Full Year 2023 Renalytix PLC Earnings Call

[music].

Okay.

Speaker 1: Good morning and welcome to the Rentalytics Conference Call to Review Fourth Quarter and the full year fiscal 2023 financial results.

Good morning, and welcome to the conference call to review fourth quarter and full year fiscal 2023 financial results.

Speaker 1: At this time, all participants are in a listen-only mode. We will be facilitating a question and answer session toward the end of today's call. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Peter DiNardo of CAPCOM Partners for a few introductory comments. Please go ahead.

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'd now like to turn the call over to Peter Denardo of cap Com partners for a few introductory comments. Please go ahead.

Speaker 2: Thank you, Michelle, and thank you all for participating today's call. Joining me today from Reno Lake's spread for more remarks are James McCulloch, Chief Executive Officer, Tom McLean, President, and James Sterling, Chief Financial Officer.

Thank you Michelle and thank you all for participating in today's call. Joining me today from Reno Lake Sprite promo marks are James Mccullough, Chief Executive Officer, Tom Mclain, President and James Sterling Chief Financial Officer before we begin I'd like to remind you that management will make statements. During this call that include forward looking statements within the.

Speaker 2: 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 Liberation Reform Act of 1995. Any statements made during this call that relate to expectations or predictions of future results and events or performance are forward-looking statements.

Meaning of the private Securities Litigation Reform Act of 1995 any statements made during this call that relate to expectations or predictions of future results.

Or performance are forward looking statements.

Speaker 2: Examples of these statements include without limitation, the potential benefits, including economic savings of kidney intellect, the commercial prospect of kidney intellect, including whether kidney intellect 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.

Therefore these statements include without limitation.

Benefits, including economic saving for kidney intellect.

Commercial prospect kidding, intellects, including weather kidney intellectual been successfully adopted by physician and distributed and marketed our expectation with regard to reimbursement decisions and the ability of kitting intellect to curtail costs of chronic and end stage kidney disease.

<unk> care delivery and improved patient outcomes friends that are market and potential benefits of government policy change the impact of COVID-19, and other world the rest of our business our expectations for hiring product development.

Speaker 2: friends 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 our

<unk> partnerships and collaborations.

Speaker 2: 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.

Embarrasment decisions clinical studies, and our regulatory submissions are based on our strategies and future growth 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.

Speaker 2: 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.

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 today September 28, 2023 with the Securities Exchange Commission all.

Speaker 2: Accordingly, you should not place undue reliance on these statements. For description of the risks and uncertainties associated with our business, please refer to the risk factor section of our annual report on Form 10-K that was filed today, September 28, 2023, with the Securities and Exchange Commission.

Speaker 2: All four looking statements made on this call are based on management's current estimates and various assumptions

Forward looking statements made on this call are based on management's current estimates and various assumptions.

Speaker 2: Rheanolytics sustains any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, September 28, 2023. I'll now turn the call over to James McCullough. James.

Claims 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.

Conference call contains time sensitive information and is accurate only as of the live broadcast today September 28, 2023, I'll now turn the call over to James Mccullough James.

Speaker 3: Thank you, Peter. Good morning. Good afternoon. In short order around this quarterly period, we crossed major thresholds and reimbursement outcomes data and achieved an FDA de novo marketing authorization for kidney and tell a

Thank you Peter Good morning, good afternoon in short order around this quarterly period, we crossed major thresholds and reimbursement outcomes data and achieved an FDA de novo marketing authorization for kidney and <unk>.

Speaker 3: Our progress was further amplified by inclusion of kidney Intellix in the draft leading kidney care guidelines, Cadego, for 2023. It is rare to see all of these milestones passed sequentially, measured in months, and we believe that these are significant for the broader adoption and clinical acceptance of kidney Intellix for early prognosis of individuals with type 2 diabetes and early stage kidney disease in the United States and abroad.

Our progress was further amplified by inclusion of kidney Intel exiting the draft, leading kidney care guidelines could go for 2023.

It is rare to see all of these milestones past sequentially measured in months and we believe that these are significant for the broader adoption and clinical acceptance of kidney Intel likes for early prognosis of individuals with type two diabetes and early stage kidney disease in the United States and abroad.

