control to a proper commercial testing. has been a challenge. We think that that is starting to work out now. And the interesting thing for me is we've now added the important optionality of growing direct-to-physician sales. And Howard will talk about that in a little bit. But the direct-to-physician sales is very much a bright light, and that is under our direct control. We also do expect to be seeing value coming out of the Atrium Wake Forest launch. And we do expect to see other groups coming on board. And I'll make one statement. It's been quite a balancing act to reorganize the company. It's like flying an airplane, slow down and go down. Difficult to achieve. We're now getting through the final stages of that where we've substantially reduced the operating burn reorganize the human resources platform, brought new people on board like Howard and a new sales force, which is now has one quarter under its belt. So I would expect that we're going to see a leveling off and an increase without forecasting in testing volume activity. And most importantly for me, the breadth of the testing volume activity. So we're not just totally dependent on Mount Sinai. as a single source customer. And that took place in 2024.
James
If I may add, James, the numbers, Dan, that you had listed were total tests, including non-billable study tests. And we have curtailed the study tests quite a bit. after the terrific data, after the 12-month point, and also it was a great opportunity to save some money. If you looked at just the billable tests, the decline is a lot less dramatic than what you indicated, mainly flat, more or less. And so I just want to make that important distinction. If you just looked at billable tests, it's a much better picture.
Dan Arias
Okay, that's helpful. OJ, since you brought it up, James mentioned in a non-forecasting way that he thinks volume should be able to ramp here in the coming quarters in a forecasted way. Would you agree with that?
James
Yes. Well, I'll stick to a non-forecasted way. But yes, there's certainly a path for volumes to be increasing. And the work that Howard is doing, particularly in the independent primary care side, It's pretty exciting. I just want some nice growth there.
Howard
Okay. Thank you, guys.
Operator
Thank you. And our next question, coming from the lineup, Randy Barron with Pinnacle Associates. Your line is open.
Randy Barron
Hi, good morning. Can you guys hear me?
Kidney Intellix
Yes. Good morning, Randy. Hey, I have a couple administrative questions and then two broader ones. Just really quickly, it was encouraging, at least for me to hear, that more bidders seem to have come out in this process since the initial unsolicited inbound in March that you got. Understanding the constraints that lawyers put on you, is it fair to say that that process potential acquisition is active and ongoing?
James McCullough
So it is active, and we are restricted, so I won't comment specifically on the process, but... I will say that it is not every day, in fact, it's quite rare that you find a product services like Kidney Intellix that addresses such a large market. In the case of the United States, it's about 14 million patients with diabetes and kidney disease. That's wide open. And that has a price attached to it of $950. per reportable result, which gives us a very significant margin, and which now has been de-risked on a regulatory front. We are largely de-risking it on a reimbursement front and is now in the clinical guidelines. And again, the data, which is so important, which we've invested heavily in, which has allowed us to get insurance reimbursement and get in the guidelines and get through FDA, is very good. and affects not only kidney health, but also diabetes health. So here you have a singular product, and with the new look from FDA on laboratory-developed tests and the expense associated with doing this, the barriers to entry are very high for a blood-based, biomarker-driven, artificial intelligence-enabled in vitro prognostic. So this really is the only precision medicine preventative solution at the front end of this huge disease funnel. And we are not surprised that that would attract significant interest from multiple players, not just in the diagnostic industry. Obviously, we have to continue with our sales and marketing effort, and we want to increase optionality here. Strategic partnering is an option. Acquisition is an option. all of which allow us to address this significant market. But this is a product that is rare to find. So we're not surprised that this process would be competitive.
Kidney Intellix
Great. And then, OJ, just an administrative question for you. You guys did a series of raises in the quarter. What's pro forma cash today?
James
So we reported $4.7 million increase. in cash on March 31st. I haven't in the past given a spot cash balance during these calls, so we won't change that policy now. But $4.7 million in cash on March 31st, and that does not include the $6.4 million from the second tranche of the pipe, nor the $1.5 million from the registered direct. And that $4.7 million figure was from 45 days ago. I should arm you with enough information to do your estimate, but that's the detail that I can provide now.
