Half Year 2023 Renalytix PLC Earnings Call
Good morning, and welcome to T D.
Randall Lakes Conference call to review second quarter, and first half fiscal year 2023 financial results. At this time all participants are in listen only mode. We will be facilitating a question and answer session towards the end of today's call.
A reminder, this call is being recorded for replay purposes, I would now like to turn the call over to Peter Denardo, a cap com partners for a few introductory comments.
Thank you Michele good morning, and welcome to the Reno <unk> Conference call to review second quarter and first half fiscal year 2023 financial result at this time all participants are in listen only mode. We will be facilitating a question and answer question session towards the end of today's call.
This call is being recorded for replay purposes.
Thank you all for participating in today's call joining me today for Marina likes to bright formal remarks are gene for Cole, our Chief Executive Officer, Tom Mclain, President James Stirling Chief Financial Officer. In addition, Fergus Fleming Chief Technology Officer will be on hand to join US for the question and answer session before we begin I'd like to remind you that management.
Statements during this call.
Forward looking statements within the meaning of the private Securities Litigation Reform Act 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 into.
<unk> the potential for insignia elects to receive regulatory clearance from the FDA the commercial prospects of it hitting until actually putting weather kicking until we successfully adopted by physicians and distributed and marketed our expectations regarding reimbursement decisions and the ability of kidney intellects to curtail cost of chronic and end stage kidney disease.
Optimize care delivery and improved patient outcomes trends in our market and the 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.
Members.
Local studies regulatory submissions, our business strategy and future growth, including plans expectations opportunities for financing our 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 of our annual report on form 20-F that was filed October 31, 2022, with the Securities and Exchange Commission.
All forward looking statements made on this call are based on management's current estimates and various assumptions renal lytic disclaims any intention or obligation except as required by law.
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 March 32023, I will now turn the call over to Gene's Makola James.
Thank you Peter good morning, or good afternoon since our last quarterly report renal vertex has made several fundamental advances, including completion of a $20 million capital round with significant new institutional investors, reaching the next time point for our results on the kidney and <unk> real World evidence study.
Expansion of insurance coverage for <unk>, the transition to a permanent long term commercial insurance payment model at Mount Sinai Health system execution of a cooperative research and development agreement with the U S Veterans Health administration, and further progress towards FDA de Novo marketing authorization of kidney and telex Tama claim will.
Speak to these final points in his prepared remarks.
In the March quarter, we have completed the milestone of transitioning to a permanent long term commercial insurance payment model for patients tested at the Mount Sinai Health system. This transition is taking place with the expected expiry of the exclusive coverage contract with Mount Sinai established through the first $6 million of kidney and <unk> testing as part of the real World evidence study.
Graham which began in 2021.
Key to this transition was our ability to secure a diversity of commercial insurance for kidney Intel X for a significant portion of the diabetes and kidney disease population in New York City.
This transition would not be possible without established payment from Medicare Medicare advantage and other large New York City concentrated Payors. This includes our recently disclosed coverage contract with the second largest nonprofit payer in the United States with $3 2 million members and another coverage contracts secured with a large value based care.
Insurer covering 1.8 million members, we are now experiencing a high rate of payment across both public and private insurance carriers in the New York region at or above our established Medicare pricing of $950 per reportable result.
This model is being successfully replicated in other major regional markets for kidney and <unk>, such as Illinois, and the Carolinas.
We continue to receive payment from the National government services for Medicare claims under the individual claim review process our coverage determination application for a local coverage determination is under review by NCS and has been updated to incorporate that real world evidence data from Mount Sinai.
For the remainder of 2023, we expect to report expanded progress on our long term stated primary business call of insurance coverage with state Blue Cross Blue Shield programs, Medicare Medicare advantage, Medicaid and other for profit and not for profit payers. We continue to believe and has seen a growing number of demonstrations that.
In our real World evidence data generation is helping to drive insurance reimbursement physician use and will eventually support the road for inclusion in clinical guidelines.
As a reminder, kidney and <unk> real World evidence results first published in the journal of primary care community Health on November 28, 2022 showed that kidney <unk> influence in clinical behavior in favor of early therapeutic intervention and timely referrals to specialists, most importantly, and what we didnt expect.
Spec to see so soon was that patients tested by kidney Intel X showed improvements in two longtime standard metrics HBA, one C levels for diabetes health and ACR or urine albumin to creatinine ratio for kidney health, we expect that if the trend continues but potential for kidney Intel X to change these too.
Metrics and other measures of kidney health in such a short time period can have an enormous impact on health care costs and reduction in patients suffering.
We are currently writing up results from the next real World evidence time point at 12 months, which will be publicly released as early as this summer.
Our real World evidence data development for which there is no shortcut in time or money continues to showcase the value of kidney and <unk>, particularly in the hands of primary care physicians practicing preventative medicine.