Speaker 3: On the growth equation, achieving these collective milestones now allows us to set the commercial target of a 1% United States market penetration over the next three years in our FDA authorized indicated use population of 14 million adults with diabetes and kidney disease.

On the growth equation, achieving these collective milestones now allows us to set the commercial target of a 1% United States market penetration over the next three years and our FDA authorized indicated huge population of 14 million adults with diabetes and kidney disease, we intend to do.

Speaker 3: We intend to do this through expanding hospital system partnerships, working closely with insurance companies covering kidney Intellix, and through our direct to physician sales force whose expansion is continuing in specific areas in the United States under the new leadership of experienced sales executive Howard Doran.

This through expanding hospital system partnerships working closely with insurance companies cover in kidney intellects and through our direct to physician sales force, whose expansion is continuing in specific areas in the United States under the new leadership of experienced sales executive Howard Durant.

Speaker 3: In addition, the international opportunity with FDA and HAMS is also quite promising, particularly given the large growth in diabetes globally. As a reminder, we have been disciplined in maintaining a $950 price point or greater in our growing portfolio contracted insurance company.

In addition, the international opportunity with FDA in hand is also quite promising, particularly given the large growth in diabetes globally.

As a reminder, we have been disciplined in maintaining a $950 price point or greater in our growing portfolio of contracted insurance companies as pricing was originally set by Medicare.

Speaker 3: pricing was originally set by Medicare. Importantly, post-FDA authority, we have reviewed our operating cost basis and are taking decisive actions to reduce our quarterly cash burn rate. This reduction in cash burn should become most apparent in the second half of fiscal 2024 and is being undertaken without compromising our sales focus on growing testing volume and revenue.

Importantly, <unk>.

Most FDA authority, we have reviewed our operating cost basis and are taking decisive actions to reduce our quarterly cash burn rate. This reduction in cash burn should become most apparent in the second half of fiscal 2024 and is being undertaken without compromising our sales focus on growing testing volume.

Speaker 3: These reductions are on top of our net year-over-year OPEX reduction of $11 million.

And revenue.

These reductions on top of our net year over year Opex reduction of $11 million. We will continue to look for opportunities to optimize cash expenditure and increase our cash position, particularly through non or less dilutive strategic partnering and potential international licensing opportunities as.

Speaker 3: We will continue to look for opportunities to optimize cash expenditure and increase our cash position, particularly through non or less diluted strategic partnering and potential international licensing opportunities.

Speaker 3: As far as we are aware, kidney Intellix is now the only machine learning enabled prognostic tool in chronic disease preventative medicine with an FDA authorization, established payment by a broad array of insurance companies including Blue Cross Blue Shield groups, Medicare and Medicaid, and real world evidence demonstrating improved outcomes in both diabetes and kidney disease.

As far as we are aware of kidney and <unk> is now the only machine learning enabled prognostic tool in chronic disease prevented preventative medicine with an FDA authorization established payment by a broad array of insurance companies, including Blue Cross Blue Shield groups, Medicare and Medicaid and real world evidence demonstrating improved.

It comes in both diabetes and kidney disease.

Speaker 3: After a four-year FDA process, which included over 1 million patient calculations, three independent trained tests validate algorithm runs. We are proud KidneyIntellix has validated a novel pathway for artificial intelligence-enabled in vitro diagnostic medicine.

After a four year FDA process, which included over 1 million patient calculations three independent train test validate algorithm runs we are proud kidney Intel X has validated a novel pathway for artificial intelligence enabled in vitro diagnostic medicine.

Speaker 3: several hard-won regulatory innovations, including validation of a nonlinear machine learning algorithm.

Several hard won regulatory innovations, including validation of a non linear machine learning algorithm.

Speaker 3: use of electronic medical record features, new predictive biomarkers, and importantly, accurate and reliable prognosis from the earliest starting point in a chronic disease category, all provide kidney intellects with unique competitive positioning. Our view is these precedents solidified in a full regulatory process will be difficult to replicate without a considerable investment over a multi-year period. In short, we are very pleased with our established long-term competitive advantage.

