Q1 2023 Renalytix PLC Earnings Call

November 30, 2022

Good morning and welcome to the Rheanolytics conference call to review first quarter 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. Thank you, Cherie. Thank you all for participating in today's call. Joining me today from Reno-Lix are James McCulloch, Chief Executive Officer, and James Sterling, Chief Financial Officer, to provide formal remarks, and Tom McLean, President and Fergus Fleming, Chief Technology Officer.

are also on hand for the Q&A 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 intellects, the potential for kidney intellects to receive regulatory clearance from the FDA, 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.

optimized care delivery and improved 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.

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 Factors section in our Annual Report on Form 20-F that was followed on October 31, 2022 with the Securities Exchange Commission.

All forward-looking statements made on this call are based on management's current estimates and various assumptions. We know LITX displays any intention or obligation, except as required by law, to update or revise any projections or finance or forward-looking statements, whether because of new information, future events, or otherwise. This conference call contains time-sensitive information.

It is only accurate after the live broadcast today, November 30, 2022. I'll now turn the call over to James McCulloch. James?

Thank you, Peter. Good morning and good afternoon.

Since we reported our year-end results just a month ago, my comments will be focused on summarizing recent achievements in the setup for a successful beginning to calendar 2023.

Since July , the start of our fiscal year, 2023, we can look back at several important milestones including publication of key utility data showing effectiveness of kidney Intellix in the primary care office.

expanding on multiple categories of insurance payment for kidney intellects, including Blue Cross Blue Shield, Medicaid, and Medicare.

demonstrating continued growth and testing adoption with our first million dollar revenue quarter ending this September , and pivoting to a lower overhead structure to extend cash runway.

Progress with insurance continues to be an important highlight. In the September quarter alone, we have secured new major insurance contracts and established Medicare payment. This brings our total number of secured contracts to 30, excluding Medicare and Medicaid.

We have also begun detailing plans with a large US health insurance company to provide kidney and telex testing Directly to their own physician care network.

This insurance company has also agreed to provide us with coverage concurrent with this direct to physician program

We believe partnering with insurance companies to implement testing across physician managed networks can be a significant driver for expanding kidney Intellects adoption in calendar 2023 and will demonstrate the value of kidney Intellects for improving care for millions of patients.

Our stakeholders should look forward to additional payer contract disclosures in coming months.

A primary contributing factor for our success in securing insurance coverage is real-world evidence that Kidney Intellx is working. This body of evidence, which takes years to design and implement, is now showing that Kidney Intellx can make a real difference in helping doctors and care for patients.

This week we announced newly released utility data for over 1,600 patients.

results across 75 doctors at 20 clinical sites, showing the importance of kidney and telex testing in helping head off the worst effects of kidney disease and diabetes at the primary care office.

These results were just published in the widely read Journal of Primary Care and Community Health.

We have already started pulling together subsequent monitoring patient test data and expect to continue publishing rolling results on the effectiveness of kidney intelex in the real world throughout calendar year 2023.

As a reminder, real-world evidence results will now begin to be incorporated from multiple medical center sources including Wake Forest Baptist Health in North Carolina.

From an operations and test processing standpoint, our laboratories conform to the highest quality and regulatory standards. This is obviously essential if we are to be prepared to support patient testing nationally post-FDA de novo marketing authorization.

Our systems and laboratories have now been subject to and passed 12 inspections from multiple agencies.

This level of quality assurance is another important facet that instills confidence in doctors when it comes to kidney IntelliX testing results. Of note, the regulatory environment is evolving. Congress recently passed the Medical Device User Fee Agreement, or MDUFA V. MDUFA V is a five-year agreement that provides operation funding for FDA and provides additional incentive funding if the agency meets key performance goals.

We believe MDUFA V is a factor in improving FDA's ability to help innovative companies bring life-saving technologies to the market.

FDA has also issued a proposed rule to drive towards convergence between the current FDA regulations and ISO 13485 requirements.

RENOlytics has pursued and achieved full ISO13485 compliance and certification. We welcome this proposed rule and believe that Kidney Intellix is well positioned from a competitive industry standpoint.