Kidney Intellix
Okay. And then just two really quick broad questions. Howard, I guess this is for you and James. It was interesting in the script to hear you talk about the breadth and volume of test changes at the direct-to-physician level. I missed the number. I think you said 30% or 33% growth, but can you just talk broadly about you know, what you've done on sales and marketing activity, what did the reorganization to align our commercial activities do? How many salespeople do you have now, et cetera?
Howard
Thanks for the question, Randy. Yes. So, you know, first and foremost, we pretty much have retooled the entire sales team from when it was last summer. We actually have four members of the team that actually are legacy that have been with us since between 2021 and 2022. We had three additional folks that are remaining from our training class that we had this past August. And we brought in three new folks as we discussed on the last call this December. So their first time in the field really was this January of this current quarter. So big change is just the folks that we have. And just as we talked about on our last call, that these folks come with, the new folks come with strong diagnostic background, Half of that group comes with nephrology experience in their past, so they know the big practices. They're able to get into some of the key thought leaders, et cetera, and just the general nephrologists that are out practicing that are very supportive of our efforts but also can also assist us with going out to the PCPs with a recommendation because they're part of the referral pattern. So having folks that can knock on those doors in addition is also helpful. We've taken a look at our marketing materials, and I just think, you know, one of the biggest triggers is having the one-year outcomes data that came during this period allow us to really complete the story. You know, we have a test that's very simple to understand what it does. Obviously, it gives you the low, medium, and high-risk test results of the patient. But now the first question a PCP or a nephrologist, for that matter, was going to ask is, what do I do with this information? Is it actionable? And now that there's a lot more tools in the toolkit from a standpoint of what you can do therapeutic-wise for these patients, there's a lot of choices. So clearly we are seeing evidence in our outcome study where in the high-risk category, for example, there was a 61% increase in patients that were being put on SGLG2s. So we've answered the question is what does the test do? Is it actionable? Yes. And then, again, the third thing that we're highlighting in all of our materials are what are the outcomes. And there's really five distinct things when you think about it that we're really highlighting and referencing right now. One is just the clinical betterment of the patient. One is, James had mentioned a moment ago, GFR. So when GFR flattening of the decline occurs, that means kidney function is being withheld or the decline in kidney function is actually more stabilized is what I mean by that, which means it extends the runway to potentially further negative outcomes. So it's about a 50% reduction in the lowering of that GFR result that is causing that assistance. When you go to UACR, which is a measure of kidney damage, we're also seeing a reduction in UACR based on the medication. So kidney health in general, the progression of the disease is slowing. So that's very important. And then the three additional factors are all fetus measures. One is because we're doing UACR testing in the combination with our test. That's a HEDIS checkpoint. One-third of patients in this study also saw a retreat in their blood pressure down to 140 over 90 back in normal range. That's a HEDIS function. And also lowering an A1C would seem statistically significant in our high-risk and intermediate-risk patients. That also is a HEDIS reduction. So there's three distinct quality measures associated with HEDIS. as well as improvements in kidney health that are coming out of this outcome study. So that was really sort of the last piece of the story that we didn't have, and that's been incorporated in a much tighter, simpler message for the clinicians to understand. So I would say those are the two biggest variables. New team with broader experience coupled with better data and a very streamlined approach on the advantages of kidney telex DTD.
Kidney Intellix
That's great, Howard. And then my last question, and I'll go back in queue. This is, I guess, James, for you. You know, Dan clearly touched on the importance of the LCD. It sounds like an event. To my knowledge, when I looked, I didn't see any negative comments in the open comment period. So when do you expect finalization to happen, and what are the implications?