Use of electronic medical record features new predictive Biomarkers, and importantly, accurate and reliable prognosis from the earliest starting point in a chronic disease category all provide kidney Intel likes with unique competitive positioning our view is these precedents solidified in a full regulatory process will be difficult to.

Replicate without a considerable investment over a multiyear period in short we are very pleased with our established long term competitive advantages.

Speaker 3: As I noted earlier, we are pleased to have announced that senior executive Howard Duran has joined Renalitx to lead the global business effort, including US direct to position sales.

As I noted earlier, we are pleased to have announced that senior executives Howard Doran has joined <unk> to lead the global business effort, including U S. Direct to physician sales efforts as of September are directed physician sales force is now active in several territories in the United States in Texas, Florida.

Speaker 3: As of September , our directive physician sales force is now active in several territories in the United States, in Texas, Florida, New York, and North Carolina, all where the rates of diabetic kidney disease are high, where we have existing or anticipated hospital partners, and where our insurance coverage in many cases exceeds 90% of the FDA authorized indicated use population.

Europe , and North Carolina, all where the rates are diabetic kidney disease are high where we have existing or anticipated hospital partners and where our insurance coverage in many cases exceeds 90% of the FDA authorized indicated use population.

Speaker 3: We believe a number of pharmaceutical and medical device industry players would benefit from kidney and telex driven patient prognosis and supported care management in the diabetes market. Recently, published data has shown that primary care physicians using kidney and telex are four times more likely to prescribe GLP-1 agonists.

We believe a number of pharmaceutical and medical device industry players would benefit from kidney Intel X driven patient prognosis and supported care management in the diabetes market.

Recently published data has shown that primary care physicians using kidney Intel X are four times more likely to prescribe <unk>, one agonists and S. G. L. T. Two inhibitors early on to diabetes patients at significant risk of kidney function decline.

Speaker 3: and SGLT2 inhibitors early on to diabetes patients at significant risk of kidney function decline.

Speaker 3: By identifying kidney care disease patients at risk early by using kidney Intellix, the potential increase in new drug therapy use, particularly at the primary care level for pharmaceutical players is compelling.

I identify kidney care disease patients at risk early by using kidney Intel X the potential increase in new drug therapy use, particularly at the primary care level for pharmaceutical players is compelling.

Speaker 3: Ongoing publication of both our own and third-party kidney and telex outcomes and utility data are critical for establishing a new, broadly used preventative standard of care. At Renalytics, we have invested heavily in real-world evidence generation since we began full operations in late 2018.

Ongoing publication of both our own and third party kidney intellects outcomes and utility data are critical for establishing new.

Broadly used preventative standard of care at renal critics, we have invested heavily in real world evidence generation since we began full operations in late 2018.

Speaker 3: As we presented in this quarter, kidney and telehealth outcomes data has exceeded our expectation by showing an association with clinical actions that in under 12 months led to observable changes in the core measure for diabetes health and kidney health.

As we presented in this quarter kidney <unk> outcomes data has exceeded our expectations by showing in association with clinical actions that in under 12 months led to observable changes in the core measure for diabetes health and kidney health.

Speaker 3: Raising funds to fuel these clear commercial opportunities is essential, particularly now that we have reduced risks associated with a successful service product and want you to adopt

Raising funds to fuel these clear commercial opportunities as essentials, particularly now that we have reduced risks associated with the successful service product and launched an adoption to.

Speaker 3: To maximize our flexibility to fund business growth, we filed an S3 shelf registration statement to give us the ability to source capital at the right time.

To maximize our flexibility to fund business growth, we filed an S. Three shelf registration statement to give us the ability to source capital at the right time.

Speaker 3: Again, we will continue to explore less dilutive and non-dilutive capital funding sources, particularly now that we have a unique product proposition post-FDA authorization.

Again, we will continue to explore less dilutive and non dilutive capital funding sources, particularly now that we have a unique product proposition post FDA authorization.

Speaker 3: I will now turn over to Tom McLean, our president, to discuss reimbursement activities and accomplishments during the period. Tom.

I will now turn it over to Tom Mclean, our president to discuss reimbursement activities and accomplishments during the period Tom.

Okay.