Also in the current quarter, we were pleased to build a fresh infusion of $20 million into our capital base made up of new well funded institutional holders.
We continue to look for opportunities to reduce expenses and optimize capital deployment. This remains a delicate balance as we need to maintain the necessary fixed overhead for our product and commercial model going forward in the highly regulated U S clinical diagnostic market.
Finally, the incredible March report.
From the World Obesity foundation predicting that over half of the world's population will be obese or overweight by 2035 means that kidney disease obesity and diabetes all of which run hand in hand, we will continue to be one of the largest and costliest medical conditions in history.
Further indicated that failure to improve prevention and treatment of obesity would have a total negative economic impact of over <unk> four trillion.
We're really 3% of the global GDP more than ever we will need the early and accurate prognosis that kidney <unk> offers to identify which patients are at highest risk for uncontrolled kidney disease progression kidney failure and dialysis and most importantly, who should be treated early to prevent the majority of.
The downstream disease effects.
I will now turn it over to Tom Mclean, our president to discuss FDA and our commercial progress good morning, Tom.
Thank you James good morning.
I'd like to take a moment to provide some additional details on our progress towards securing food and drug administration to novo marketing authorization.
First some of you have asked what exactly is de Novo marketing authorization in the Fda's own words I didn't know faux request provides our marketing pathway to classify novel medical devices for which there is no marketed product.
Yes.
Since there is no FDA predicate for our pioneering kidney and calix test a de Novo marketing authorization requests was the agreed pathway during our initial discussion with FDA in 2018.
We were subsequently granted a review process under breakthrough device designation, which has allowed for more frequent discussion with FDA reviewers for complex novel medical devices.
As noted in the Securities and Exchange Commission. Finally, we submitted on March 21, the review process with FDA for kidney Intel X continues at an advanced stage in.
In conjunction with the successful outcome of this review the FDA will prepare a reclassification order and pursue certain internal activities for kidney and telex prior to communicating our finance a final decision in effect the reclassification order.
<unk> will set standards and controls for the first time through this novel class of test.
The FDA has indicated to the company that in order to provide sufficient time for the completion of this process FDA is working towards a decision.
By the end of Q2 2023.
It is important to point out that we have responded timely and comprehensively to all questions that FDA has submitted to the Olympics.
The FDA has a dedicated team of experts working on our request, reflecting the novelty of kidney Intel X and the extensive set of information submitted for their review.
This information includes relevant data on the kidney until like clinical application in kidney disease.
Inclusion of novel Biomarkers in combination with health record data and machine learning models, and supporting software and cyber security controls.
With this complexity in mind, we can appreciate the care and thoroughness that FDA is exercising during this interactive review process, knowing the kidney and <unk> is a breakthrough technology that can potentially have an impact for a long period of time in tens of millions of.
<unk> in the United States and internationally.
While there are no guarantees of a marketing authorization, we remain optimistic and we are working diligently with the FDA towards a successful outcome.
Next in regard to our commercial progress we've begun to experience the benefits of establishing permanent long term commercial insurance payment and publication of successful kidney and <unk> real world evidence developed within a system as large an.
So as the Mount Sinai Health system in New York.
Push this all without discounting kidney Intel X test pricing below the Medicare and General services administration established pricing on <unk>.
$950 per test.
When expanding our insurance coverage.
The transition to commercial payment for testing at Mount Sinai that James mentioned earlier will have a short term negative impact on testing volumes predominantly for the month of March this will be reflected in our revenue reduction for the full quarter ending March 2023.
Further as is customary when diagnostic products move to scaled commercial billing the average selling price for kidney and telex will now also include a minority percentage.
Of discounted testing for patients qualifying for financial assistance and for out of network testing.
Turning briefly to the VA in January of this year, we announced completion of an agreement with the veterans Health administration to integrate kidney Intel X test ordering and reporting across all VA electronic health record systems, making kidney in <unk>.
Eventually accessible to the approximately half million veterans with diabetic kidney disease.
This integration will streamline operations to overcome a significant adoption hurdle.
Enable access the kidney and telex sorry, this large at risk patient population the program will be implemented on a phased basis.
Turning to health systems, we are working with atrium health to expand beyond the real World evidence program to make the test widely available across their health system.
This is enabled by our progress towards significant regional payer coverage, we expect to launch primary care education programs in our fiscal Q4, and we will also work with atrium to expand EHR integration beyond their wake Forest Baptist clinical sites.
Success here could also create the opportunity to expand this program to Illinois and Wisconsin.
Atrium health merged with advocate Aurora Health in 2022, and the combined entity advocate health is now the fifth largest health system in the United States.
Our sales force outside of Mount Sinai is focused on direct sales in the primary care practice using our my intellect portal.
In the current quarter, we have seen a significant ramp up at testing based on the publication of real world evidence demonstrating that based on kidney and <unk> risk assessment.