James McCullough
Yes. The National Government Services has until September to issue That's the standard timeframe. We could see it sooner than September. The implications are significant, especially in combination with guidelines. These processes are not easy at all. They take a long time. There's a lot of data production required. especially when you're innovating in an area where there's been nothing before you. So really, prediction early of chronic disease risk is a difficult thing to do. And we saw this with FDA. The level of proof and validation required to get through these government organizations and to be able to declare risk with accuracy early and do it in a way that it's simple for a primary care physician to interpret, even though there's a lot of technology back end. This requires a significant amount of validation, a lot of data, a lot of process. Getting Medicare coverage into such a large population is going to be a major event. for us and not easy to replicate. And I think, you know, the comments I'm hearing, I gave you one earlier on, is that you really enter a new paradigm when you are in the guidelines and you've got this long-term Medicare coverage in place. And with the health economics data, with the clear advantage of Kidney IntellX, in terms of preventative medicine, I don't see a case why an insurance company does not cover kidney Intellix. And for progressive thinkers, I don't see a case why insurance companies don't educate physicians on the benefits of using kidney Intellix. Everybody wins. The insurance company wins. The patient wins. Obviously, we will win. The government wins because they're spending an inordinate amount of money on patients that fall into dialysis, which published in JAMA last year, first year alone for dialysis cost, treatment for kidney failure is over $200,000 a year. And everything's a time and a place. We have the drugs now that are available. Insurance coverage, they have very good data. And pharma is now out. educating with us on the importance of diagnosing kidney disease, especially if you have diabetes. So the equation now becomes very simple, right? It's if you have diabetes, you have to be diagnosed for kidney disease. Do you have it or don't you? And if you have diabetes and kidney disease, you have to understand your risk because we know the top 10 to 15% of patients at high risk by kidney IntellX have a greater than two-thirds chance of experiencing an event, significant decline in kidney function or kidney failure over the next couple of years. The bottom 50% of patients, regardless of stage and grade, you can be moderate stage kidney disease. But if you're at low risk by kidney IntellX, you are highly unlikely to progress. So this is not a marginal equation. This is a very strong, to me, black and white equation at the front end of this huge disease funnel. And we can now, for the first time, rapidly and in an easy way for the primary care physician to determine who should be treated and who's really at risk and who's not. So everybody benefits with Kidney Intel X. And the payoff comes very quickly because the cost of not catching people early is so significant. So we can eliminate a whole lot of sufferings. across millions of patients and a whole lot of cost. This really is the paradigm for how you manage chronic disease. And not to go too much further, but this is the issue that we all face in clinical medicine going forward. How do we manage chronic disease? Because you can't treat everybody. Populations are too large. And if you don't have prognosis early, accurate early prognosis, accurate early risk assessment, you've already lost the war. And here we now have an FDA approved, beautiful outcomes in the guidelines, and now with an LCD, the equation is really complete. And we've achieved what should be now the standard of care around the world for early stage prognosis in this big disease state. So I do think the LCD issuance is a key and critical validation. and is going to help start to move the clinical community towards adoption.
Kidney Intel X.
That's great. Good luck.
Operator
Thank you. And our next question, coming from the line up, Mark Mazzaro with VTIG. Your line is open.
Mark Mazzaro
Hey, Mark, we can't hear you. You may be on mute.
Mark
Oh, sorry about that. Can you hear me now? Yes, now we can hear you. OK, yeah, thanks for taking my questions. So you guys got into final Cadego guidelines two months ago. And in the past, you've disclosed metrics like number of commercial payers, number of Medicaid contracts. I think roughly 40 private payers and call it 35 state Medicaid contracts. Do you have an update on the payer coverage that you have today? And in the last couple of months, has there been any movement towards engaging payers in a greater capacity? And maybe could you just remind me who you have? Obviously, you've made some reductions in headcount, but do you have a team of folks in front of commercial payers at this time?