Okay.

Okay.

Hard work comp.

Yes.

Sure.

Yes.

Okay.

Hoping to accelerate that.

Speaker 3: Sounds like we're having a communication with Tom with your communication issue. I'll go ahead and read Tom's script for the moment.

David It sounds like we're having a communication with E com.

Tom What's your a communication issue.

I'll go ahead and.

Read Tom's script for the moment.

Speaker 3: What Tom is going to say is following much hard work to accomplish the momentous task of achieving FDA authorization. We now believe that the kidney and telex deployment road ahead of us is wide open to accelerate testing.

What Tom is going to say, it's following much hard work to accomplish the momentous task of achieving FDA authorization.

We believe that the kidney Intel X deployment road ahead of US is wide open to accelerate test adoption.

Speaker 3: As James indicated, kidneyintellx.dkd is now the only prognostic in vitro diagnostic test for assessment of chronic kidney disease progression with FDA authorization.

As James indicated kidney <unk> TKD is now the only prognostic in vitro diagnostic tests for assessment of chronic kidney disease progression with FDA authorization.

Speaker 3: Since we announced this at the end of June , our ability to engage in conversations with partners and payers has been elevated to a new, exciting level.

Since we announced this at the end of June our ability to engage in conversations with partners and Payors has been elevated to a new exciting level.

Speaker 3: Following the announcement of FDA authorization, the Medicare administrative contractor responsible for test claim payment coming from our samples processed in our New York laboratory convened a contractor advisory committee meeting or CAC meeting.

Following the announcement of FDA authorization, the Medicare administrative contractor responsible for tests claim payment coming from our samples processed in our New York Laboratory convened a contractor Advisory committee meeting or CAC meeting.

Speaker 3: The CAC meeting is recommended under the 21st Century Cures Act as part of the Advancing the Local Coverage Determination process.

CAC meeting as recommended under the 20 <unk> century Cures Act as part of the advancing the local coverage determination process. The purpose of the meeting was to discuss the clinical literature that supports advancing the development of a local coverage determination.

Speaker 3: The purpose of the meeting was to discuss the clinical literature that supports advancing the development of a local coverage determinant.

Speaker 3: There were a number of highly interactive discussions regarding the clinical utility of kidney intellects by independent physicians selected by national government services. We were pleased with the outcome of the meeting and supported the dialogue by submitting a summary of how the evidence addresses questions posed to the cat panel during the meeting in summary and especially following FDA authorization. We continue to be confident in our ability to secure a coverage determination from medical.

There were a number of highly interactive discussions regarding the clinical utility of kidney Intel X by independent physicians selected by National Government services.

We're pleased with the outcome of the meeting and supported the dialogue by submitting a summary of how the evidence addresses questions posed to the CAC panel during the meeting.

In summary, and especially following FDA authorization, we continue to be confident in our ability to secure a coverage determination for Medicare.

Speaker 3: In keeping with our stated strategic goal of focusing our commercial efforts on regional areas where we can bring the benefits of our kidney and telex technology to large populations of adults, we recently announced expansion of insurance coverage and text.

In keeping with our stated strategic goal of focusing our commercial efforts on regional areas, where we can bring the benefits of our kidney Intel X technology to large populations of adults, we recently announced expansion of insurance coverage in Texas.

Speaker 3: This was the result of executing a contract with Blue Cross and Blue Shield of Texas, the largest statewide health care plan covering 7 million members in all 254 Texas counties.

This was the result of executing a contract with Blue Cross and Blue Shield of Texas, The largest statewide health care plan covering 7 million members in all 254, Texas counties. This organization works with more than 140000, physicians and health care practitioners and 520 hospitals. Furthermore.

Speaker 3: This organization works with more than 140,000 physicians and healthcare practitioners and 520 hospitals.

Speaker 3: Furthermore, we also executed an agreement for insurance coverage of kidney Intellix with Parkland Community Health Plan, a Dallas-based insurance plan with over 300,000 covered lives and service in seven counties. As a reminder, these regional agreements complement coverage already secured and announced previously, whereby Blue Cross Blue Shield plans cover our tests across millions of covered lives in Illinois, Maryland, Virginia, Iowa, and South Dakota.