Care improves both type two diabetes and chronic kidney disease.
We also have established billing practices that assure the test is accessible and affordable for their patients.
I look forward to providing updates on these multiple opportunities for test adoption and revenue growth in future quarters.
I would now like to turn the call over to James Starlink, who will discuss our financial results for the quarter James.
Thanks, Tom.
Today, we issued two financial reports first is our six month interim report under <unk> accounting.
And the second is our quarterly SEC filing under U S. GAAP that included three and six month financials.
Both reports are for the periods ended December 31, 2022, which corresponds with our second quarter fiscal 2023, and our half year results.
Figures I will discuss here are based on our GAAP financials, you quoted in U S dollars, which is our reporting currency.
For the quarter, we recorded total revenue of approximately $1 2 million compared to about $600000. We reported for the second quarter of the prior fiscal year.
Our revenue in the quarter comprised of about $1 million of testing revenue at $200000 pertaining to services.
Operating expenses were $10 $1 million on a GAAP basis down from $14 1 million for the prior year period.
This reflects in part the success of actions, we announced in August 2022 to lower annual expenditures by over $12 million through program vendor and employee reductions.
Net loss for the second quarter of fiscal 2023 was about $10 4 million or <unk> 14 per share.
This was down from approximately $15 3 million or 21 per share for the second quarter of fiscal 2022.
We ended the quarter with $23 $8 million in cash as of December 31.
The cash figure does not include the fund raise of approximately $20 million we closed in early February .
Operator could we now please open the call for questions.
As a reminder to ask a question. Please press star one one on your telephone.
For your name to be announced to withdraw your question. Please press star one again, please standby, while we compile the Q&A roster.
Our first question comes from Dan Arias with Stifel. Your line is now open.
Hey, good morning, guys. Thanks for the questions James maybe just digging and digging in on test volumes here.
<unk> thousand 300 test I believe this quarter, which is up a bit from 12 100 last quarter, what came from Mount Sinai versus the other institutions.
And then for the non Mount Sinai portion of its makeup wake Forest, Utah St. Joe's what should we think about those kicking into gear and starting to ramp volumes in the overarching question is under the assumptions that you have.
The FDA and reimbursement.
What's sort of your working projection for a sequential ramp in volume over the course of the year, regardless of where the volumes come from it I mean, it sounds like we're going to take a step down here in <unk>, So I guess.
Where is the confidence that by the end of the calendar year youll be materially higher on volumes and you are now.
Thanks, Dan and good morning.
A couple of things to unpack.
The majority.
<unk> of the <unk>.
Testing volumes coming from Mount Sinai.
That is starting to change.
So we are seeing green shoots for example, with direct to primary care physician sales.
Which is a completely different channel and that should the <unk> portal.
That is something that we are focusing on.
Now and starting.
Starting to build.
The other thing Thats happening is where we're effectively making the transition to full commercial pay models.
Across the board so.
The key.
The key thing is can you get reimbursement across a broad enough population in a region I referred to it before a supermajority coverage, we call it greater than 70% of patients in our region who have.
Some form of insurance coverage for <unk>.
That is when you can start to drive commercial testing volume we saw that emerge.
First in Illinois, where we have I believe now close to 90% of patients in the indicated use kidney <unk> indicated use with kidney and diabetes with some form of insurance coverage.
That's quite an achievement.
So therefore, we're pushing for direct to PCP sales.
EMEA, Illinois region and we're also.
Moving towards integrating with different hospital systems, there as well so.
Revenue growth out of Mount Sinai is now available for us with that supermajority coverage in Illinois, we expect that same.
Dynamic to be occurring shortly.
Other regions of the United States, including New York City.
The commercial.
The conversion to a commercial contract.
Sinai is quite a milestone we had to have full.
Full data.
With the real world evidence that had to be successful we had to have independent physician review using kidney and <unk> in the wild.
In the Mount Sinai Health system.
And I think everybody should expect some additional news coming out of the Mount Sinai Health system about how that transition is going to take place.
And again, because we're able to execute on.
A number of Payor contracts in the New York City, we're now in a position to make that transition as part of that transition, yes that will impact revenue for <unk>.
The March time period, as we make that shift.
But.
It is a critical milestone to get off of the original contract with Mount Sinai, We could only have done it with a.
A number of different payer contracts in place so the timing was actually.
Quite exquisite that we're able to get to the point, where we can jump off.
The Sinai contracts for payment into.
The diverse full commercial model, which is required.
So we.
We expect that the June quarter and quarters going forward, you should start to see a diversity of revenue.
From different places my Intel X direct to physician you should see it from pre <unk> integrated hospital.
Initiated.
<unk> and you should also now begin to see it from you.
Independent insurance companies have now done the health economics and data analysis on kidney Intel X <unk>.