As we discussed in previous quarterly call.

we can expect to look forward to a milestone-heavy short term.

In terms of our FDA process, while there is never a guarantee, we believe we are reaching a logical conclusion in the process with a De Novo marketing authorization decision as early as the March quarter.

As previously discussed on our call, on our last call, Medicare coverage through a local coverage determination is also a potential for kidney intellects in the first half of calendar 2023.

I would now like to turn over to James Sterling who will discuss our financial results for the quarter. James.

Say we issued our financial results for the quarter ended September 30, 2022.

Which is our 1st quarter of the 2023 fiscal year.

Figures I will discuss here are based on our GAAP financials and quoted in US dollars, which is our reporting currency.

For the quarter, we recorded revenue of approximately $1 million.

Double the $500,000 reported for the first quarter of the prior fiscal year.

Operating expenses were $12 million on a GAAP basis as compared to $12.1 million in the first quarter of fiscal 2022.

Our operating expense reflects a reduction of $2 to $3 million per quarter since we announced our efforts to reduce expenses.

Net loss for the first quarter of fiscal 2023 was $12 million, or 16 cents per share.

This is compared to a net loss of $10.1 million or 14 cents per share in the first quarter of fiscal 2022.

We ended the quarter with $31 million in cash as of September 30th.

We remain committed to preserving cash where possible while retaining the ability to grow sales.

Operator, could we now please open the call for questions?

To ask a question, you will need to press star 11 on your telephone.

Please stand by while we compile the Q&A roster.

And one moment for our first question.

That will come from the line of Ban Arias with Stiefel. Please go ahead.

Morning guys, thanks for the question here. James, as we're starting off the new year, I was hoping maybe you could just sort of set expectations for where geographically and...

with respect to certain institutions, we should look for kidney and telex usage to ramp most notably in the near term and then across the quarters. And then, you know, recently you did make mention of some new areas that there might be news on or where you're trying to establish commercial relationships. Can you just sort of help us with what we should think about new business development as well?

Yes. Thank you, Dan. Good morning.

As we discussed, we are narrowing the focus and following the coverage.

the insurance coverage that is.

because where we are developing what I've termed supermajority coverage

where you now have a sequence of insurance payers covering a significant majority of a population.

in a specific region, that's where the business goes.

And I disclosed that we are focused on Illinois, New York.

and North Carolina as three primary examples where we can concentrate resources. That also helps us with cost control. So we're not doing.

ubiquitous distribution across the United States today. We're really focusing on areas where.

insurance coverage is prevalent and that helps in a number of ways one of which is

you significantly reduce the risk that a patient ends up with a bill.

which is a real no-go, especially at primary care, which is our target audience for.

preventative health care in diabetes and kidney disease. This is where you have to do it as a primary care.

So I would focus on those three areas for the moment.

We've made substantial progress. We've disclosed recently Medicare and Blue Cross Blue Shield coverage in Illinois. You should expect to see that pattern to continue.

with broader insurance coverage in New York and also North Carolina. However, if insurance coverage, supermajority coverage, does develop in other states, that doesn't mean we can't reflex.

and move into those states.

And one of the interesting things that we brought online is a direct to physician capability through our portal, MyIntellix.

which is now up and running. And we are receiving physician orders through my Intellix.

So that allows us to move into a territory where insurance company develops without doing a hospital system integration. That doesn't mean ultimately we don't want to do a hospital system integration because that helps. But we certainly now have the capability to move into a territory with developed insurance.

with my Intellix and begin testing.

in a very short period of time without a significant upfront investment.

which is key obviously in this current market environment where

Cash maintenance is very important.

I also do expect in 2023 we will continue to see progress with the VA system.

And I do expect that, as I mentioned in the call.

the insurance-led initiatives are starting to emerge. So the health economics, the cost benefits of understanding who's at risk and who's not in these large populations early and intervening are significant. If you get in early and you practice preventative medicine, you cut the cost.

for the insurance company down dramatically, especially in this space with diabetes and kidney disease.

So we are initiating an insurance-led.

program direct to their own physician network.

This is a large insurance company. You should expect additional news on this.