We also executed an agreement for insurance coverage of kidney intellectual parkland community health plan or <unk>.

<unk> based insurance plan with over 300000 covered lives and service in seven counties. As a reminder, these regional agreements complement coverage already secured and announced previously whereby bluecross blueshield plans cover our tests across millions of covered lives in Illinois, Maryland, Virginia.

And South Dakota.

Speaker 3: It is unusual to achieve this level of comprehensive insurance reimbursement with such a short operating history.

It is unusual to achieve this level of comprehensive insurance reimbursement with such a short operating history. We expect our success with coverage will accelerate now that we have completed regulatory real world evidence and clinical use milestones.

Speaker 3: We expect our success with coverage will accelerate now that we have completed regulatory, real-world evidence, and clinical use models.

Speaker 3: Also, this level of insurance payment is an important validation of Kidney Intellects and a key component of the intrinsic value of the franchise for potential strategic partners.

Also this level of insurance payment is an important validation of kidney Intel X and a key component of the intrinsic value of the franchise for potential strategic partners I would now like to turn the call over to James Sterling, who will discuss our financial results for the quarter and the year James.

Speaker 3: I would now like to turn the call over to James Sterling, who would discuss our financial results for the quarter of the year.

Speaker 3: Good morning. Today we issued the financial results for our 2023 fiscal year, which ended June 30.

Good morning.

Today, we issued the financial results for 2023 fiscal year, which ended June 30th.

Speaker 3: Our GAAP financials were filed today on Form 10-K and will be followed shortly by our annual report under IFRS.

Our GAAP financials for filed today on Form 10-K, and will be followed shortly by our annual report under <unk> accounting.

Speaker 3: Figures I will discuss here are based on our GAAP financials and quoted in US dollars, which is our reporting.

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

Okay.

Speaker 3: We recorded total revenue of 3.4M dollars for fiscal year 2023. Which was up about 15% over fiscal 2020.

We recorded total revenue of $3 4 million for fiscal year, 2023, which was up about 15% over fiscal 'twenty two.

Speaker 3: During fiscal 2023, we recognize services revenue of nearly $300,000 upon completion of two services contracts, including our projects with AstraZeneca.

During fiscal 2023, we recognize services revenue of nearly $300000 upon completion of two services contracts, including our projects with Astrazeneca.

Speaker 3: For the fourth quarter, we recorded revenue of $520,000 compared to $830,000 for the fourth quarter of the prior.

For the fourth quarter, we recorded revenue of $520000 compared to $830000 for the fourth quarter of the prior fiscal year.

Speaker 3: As we noted on last quarter's call, revenue has been impacted by the successful transition to commercial payment for testing at Mount Sinai.

As we noted on last quarter's call revenue has been impacted by the successful transition to commercial payment for testing at Mount Sinai.

Speaker 3: While total testing volume has remained relatively steady, certain clinical trial tests that were billable under the prior contract at Mount Sinai are no longer billable under the commercial model.

While total testing volume has remained relatively steady certain clinical trial tests that were available under the prior contract at Mount Sinai are no longer available under the commercial model.

Speaker 3: Upon completion of study enrollment, we expect the percentage of billable tests to increase over the latter part of fiscal 2020.

Upon completion of study enrollment, we expect the percentage of billable tests to increase over the latter part of fiscal 2024.

Yes.

Speaker 3: Operating expenses for the fourth quarter were $9.8 million on a GAAP basis, significantly reduced from $13.2 million for the prior year period.

Operating expenses for the fourth quarter were $9 $8 million on a GAAP basis significantly reduced from $13 2 million for the prior year period.

Speaker 3: This reflects the result of actions we previously took to lower operating expenses through program, vendor, and employee reduction.

Reflects the result of actions, we previously took to lower operating expenses through program vendor and employee reductions.

Speaker 3: Net loss for the fourth quarter of fiscal 23 was $11.1 million or $0.11 per share.

Net loss for the fourth quarter of fiscal 'twenty, three was $11 $1 million or <unk> 11 per share.