Including the recent.
Large not for profit insurance group that were working with.
Who will be taking a look at innovative ways to provide kidney <unk> testing to their own primary care physician basis.
So.
While we're not going to give a forecast.
What we're now seeing is multiple channels, where kidney and <unk> can grow.
And we are seeing for the first time in.
An environment, where you have a super majority or a diverse comprehensive insurance base.
Which can allow us now to market directly to primary care physicians and again I just want to point out that.
You cannot get.
Substantial scaled sales.
Without having a full.
Cohort of commercial payers online because we.
Primary care physician cannot hear from a patient that they have received a bill for $950.
A non starter.
So what youre seeing now is the emergence of comprehensive diverse insurance youre seeing the opening up of different channels direct or primary care integrated.
Hospital system population health supported.
Adoption and of course now we are seeing a whole new category, which is insurance led.
Potential adoption for kidney Intel X.
Okay. Okay. So just to that point I mean, because theres volumes and then Theres revenues as your point that the that the about the test volume ramp shouldn't be dramatically different from the revenue ramp because you need reimbursement, which triggers revenues in order to drive volumes or should we think about test volume improvements.
Sequential improvement over the next four to six quarters being.
Being beyond revenues the way that it sometimes does with a test that's in the early stages of being paid for.
Yes, you did.
Delta between test volume and revenues.
Or billable tests is not going to be huge because we are now enabling diverse comprehensive insurance in specific regions that we are rolling out too. So we're not.
And we have to be careful right in this capital markets with capital resources.
We have to be very careful so we as we stated in the past we're focused on specific regions, where we have comprehensive insurance.
And we can then move forward with billable testing.
And apply direct sales et cetera. So the difference between billable testing in test volumes is not going to be huge there will always be a little bit of a difference I think we're.
You are going to see a delta, which again I don't think is going to be significant but it will be there is between.
The average revenue recognizable price.
Per test.
And the test volume. So you can't just go $950 per every test that your run rate.
And especially because we're moving into although.
It's a small minority there there are people, who will need <unk> testing, we want to expand access to everybody. We can there is a huge health equity component here.
So there will be people that will be.
Federally means tested.
Or who we have a different pricing.
And there will people be people that are cash pay yourself insured so.
Or who are who are out of network, but that's a standard.
Customary thing that you see when you start to roll testing into a distributed reimbursed model.
Tom I don't know if you want to add to that.
Right.
You did a great job there James.
Again, reiterating that we intend to focus our build in volume in regions, where we have that super majority coverage and Dan that type of discipline and focus should help too.
Minimize that disconnect between realized price per test in our contracted rates.
Versus what is typical at this stage for a company like Green analytics.
Okay. Okay. If I could just ask one follow up on the VA.
Started off the year with some progress there on integration of the test into the EHR complex to what extent was that the barrier to faster adoption versus more just sort of.
Personnel related issues like the bureaucratic nature of the VA just how fragmented.
The systems are I'm just kidding.
At the end of the year. It felt like it was a little bit of a slog in the VA I'm just I'm just wondering how much better you feel about the situation now given that you are.
You've had some EMR progress there.
I'll, let Tom answer that thoroughly but it's.
It's a lot of slog, its not a little bit of a slog.
I think that we substantially underestimated the complexity of rolling in that system.
At the same time.
We are working through this.
And there's a significant population of diabetic kidney disease patients available and obviously being able to.
Get into National integration is going to help but Tom please characterize.
Sure.
I think there is there is a bureaucratic slogging EMEA as you both have stated.
We didn't fully appreciate how much worse that would be come during an environment of Covid post COVID-19 and the consequences of all of the budget pressures that the cost of the Covid.
<unk> put on to the DHA.
That said.
We are now at a point where people are raising their eyes backup and looking at other health care challenges and how they can be dealt with.
As we did that.
The access to patient health information and how we worked with the VA to BHA system because of the government's requirements for protecting veterans' health information those were significant.
<unk> will be the first laboratory given the opportunity to develop this this.
EHR solution using the VA cloud, where we'll be able to.
To basically get access to data run our test in the in the <unk> environment, and we think that's going to be a significant enabler as we go forward, it's not going to mean that VA start start ramp up instantly and where all the crops. The system right away there is the development.
For that and then educating and introducing that across centers, but it will certainly be.
A significant help to us.
With the success that development effort, which which were initiating with the BHA right now.
Okay Super Thank you guys.
Thanks, Dan please.
Please standby for next question.
Our next question comes from Mark Massaro with <unk>. Your line is now open.
This is Dan on for Mike Thanks for taking the question.
Do you have any outlook for visibility on it.
I think the ICR, we add can continue.
Over the course of 'twenty three.
I think you also mentioned getting paid above 90 came from and then talked about diversity in revenue going forward.
Just any guidance you can share on.