James McCullough
Yes, and I'll take that last question. The headcount reduction has obviously been painful. And we have ended up with what I think is an efficient market access group, which is the group that interacts with payers. We have also, we have a third party billing group that we've been working with for a while now who has taken on more and more of the burden. administration burden because as you get more and more payer contracts, there's a larger administrative burden that goes along with maintaining those payer contracts. And so we've been able to find a more efficient mix there. And again, as I said originally earlier on in the call, this is a dynamic process. I've learned an awful lot about how do you create comprehensive payer coverage. It's very difficult, right, because You have different payers with different ideas of value based care, different ideas of health economics, different drivers. There are early adopters, mid adopters and late adopters. There are national payers, there are local payers, there's Medicare, Medicaid. This is an incredibly complex equation and it requires an enormous amount of data and proof. And I think, you know, for example, For us to be able to get contracts like Texas Blue Cross Blue Shield, which covers over 8 million members, and Illinois Blue Cross Blue Shield, which I believe covers over 8 million members, Emblem Healthcare in New York City, these are very sophisticated groups. They look at the data, and they require a lot of diligence before they issue a coverage determination, especially for an advanced diagnostic test like kidney and telex. Many of them are now requiring outcomes data. not just utility data. And that requires time, a time function, which is a significant investment. And there's no shortcut. Many of them require FDA. Otherwise, you're deemed to be experimental. So we've been very fortunate because from the very beginning at Renalytics, we set this dynamic up. We knew this was going to be an uphill fight to get this. And we've all died on the hill of reimbursement. And if you can't get paid, You know, you have a big research project. You don't have a business. So, we knew from the very beginning we had to generate outcomes data. We made the choice to go through FDA. And all of this, of course, was focused on getting to the guidelines as well. So, it has been a continual update process. Having been put in the final guidelines is a major help because we are no longer experimental. Nobody can say, oh, you know, you're just a laboratory developed test. Now we can point to a whole sequence of major payer decisions and draft LCD guidelines, FDA outcomes data. I cannot see a reason why a healthcare insurer, especially with the risk exposure to chronic kidney disease and diabetes, right? This is not just, we're not screening people here. These are patients walking into a primary, a very busy primary care physician office, with a complex disease, multiple complex diseases, that could represent a significant short-term actuarial risk. There's no reason, no logical reason why you shouldn't understand the risk of that patient. And we're now talking about adding very expensive drug prescription to the table. So prognosis, precision medicine prognosis, which is kidney and telex, which can be utilized by the primary care physician. This is key. It's got to be very simple. It's got to be rapid. It's got to be very actionable, which is what we spend a lot of time and money figuring out and having it regulated. This becomes critical to managing the disease and all of the downstream suffering and all of the downstream expense. It becomes critical to the health equity equation in the United States. And I'm pounding the table here because this is the solution for managing chronic disease. getting in early at the primary care level and understanding risk. From there, all of the clinical decisions can be made. And if you don't understand risk, and we see this now in the real world data, physicians are not understanding risk without kidney and telex, and we see the consequence. Today in the United States, still 50% of the people who enter hemodialysis do it through the emergency room. We're still having crash catheterizations we're now prescribing $1,500 a month psychobiologics into patients who may respond or not, who may not be high risk. So unless you understand where you are on the risk spectrum, unless you understand the ability to characterize the disease, and you can do it in a very simple way, which is not easy, then you can't control it. The LCD is a significant event for us, and we're continuing to update the payer landscape. I don't have all of the numbers in front of me, but a lot of them are listed on the website, and we do issue 8Ks with material events. I would like to see national payers coming on board. They're spending an awful lot of money that they don't need to spend on late-stage kidney disease. If they implement Kidney Intellects across their systems, it is now abundantly clear that preventative medicine goes in place and you start to prevent progression and you get a much better characterization on these huge populations that you're now insuring. So I think we're in a win-win position for 2024 to knock off the rest of the insurance coverage.
Mark
Okay, that's helpful. And certainly it would be great to see the LCD go final by September or sooner. I know in the past, James, you talked about a potential opportunity to get an NCD, you know, the National Coverage Determination. Is that still a pathway you guys are looking at, or is it really just more about, you know, getting the LCD and just going from there?
James McCullough
It still is a possibility. We are speaking with CMS. We are speaking with FDA. But I think for all practical purposes, an LCD finishes the game for us. And just to remind everybody, National Government Services is the Medicare contractor that is going to issue, that has issued the draft LCD. And as long as we process samples in our New York laboratory, we can now bill at $950 to national government services and get paid. We're being paid now under a convention called ICR Individual Claim Review. It's a little bit cumbersome. So the issuance of an LCD again will be another incremental smoothing into the clinical pipeline. But we can take a sample from any Medicare beneficiary anywhere around the world. As long as we process that sample in our New York laboratory, we can build Medicare. A final LCD means that we can service the entire Medicare population with Kidney Intellex.