Speaker 3: This compared to a net loss of $5.2 million or 7 cents per share for the fourth quarter of fiscal 2022, which included a foreign currency gain of $5.1 million. Excluding the foreign currency gain, net loss for the year-ago period would have been $10.2 million or 14 cents per share.

This compares to a net loss of $5 2 million or seven cents per share for the fourth quarter of fiscal 2022, which included a foreign currency gain of $5 1 million.

Excluding the foreign currency gain net loss for the year ago period would have been $10 2 million or <unk> 14 per share.

Speaker 4: We've continued to maintain a tight focus on controlling expenses.

We continue to maintain a tight focus on controlling expenses.

Speaker 4: As a result for the year ended June 30th net cash used in operating activities was about 33.4M dollars. This was down 27% from 45.9M in the prior.

As a result for the year ended June 30, net cash used in operating activities was about $33 4 million and this was down 27% from $45 9 million in the prior fiscal year.

Speaker 4: We ended the fourth quarter with approximately $24.7 million in cash as of June 30th.

We ended the fourth quarter with approximately $24 $7 million in cash as of June 30th.

Speaker 4: And as James mentioned, we're in the process of taking steps to further reduce our operating expenses to extend our cash runway.

And as James mentioned, we are in the process of taking steps to further reduce our operating expenses to extend our cash runway.

Operator, we can now please open the call for questions.

Speaker 1: To ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Please stand by while we compile the Q and A roster.

To ask a question. Please press star one one on your telephone and wait for your name to be announced.

To withdraw your question. Please press star one again.

Sam by while we compile the Q&A roster.

Speaker 1: The first question comes from Daniel Aries with SIFL. Your line is open.

The first question comes from Danielle <unk> with Stifel. Your line is open.

Yes.

Speaker 2: Thanks for taking the questions. Paul on for Dan here. Just wondering about the sequential cadence looking forward into 2024 fiscal. So could you give some color on what you're looking for in Q1 out of Q4 and from there, you know, how does that play out through the year?

Thanks for taking the questions Paul on for Dan here.

Just wondering about the sequential cadence looking forward into 2020 for fiscal so could you give some color on what youre looking for in Q Q1 out of Q4 ends and from there.

How does that play out through the year.

Okay.

Joe you want to if I could start with that.

Speaker 4: That's fine. And so we indicated in the R&S or the press release this morning that test volumes stayed fairly consistent through the period and into this first quarter. Billable volumes, billable portion of that, just about half of our 1200 or so quarterly testing volume.

So.

We indicated in the <unk>.

In the rns or the press release this morning that cash.

Cash volumes to state.

Fairly consistent through the period and into this first quarter.

Billable volumes.

Billable portion of that just about half of our of our 1200 or so quarterly testing volume.

Speaker 4: And I do expect that to increase over the course of the fiscal year, both as a function of higher volumes, as well as a higher percentage of billable testing among the tests that we do. Not giving specific guidance on a quarter by quarter basis.

And do you expect that to.

Over the course of the.

Fiscal year <unk>.

It is a function of higher volumes as well as <unk>.

A higher percentage of billable testing among the tests that we do not.

We're not giving specific guidance on a quarter by quarter basis yet.

At this time.

Sure sure and then just for the follow up.

In terms of the wake Forest.

EHR.

Integration that you recognize do you see like a big inflection point in terms of how that cadence will rollout over.

Over the year or is that more of that.

You can start scaling some volumes before that's fully integrated.

And it'll be a little smoother.

So we've been working with weight for us for a while.

Speaker 3: and things are going quite well. There are a lot of physicians using kidney Intellect.

And things are going quite well there are a lot of physicians using kidney Intel X.

Speaker 3: the moment we're switching that over to a commercial model later this year. The integration into a major system like Atrium Lake Forest through EPIC is a key proof point for us. We've already done that in Mount Sinai.

At the moment, we're switching that over to a commercial model.

Later this year.

The integration into a major system.

Like atrium wake forest through epic as a key proof point for us we've already done that and Mount Sinai.

Speaker 3: Everybody's asking, okay, that's great with Mount Sinai. Let's see it in another large system. Well, this is it. So Wake Forest Atrium is quite large.

Everybody's asking okay, that's great with Mount Sinai, let's see it in another large system well this is it.