Thanks.
Yes, we've been very we've been very consistent that we do not want to compromise the Medicare price.
And I don't see us doing that in the foreseeable future.
A very important.
Point for us.
And.
Being paid by Medicare and individual claim review.
At $9 50 price.
As far as we see is going to continue.
There are other contracts, which exceed that price.
But we are very happy and very pleased.
We're very happy and very pleased where we are in terms of pricing and margin.
Kidney until X and we think it's a unique position.
<unk>.
And it continues to be validated as we expand.
Insurance covers two other significant players so.
I think our confidence that that is the price is very high.
And we will continue forward.
If I could reiterate on Medicare price, our Medicare price for Arc Test code is set on CMS clinical lab fee schedule, that's a public process national process.
And that there is a period that CMS is specified for reconsideration of that price and we are in a cycle, where the earliest that the $950 price would be reconsidered would be for the year.
On January one of 2026, so that price is locked in until men for our reimbursement code.
And certain contracts that we execute are set at a premium to Medicare price. So that that is what leads to pricing.
Above the $950 price for certain contracts.
Okay perfect. Thank you and then just any update on the number of private payers that you are in contact with.
And if you could potentially share the number of covered lives as well.
And then just a follow up to that I think you've also talked about peer review.
Real world evidence and moving the needle for Paris. So can you just update us on any timing we should expect there.
Real World evidence competition.
Okay.
So Andrew I'll answer the one on real World evidence.
This is an enormous intrinsic value for renal clinics and when we started.
The company.
Again, we took a look at what would it take to get national comprehensive reimbursement.
And at the top of the list was data generation and there are no shortcuts here.
In terms of cost and in terms of time, so from the very beginning of the company we started to invest heavily in.
Generating.
Type of real world evidence that would be convincing.
To clinicians payers regulators.
Everybody that's required that kidney in telmex.
Wasn't fact validated and it works in the wild.
Particularly at the primary care level, which is our focused market. So it became critical for us to demonstrate that kidney and <unk> in the hands of primary care physicians generalist physicians.
Made a difference.
And.
We are now demonstrating that and we're demonstrating that at scale.
That real World evidence program is just getting started in terms of pumping out results.
As we move along.
In 2023, we are adding large institutions.
Academic medical institutions that are looking at <unk>. We are also expanding the breadth of that real world evidence.
To look at specific issues like health equity.
And diverse populations. So this is a substantial body of work that will keep giving.
We've just started to publish the results and again, what I mentioned in my.
Prepared remarks as we've been.
Very pleasantly surprised by the observational impacts on HBA, one see in UAC, our two critical measurements for diabetes and kidney health.
We didn't expect to see so soon.
The fact that this we're observing these changes inside of a 12 month period.
It's quite remarkable I don't think that that's ever been demonstrated before.
And so kidney Intel X is working it's working very well that has direct impacts on health economics.
Meaning how much money does it save if you deploy kidney Intel X Cross primary care.
Which is a critical equation for insurance reimbursement. So all of this is interconnected.
And.
We are now demonstrating that that real world evidence data is having an impact on our ability to get coverage.
So the real world evidence is very important.
I have just processed the 12 month time period, and our Mount Sinai Health system real World evidence program.
We will be releasing those results.
And putting them into circulation through conference publications in peer reviewed publications.
Starting as early as this summer.
And that again is an ongoing program, we expect to release.
Results every six months after the real world evidence so that investment is.
Been very worthwhile.
And Tom I'll turn it over to you on the reimbursement question.
Thanks, James on the reimbursement side, and we've achieved payment with Medicare under the individual claim review process, which is a nationwide coverage. We also have a contract with the federal government under the General services administration.
Beyond that we've executed 37 private payer contracts, we provide that information on our website.
You will see that we concentrated those efforts in markets that are significant for near term growth of kidney Intel X revenues markets like what we've discussed today in New York City in New York State, Illinois and in the Carolinas. In addition to that we've seen.
Stablish payment with 26 are there payers that are important to those regions and we're at a point now where.
We are positioned for that type of Super majority payment.
Where we're looking to drive revenues for kidney Intel X on a large scale.
Okay.
Thanks for taking the question.
Thank you.
As a reminder to ask a question. Please press star one one on your telephone.
Please standby for next question.
The next question comes from Janice Linquist with Investec. Your line is now open.
Hi, guys.
Couple of questions from me.
First of all there's a growing body of evidence relating to <unk>.
Predictive genetics ckc.
But not exclusively for one.
Looking at that is that is that a potential threat to kidney into the exit which looked at some points.
Incorporate that or combine it with the test in its current form.
That's my first question. The second question is on the Prime CK Day initiative in Europe .
What youre expecting from that in terms of a commercial outcome.
So how you look at the opportunity in Europe more generally because it would seem to me like an inflection will be quite well positioned for uptake in the start of a more integrated.