And we think that this is a very interesting model, obviously, going forward. It took time to get to this point. We had to generate a lot of real-world evidence.

to show the benefit of kidney Intellix. We are now doing that and publishing on it, and that's giving us a whole new level of conversation with insurance companies that are now struggling to figure out how do we.

control the cost here. So in summary, look at Illinois, look at New York, look at North Carolina, and look for opportunistic, selective moves where we have insurance-led initiatives or where we start to develop supermajority coverage across very large populations and look for direct-to-physician initiatives with myAntelix.

Okay, that's helpful. Maybe just a follow-up on that topic of reimbursement. If I remember correctly from the call a couple of weeks ago, I think the application for an LCD had been submitted and accepted.

Do you think that a draft coverage policy could show up in a similar timeframe as the FDA approval, which I know you mentioned is an uncertainty in itself, but just from a timing perspective, does it look like meetings and So thank you and thank you very much.

Conversations that you'll have with CMS are tracking towards a first quarter or second quarter of the calendar year timeframe.

Thanks. Yeah, so I'll let Tom answer that. And timing is always difficult, but with that caveat.

It looks like

You know when it rains it's going to pour so we may see a confluence of events here

Going into the next calendar year, but Tom, why don't you answer specifically.

Sure, thanks, James. The contractor that we're working with Dan has quarterly open meetings, so it is possible that there could be a coverage determination for consideration at either of those meetings.

Terrific. Thank you, Tom. Thank you.

Thank you, Dan.

As a reminder, if you have a question, please press star 1-1. One moment for our next question.

And that will come from the line of Mark Massaro with BTID. Please go ahead.

Hey, guys, thank you for the questions. I think going through my notes and just remembering the last call, I believe the majority of your volumes came from Mount Sinai. I guess, can you just maybe provide us with an update of what procedures you have in front of you with the VA just to try to...

increased volumes across the VA hospitals. You know, I recognize that working with the VA can be challenging given that I think you have to go hospital to hospital. But can you just give us an update there and, you know, to what extent do you think the VA can start to really, you know, build relative to your overall volume mix.

Yes, it's a very good question and the VA remains a very important opportunity, especially because we have secured coverage.

through the 10-year government contract. And it is taking longer because the VA is very complicated, as you point out, but I think it'd be helpful, Tom, if you could answer from an operations standpoint and also from a technology standpoint for some of the opportunities coming up in the VA Fergus, if you could chime in after Tom.

Sure. Thanks, James. So, Mark, VA is a significant opportunity for us. There is a large population that would benefit from kidney and FLEX testing on the traditional approach with the VA, which is to secure contracts like laboratory services agreements and contracted purchase agreements.

We are making the initial gains there by entering into those agreements.

But with the supermajority insurance coverage that James has spoken about, it's giving us the opportunity to have those government account execs now also call on physicians in the community. And that is an important opportunity with coverage and payment like James has described.

but it also opens up the opportunity to provide kidney and telex testing for veterans who are receiving care in community practice offices. That's allowing us to drive volume in VA centers that will be important evidence of utilization for securing expanded laboratory service agreements.

Yeah, I mean, as we…

scale within the VA and grow those volumes and grow those relationships with individual VA facilities, one of the key drivers is ensuring that we can deliver this solution in a seamless, frictionless way to the ordering provider. While at the same time being very cognizant and adhering to

the strict data protection and privacy framework that applies within the VA to

To address those challenges, we have been very fortunate to work with, at a national level with the VA, on a novel solution whereby we're working on deploying our kidney intellect solution within the VA's own cloud infrastructure so that we can provide the same level of ease of use that applies to other health systems.

to all auditing positions within the VA by allowing them to order the test and receive the results within their own IT infrastructure without the need for us to extract their data and be subject to the very strict regulatory framework that would therefore apply. So we've caught some significant milestones in recent weeks in relation to that program.

and we're now moving into a new phase of implementation whereby we will begin to deploy our code into the VA's own cloud infrastructure which they call the Enterprise Cloud and we'll be one of the first companies to partake in that type of an endeavor. So that's happening in parallel as volumes grow.

as the ordering of that service agreements come into place, the ability to be able to deliver that service to that seamless order and reporting infrastructure will be pivotal.