So wake forest atrium is quite large.

Larger than that cyanide.

Speaker 3: And having Kidney Intellects fully integrated into Epic and available for many practicing physicians now to order online is going to be a key part of the process.

Having.

Having kidney <unk> fully integrated into epic and available for <unk>.

Many practicing physicians that order online.

Is going to be a key.

Bilestone for us.

Speaker 3: and being able to do this with an independent Epic integration. So we're doing this directly in conjunction with Wake Forest IT group.

And being able to do this with an independent epic integration. So we're doing this directly in conjunction with wake Forest group.

Speaker 3: It's been a tremendously successful process. We've learned an awful lot since we first did this with Mount Sinai.

It's been a tremendously successful process, we've learned an awful lot since we first did this with Mount Sinai.

Speaker 3: And I do very much believe in fiscal 2024, it's going to start to produce evidence of increased testing use.

And.

Yes.

I do very much believe in fiscal 2024, it's going to start to produce evidence.

The increased testing use.

Speaker 3: And I'm very excited to see this system come online. I do believe that with.

I am very excited to see this system come online.

I do believe that.

With a fully integrated kidney Intel X.

Speaker 3: In Epic, in a system like Atrium Wake Forest, you now open up the possibility for practice alerts to come out, especially now that we've passed through all of these significant milestones from outcomes data to utility data to FDA, inclusion in the draft guidelines, expansive reimbursement. All of these milestones collectively add up to something that a large healthcare system can feel quite confident that kidney Intellect should be part of.

In epic in a system like atrium Wake Forest, you now open up the possibility for practice alerts.

Come out, especially now that we've passed through all of the significant milestones from outcomes data to utility data to FDA inclusion in the draft guidelines expansive reimbursement.

All of these milestones collectively add up to something that a large healthcare system can feel quite confident that kidney and <unk> should be part of.

Standard of practice and should be something that should be broadly used across their primary care physician networks.

Speaker 3: And should be something that should be broadly used across their primary care physician networks. To be able to understand risk and diabetes and kidney disease.

To be able to understand risk and diabetes and kidney disease.

Speaker 3: and help mitigate outcomes and also cost. So the Wake Forest atrium deployment for us is a very high priority and everyone should stay tuned. We'll have more news on that coming up shortly.

And help mitigate.

Outcomes and also cost so the wake forest atrium deployment for us is a very high priority.

Everyone should stay tuned we'll have more news on that coming up shortly.

Speaker 5: Great, that's helpful. Thank you and congrats on all the progress.

Great. That's helpful. Thank you.

Congrats on all the progress.

Thank you.

Speaker 1: Thank you. Please stand by for the next question.

Thank you please standby for the next question.

Speaker 1: The next question comes from Chris Glasper with Singer Capital Markets. Your line is so...

The next question comes from Chris Glasper with senior capital markets. Your line is open.

Speaker 6: Yeah, morning guys. Just a couple of questions, please. First, can you just give us a little bit more color on the target penetration that you've outlined? I'm assuming that's accumulative over three years. And then second question, really just again quantifying a little bit of detail around the further cost savings that you're expecting to make. Thanks.

Yes. Good morning, guys. Just a couple of questions. Please firstly can you just give us a little bit more color on the target penetration that you've outlined I am assuming that's cumulative over over three years and then second question really just again quantifying a little bit of detail around that.

Further cost savings that you're expecting to make thanks.

Speaker 3: Yeah, we'll start with the cost savings and then OJ, please comment on top of me. Conditions are fabulous, as everybody knows, and market volatility is high.

Yes, we will start with the cost savings and then O J. Please comment on top of me.

Market conditions are fabulous as everybody knows and market volatility is high.

Speaker 3: Uh, this is not an easy environment, so, uh, we're taking cost reduction very seriously. Uh, we've already started to take specific steps.

This is not an easy environment. So we're taking cost reduction very seriously.

We've already started to take specific steps so that we can lower our quarterly burn rate.

Speaker 3: so that we can lower our quarterly burn rate. We do not want to compromise our revenue-generating capacity, so it's really a focus and a shift of priorities.