And health care systems. Thank you.
Yes. Thank you, yes, and we'll bring Ferguson on this discussion just quickly kidney Intel X is an expandable platform. It was designed that way.
So we can add biomarkers, we can add genetics.
Components, we can add pay.
Patient record features all of which ultimately move into this precision medicine equation, which is subtyping disease too.
Specific groups. So it is a it is a powerful design.
And with our regulatory platform and a reimbursement platform.
What we're establishing now has the ability to roll additional versions, where additional enhancements of kidney intellects into an established reimbursement regulatory pathway. So.
Again, theres a lot of intrinsic value.
Associated with moving kidney <unk> forward in the regulatory and reimbursement framework, which I think is absolutely necessary.
Youre going to get standardized broad scale adoption, so that any physician can use it.
There are a lot of folks who are creating homebrew.
Tests or algorithms.
The challenge for all of them is how do you get somebody else to use it.
Outside of the immediate purview of the person who's creating it well you have to regulate it and you've got to get paid for which is a very expensive time consuming.
Process, which puts kidney and <unk> and a class of its own.
And we expect to.
To move forward with different versions as kidney and <unk> as we move along so no I don't see any competitive threat.
At the moment.
And I don't see one in the foreseeable future because it does take so much time and money to generate the evidence the validation.
To get through the regulatory and the very complex reimbursement pathway that we're now validating so those are significant competitive barriers to entry.
And we continue to have expansive relationships with different groups.
To be able to examine other features that we can add to improve kidney Intel X or create new versions.
But fergus.
Please step in.
Yes, hi.
Interestingly I think both of your questions are somewhat linked.
While there is a lot of research going on in terms of how.
Passive data and genetics can be used to generate insights into chronic kidney disease and other chronic conditions.
They are very much at a population level of screening.
And early early risk prediction.
Diagnose patients, which is somewhat different to the.
The spectrum in which we operate in.
And it's also largely based on discovery ediscovery levels far for sub phenotype are subclasses of disease.
For pharmaceutical companies to targets. So in the short term we are not seeing anything that is.
Commercially scalable.
Implementable.
Level <unk>.
Interestingly the primes ticketing program really comes from.
Okay.
Overlying context underlying context on Biomarkers and biological and print touch your cash from separating Biomarkers are the most impactful way of understanding what's happening in the presence of disease and in the presence of therapeutics targeting that disease.
A central element of the Prime secretive program is not just the basic research.
Data around those biomarkers and how it again.
Cheyenne light on therapeutic benefits in Turkey take effect.
But our role in that program is very much how you bring those findings to the clinic.
Translational aspect of cash from a regulatory.
Business process perspective.
So.
So primarily secretly really seeks to address some of the major challenge is best.
Exist in terms of bringing these novel therapies and novel insights to the clinic.
In relation to moving on to <unk>.
How that impacts the roll of kidney intellects and Europe .
If that is something that we we are currently exploring in terms of what the best.
Model by which we will deploy at the kidney its next platform in Europe .
Relation to assay method.
The source of data and how to collect data.
And in a fashion that meets all the requirements around GDP or et cetera.
So it is something that we're looking at and again.
Brian <unk>.
I think that by which we can engage with the regulators and some of those questions.
That is in other central tenant.
The privacy can be broken so I think we're going to benefit greatly from.
And having access to a stakeholder group.
Access to the leading clinical and scientific researchers in the field.
And really understanding China is I'm trying to make this type of precision diagnostic.
Solution in Europe .
Okay. That's great that's very informative thank you.
As a reminder to ask a question. Please press star one one on your telephone.
Please standby for our next question.
Our next question comes from Randy Baron with Pinnacle. Your line is now open.
Hi, guys. Good morning can you hear me.
Yes.
Good morning, I have one question for James and one for OJ James It seems to me I mean your comments on the FDA were very good billions and positive.
Has there been a change in tone or outlook or are you more positive today about FDA than you were call it six months ago.
I am.
I think we've done a significant amount of work I have to caveat to say until we have FDA you don't have it.
Just to be very clear.
But.
We've done an enormous amount of work we have.
Superb third party advisers, many of whom were.
Ex FDA.
And as.
We have gotten deeper and deeper into what is a very complex process.
We're not going for a me too product.
We're not going for something like we are going for a new classification, we're going for something that is a lot of implications.
Or how you're bringing a risk assessment, a prognostic and advanced prognostic test to the front end of a very large disease category.
And.
This takes a lot of time, a huge amount of data.
FDA has been.
Very thorough.
In reviewing that data.
And so.
My confidence has grown over time.
And I think.
The team internally and the expert advisory team would agree.
Again, there's no guarantees were very humble.
In this process, but we're also pleased that.
FDA is indicating spin.
Specific timing.
To us I would hope it would be in the March quarter.