Okay, great. It's nice to see that you're getting paid through the ICR process for Medicare. Would it be possible for you to clarify, you know, are you getting paid on the majority of the claims that you're submitting to them? Or are you getting paid on all of them? Just any sense for how the ICR process is going?

Tom, do you want to respond to that?

Sure. No, we're not commenting on the specific payment practices of the contractor. That's something that works itself out over time.

But what I can say is we're very pleased with what that payment practice has been to date.

Okay, and then maybe just last one for me. It looks like you picked up a couple commercial payer contracts, which is nice to see. Can you give us a sense for

what your outlook looks like for commercial payer contracts for fiscal 2023. Do you think that some other payers are looking to other key achievements, whether it's a Medicare LCD or perhaps even an FDA approval? Or do you think that a lot of the conversations you're having with payers is really around your dossier?

care delivery and that is the importance of the publication that was announced this week. That is real-world evidence that shows a test like kidney and telex which is directed to change chronic disease care in the primary care office which has been a goal of population health initiatives across the country for a long time.

but it's showing that this test is utilized by physicians. It does change what they're doing in the care management of patients, and it benefits them clinically in as little as six months.

So, for us...

that type of evidence for any product like kidney and Felix. That is the definitive evidence for payers that drive those coverage determinations. So with the publication of that data, we are strongly optimistic about our ability to expand and execute new coverage agreements in 2023.

Perfect. Congrats on the publication and I'll hop back in the queue.

Congrats on the publication and I'll hop back in the queue. Thanks Mark.

As a reminder, if you have a question, please press star 11.

So, operator, are there any other questions? Yes, we do have one more question, and that will come from the line of Yi Chen with the HPWO. We'll go to another one on the same computer game. Wow.

We do have one more question and that will come from the line of Yi Chen with HVW. Please go ahead.

Thank you for taking the questions. You mentioned that during the quarter 80% of the tests were billable. Do you expect the percentage to improve or remain stable going forward?

would expect, Yuchen, thank you, we would expect the percentage ultimately to increase with increasing coverage.

But we're actually very pleased with that percentage at the early stage. Tom, do you have anything to add to that?

No, I think that's fair. With things like being on the clinical lab fee schedule, with the coverage determinations that are in place with Medicare payments, all of those factors impact how the test is paid for, whether or not there are coverage agreements in place.

And yes, overall, looking at kidney and telex and the stage that we're at with commercial launch, we're very happy with the level of coverage that we're seeing.

I think it's important to note again that there is.

a large intrinsic value which has been accumulating.

through the Real-World Evidence Program. The data results just published, as Tom mentioned, showing benefit within six months.

we believe is exceptional.

and quite novel in this space.

And these data results take years to put together. They're very expensive.

But once they are in place, they now begin to...

continue to accumulate.

The real-world evidence program is not only very strong, but it's growing and it will continue really on an every six-month basis.

to put up new and additional longitudinal data to support use of kidney and telexa primary care. And this, as Tom mentioned, goes directly to the

generating coverage determinations, percentage of coverage, et cetera. So we're really, I believe, with insurance payment, we're very much at an accelerating.

point.

and 2023 we'll continue to see regions including large population center regions.

developing comprehensive coverage.

across large populations.

Were all the billable tests paid at $950 per test?

Yes, so our.

Our list price for the test is set at $1,200. Our contracts for payment of the test has been at $950 or more.

Got it. And could you share with us the latest feedback from the FDA regarding the de novo application? Is the FDA awaiting additional clinical evidence or is the existing clinical evidence sufficient for the FDA to make a decision?

Can you share with us the latest feedback from the FDA regarding the de novo application? Is the FDA awaiting additional clinical evidence or is the existing clinical evidence sufficient for the FDA to make a decision?

Fergus.

And.

At this moment in time, the FDA has all the information that they have requested and we've provided all the data and analysis that has been requested through the breakthrough process. So there is no outstanding data requests from the FDA at this moment in time.

.....................

Okay, thank you.

Thank you. I'm currently showing no further questions in the queue. Thank you all for participating. This concludes today's conference call. You may now disconnect.