Just fine if it's in the June quarter.
And obviously, we'll keep the market up to date as we get additional information but.
Achieving FDA.
In the near term would be.
Would be a lot of fun.
At this point given that.
We got breakthrough device designation in I believe may of 2019 Covid notwithstanding.
But this will be quite an achievement. If we are able to cross the line.
We're all we're all rooting for U O J, let me, let me shift to you.
I really love to get your take on cash burn, let's call. It on average for the quarter in other words, we're not you're not giving guidance. We're not we don't have any test but.
But if you've got 40 something million of cash.
How far down the runway does that get us does that get us to profitability just give us some high level color on what we should expect for cash burn.
Kevin.
So I'm comfortable that we've got the cash to get through to the next.
Few important milestones so FDA if it comes.
LCD demonstrates some revenue growth and diversity away from Mount Sinai. So.
So those key areas.
You can't yet comment on whether thats enough cash to get us to profitability.
But gets us on our way there.
And I think as we've demonstrated in February .
There is a good set of institutional investors, including new investors that have an interest in renal lytic. So we've demonstrated an ability to raise capital if we need it.
So I feel pretty good overall.
And.
And where we are and certainly.
For the next 12 months, we've got the ability to.
Throttle expenses as needed depending on how revenue comes in and.
As you've seen in the last couple of quarters.
Have successfully.
Cash burn as well.
So.
So I think things so things look okay.
Yes.
<unk>.
Okay, and sorry, I just missed your actual answer.
Should we model closer to $10 million, a quarter 5 million a quarter like just directionally, how should we think about cash burn.
Alright, well you are asking for forward looking guidance for that question. So.
We don't give so let me let me ask the question this way just know Jay.
It is the burn rate was historically $10 million could it could it conceptually get as low as six or seven or are there. Some structural reasons why cash burn cannot fall below a certain level.
Okay.
Well of course, there are reasons why.
Certain level at which cash can't get below.
On the burn.
So theoretically you could cash get as low as six or seven short, but not saying on this call that anybody should be should we be modeling that.
You're talking about cash burn rate, Randy burn or cash balance.
James I'm, just trying to get a sense of if you've got 40 million cash he did a wonderful raise bringing some real players, which I think is great and suggests that there is a lot of support in institutional market for what you're doing but obviously this market like you said you never know how the capital markets are going to go and it's going to be open again. So I think it's a fair question to say how far could.
Conceptually get it so if you take 40 divided by two O J just response seven.
In a worst case scenario starts to get a sense that this could push us.
Deep into calendar 'twenty four am I am I, correct thinking about it that way.
I think there are quite a few variables.
So it becomes impossible to answer we can get we can get a long way with the cash that we have.
Question is do.
Do we end up for example, with a strategic partnership.
What does the landscape look like after FDA, assuming we get a positive decision.
Are we now.
Investors should hold our feet to the fire.
Knowing evidenced that with comprehensive coverage we start to.
Scale testing adoption do we have additional systems in the pipeline that are going to come online.
And obviously all of this comes in the context of controlling the cost basis.
So there are a number of different levers I think the most important thing is we.
We are reaching a point.
Sure.
We've got three legs of the diagnostic stool, which are necessary to grow a significant revenue base reimbursement.
Data.
And regulation once you mitigate those three.
It becomes a sales and marketing exercise.
And the sales and marketing exercise is either difficult easy or easier.
Dependent upon the efficacy of your data.
And the diversity and depth.
Of your insurance coverage and things that I can point to which give a lot of optimism for this model.
Going forward in terms of ultimately generating revenue, which reduces cash burn on.
On a quarterly basis.
And frees up the capital markets to give us access to capital at lower cost.
We have fabulous data.
And we have clearly demonstrated that the original mission before we spend a nickel when we started the company was reimbursement reimbursement reimbursement.
And we're validating that now.
In a way that I think is incredibly important.
It's not just one coverage contract with one Medicare contract.
Tractor, we're now 10 months trading.
Blue Cross Blue Shield coverage.
A large for profit large nonprofit Medicare Medicare advantage.
I'm trying to think of another diagnostic company example that has been able to generate the diversity of coverage and maintain hold the price that Medicare set.
Back to an earlier question.
So.
The answer to your question is.
Im actually quite optimistic that in 2023, we cross the Rubicon.
So we check off start to completely check off the box of data.
Real World evidence, which is now being published.
Diversity of insurance reimbursement and concentration in specific regions with high populations of diabetes and kidney disease like Chicago, Illinois, like New York.
Carol lineups.
The vast majority of people will have some form of insurance coverage to give me until X and then of course, let's see what goes on with FDA. It would be nice to get it here in the short term.
So now we check off the regulatory box now it's strictly a function of.
What type of sales force do we hired.
Into those regions and we prove in those specific regions.