We are currently showing no further questions in the queue. Thank you all for participating. This concludes today's conference call. You may now disconnect. Thank you. This concludes today's conference call. You may now disconnect. Thank you.

The conference will begin shortly. To raise your hand during Q&A, you can dial star 11.

We.

Good morning and welcome to the Rhealitics conference call to review first quarter 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. Hi, I'm

Thank you, Cherie. Thank you all for participating in today's call. Joining me today from Reno Littics are James McCullough, Chief Executive Officer, and James Sterling, Chief Financial Officer, to provide formal remarks. And Tom McLean, President and Fergus Fleming, Chief Technology Officer, are also on hand for the Q&A session.

Examples of these statements include, without limitation, the potential benefits, including economic savings, of kidney intellects, the potential for kidney intellects to receive regulatory clearance from the FDA, the commercial prospects of kidney intellects, including whether kidney intellects will be successfully adopted by physicians and distributed and distributed, our expectations regarding reimbursement decisions, and the ability of kidney intellects to receive regulatory clearance from the FDA.

to curtail costs of chronic and end-stage kidney disease, optimized care delivery, and improved 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 our operations and revenue projections and guidance. These statements involve material risks and uncertainties that could cause actual results.

on this call are based on management's current estimates and various assumptions. We know that it defends any intention or obligation, except as required by law, to update or revise any projections or financial statements, whether because of new information, future events, or otherwise. This conference call contains time-sensitive information. It is only accurate after the live broadcast today, November 30, 2022.

I'll now turn the call over to James McCullough. James? Thank you, Peter. Good morning and good afternoon.

Since we reported our year-end results just a month ago, my comments will be focused on summarizing recent achievements in the setup for a successful beginning to calendar 2023.

expanding on multiple categories of insurance payment for kidney intellects, including Blue Cross Blue Shield, Medicaid, and Medicare.

demonstrating continued growth and testing adoption with our first million dollar revenue quarter ending this September , and pivoting to a lower overhead structure to extend cash runways.

We have also begun detailing plans with a large US health insurance company to provide kidney and telex testing directly to their own physician care network.

This insurance company has also agreed to provide us with coverage concurrent with this direct to physician program

We believe partnering with insurance companies to implement testing across physician-managed networks can be a significant driver for expanding kidney Intellix adoption in calendar 2023, and will demonstrate the value of kidney Intellix for improving care for millions of patients. Our stakeholders should look forward to additional payer contract disclosures in coming months.

A primary contributing factor for our success in securing insurance coverage is real-world evidence that kidney Intellix is working. This body of evidence, which takes years to design and implement, is now showing that kidney Intellix can make a real difference in helping doctors and care for patients.

This week we announced newly released utility data for over 1,600 patients.

results across 75 doctors at 20 clinical sites, showing the importance of kidney and telex testing in helping head off the worst effects of kidney disease and diabetes at the primary care office.

These results were just published in the widely read Journal of Primary Care and Community Health.

As a reminder, real-world evidence results will now begin to be incorporated from multiple medical center sources including Wake Forest Baptist Health in North Carolina.

Our systems and laboratories have now been subject to and passed 12 inspections from multiple agencies.

This level of quality assurance is another important facet that instills confidence in doctors when it comes to kidney intel-x testing results. Of note, the regulatory environment is evolving. Congress recently passed the Medical Device User Fee Agreement, or MDUFA V. MDUFA V is a five-year agreement that provides operation funding for FDA and provides additional incentive funding if the agency meets key performance goals.

We believe MDUFA V is a factor in improving FDA's ability to help innovative companies bring life-saving technologies to the market.

FDA has also issued a proposed rule to drive towards convergence between the current FDA regulations and ISO 13485 requirements.

Renalletics has pursued and achieved full ISO 13485 compliance and certification. We welcome this proposed rule and believe that Kidney Intellix is well positioned from a competitive industry standpoint.

As we discussed in previous quarterly call.

we can expect to look forward to a milestone-heavy short term.

As previously discussed on our call, on our last call, Medicare coverage through a local coverage determination is also a potential for kidney intellect in the first half of calendar 2023.

I would now like to turn over to James Sterling, who will discuss our financial results for the quarter. Please observe the Offend

Good morning.