That we can generate significant testing adoption against our established reimbursement coverage then we can turn to wall Street and say look.
Without spending gobs of cash to rollout nationally we can say here are three or four major markets.
We have shown that we can get comprehensive reimbursement.
And we have shown that we can get testing adoption.
We now want to go back to the capital markets at some point in the future.
Hopefully when interest rates have leveled off hopefully when the market.
<unk> has come out of its malaise and people can say, yes. This is something that's worth financing to grow out nationally and then subsequently internationally because.
It's wide open I don't see us having any direct competition today, because everybody wants to compete with us is going to have to invest in a multi year multi center.
Very expensive program to generate real world evidence to show the thing works and Theyre going to have to go through a regulatory process in the reimbursement process. There are no shortcuts.
So the answer to your question is we've got the cash to be able to prove that model.
In specific.
A large population.
Key major markets like Chicago, New York.
In the Carolinas, and we're probably going to add one other.
And that doesn't have to break the bank to do that so.
And it takes a while to evolve to understand exactly how to get to that business model to prove that that's where we are right now.
James That's excellent let me ask one last really quick one then I'll hop back in the queue you started.
That preamble with a comment about partnerships.
Back on the table, we haven't heard about that in some time I guess it was about a really quick update and thank you. So much for your time today guys.
Yes.
The partnership discussions have always been ongoing.
And there was definitely a major chill.
In partnership discussions everybody pulled back the reins on the horses.
And again, we continue to have discussions with digital health companies we.
We continue to have discussions with pharmaceuticals.
Major pharmaceutical companies, we continue to have discussion with medical device companies to me there is so much synergy here.
Here everybody needs to get to primary care, if you want to deal with the biggest cost of medicine full stop it's not the specialty groups that ultimately govern control of cost of medicine over the next 10 to 20 years, it's chronic disease management at an early stage and Thats primary care.
There are many people that are focused on that and need to get there we happen to have a very interesting entry point.
Which is kidney disease and diabetes.
And.
So.
And people recognize this and as we continue to get more and more insurance coverage as we continue to put out more data hopefully as we get a.
Our regulatory approval here.
To me it becomes a black and white that kidney and <unk> is a unique and significant entry point.
Into.
The vast expanse of primary care, that's not without its challenges there's huge education challenges, they're huge awareness challenges.
It requires investment to do that but we're opening the door to a very unique and broad entry point into primary care at the front end of one of the largest chronic diseases. That's out there that has a significant value.
And that has not gone unnoticed.
Across a number of different potential strategic partners.
I think.
We got a long way last year.
And I think what happened is everybody I saw it and I talked to senior executives at large corporate.
He said look we aren't doing anything until we find out where this economy is going.
The stock market.
Et cetera, so everybody pulled back on now starting to see a.
A revival of activity.
And again I'm not predicting what's going to happen here.
For us, but I'm more encouraged that there will be opportunities available for us hopefully in 2023.
We're able to get FDA on top of that then this becomes a very unique proposition.
When we eliminate regulatory risk.
We're working on eliminating reimbursement risk.
And the data is coming out so it just takes time and unfortunately.
It's interesting.
Resting running a NASDAQ public company, that's subject to this quarter by quarter.
Reporting value.
It often doesn't we lose sight of the fact that we're continuing to build a significant amount of intrinsic value.
And the story is continuing to develop in a very real way that's <unk>.
<unk> reviewed and published in regulated and reimbursed.
And that is going to lead to some very good. Thanks, So yeah.
Feel the clouds are lifting again and I feel activity on.
Our strategic level, our strategic partnering level is starting to open up again, we're certainly seeing that in the dialogue.
So stay tuned.
Yes.
Well, we're rooting for you.
Thank you.
Please standby for our next question.
Our next question comes from Chaitanya <unk> with H C. Wainwright. Your line is now open.
Hey, this is <unk> on behalf of <unk>.
Thank you I mean, most of my questions have been answered. So just one quick question on the FDA review process.
The nature of questions or concerns that the FDA is posing to you. Thank you again.
Thank you for the question Fergus.
Hi, yes. Thank you for the question.
Got it.
It's very diverse.
Mentioned in the prepared statements.
This is a very comprehensive package of information covering a lot of diverse.
Sales from data science to biomarker biomarker technology to a new clinical indication so the questions reflect the.
The complexity that the FDA have to.
Okay generally as an understanding of in order for them to arrive at a decision around the safety and efficacy of the device in the first instance, and also in order to inform the future.
Regulations and controls.
The reclassification.
We spoke about so the questions are reflective of the novelty and complexity of of what we are.
Undertaking with the FDA and it's been very.
Cooperative and interactive soon.
Hopefully that answers your question.
Yes. Thank you.
At this time I show no further questions.
This concludes today's conference call.
You for participating you may now disconnect.
Okay.
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