We do not want to compromise our revenue generating capacity.

So, it's really a focus and a shift of priorities.

Speaker 3: uh, with a very heavy weight towards commercialization, which is, which is good and appropriate, uh, this stage of the company now that we're on the other side of it.

With a very heavy weight towards commercialization.

Which is good and appropriate.

At this stage of the company now that we're on the other side of SBA.

So.

Speaker 3: We will continue to look for ways to narrow that burn rate.

We will continue to look for ways to narrow that burn rate.

Speaker 3: Obviously, other ways that you can narrow the burn rate is to increase the revenue.

Obviously other ways that you can narrow the burn rate is to increase the revenue.

Speaker 3: Uh, and we're working on that as well, uh, specifically with the introduction of.

And we're working on that as well specifically with the introduction of <unk>.

The direct to physician sales force.

Speaker 3: Uh, we talked about atrium wake forest. There are other things in the pipeline that will give us additional exposure in. Uh, select regions, so we're really focused now on select regions where we have high rates of diabetes and high rates of kidney disease and high rates of insurance coverage. Uh, for kidney intellect, so these are optimal areas for us to expand and grown.

We talked about atrium wake forest there are other things in the pipeline that will give us additional exposure in.

Operator: Good morning and welcome to the Renalytix conference call to review fourth quarter and fourth year fiscal 2023 financial results. At this time, all participants are in a list and only move. We will be facilitating a question and answer session toward the end of today's call.

Select regions. So we're really focused now in select regions, where we have high rates of diabetes and high rates of kidney disease and high rates of insurance coverage.

For kidney and <unk>. So these are optimal areas for us to expand and grow now.

Speaker 3: So it's really a focusing of the company at the right time at the right place.

So it's really a focusing of the of the company at the right time at the right place.

Speaker 3: And we'll continue to look for ways to optimize cash use.

And we'll continue to look for ways to optimize cash use as.

Operator: As a reminder, this call is being recorded for replay purposes.

Speaker 3: as we go forward, but obviously we're taking a cash burn rate.

We go forward, but obviously we're taking.

Peter Denardo: I would now like to turn the call over to Peter DeNardo of Capcom partners for a few introductory comments. Please go ahead. Thank you, Michelle. And thank you all for participating today's call.

Cash burn rate very seriously.

Speaker 3: And I'm sorry, I lost the first part of your question. I was focused on the cash burn rate. What was the first part? Just around the 1% target penetration rate within three years.

And I'm, sorry, I lost the first part of your question I was focused on the cash burn rate what was your what was the first part.

Peter Denardo: Joining me today for Renalytix spread formal remarks are James McCullough Chief Executive Officer, Thomas McLain President, and James Sterling Chief Financial Officer. Before we begin, I'd like to remind you that management will make statements during this call that include four looking statements within the meaning of the private security, litigation, reform act of 1995. Any statements made during this call that relate to expectations or predictions of future results and events or performance are four looking statements.

Just around the 1% target penetration rates within three years.

Speaker 3: Yeah, we've discussed this heavily internally. We've looked at historical examples.

Yeah.

We've discussed this heavily internally we've looked at historical examples of.

Peter Denardo: Examples of these statements include without limitation, the potential benefits, including economic savings of kidney intellects, the commercial prospect of kidney intellects, including whether kidney intellect will be successfully adopted by physicians and distributed and marketed or expectations regarding reimbursement decisions and the ability of kidney intellect, the curtail costs of chronic and end stage kidney disease, optimize care delivery and improve patient outcomes, friends in our market and potential benefits of government policy change, the impact of COVID-19 and other world events on our business, our expectations for hiring, product development, strategic partnerships and collaboration, reimbursement decisions, clinical studies and regulatory submissions, our business strategies and future growth, including plans, expectations and opportunities for financing or operations and revenue projections and guidance. These statements involve material risk and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Reportingly, you should not place undue reliance on these statements.

Speaker 3: of companies that have been successful and what their growth rates are once they have reached the threshold of crossing through reimbursement, regulatory outcomes data, they're starting to be included in the guidelines. What is a realistic way to look at business growth?

Companies that have been successful in what their growth rates are once they have reached the threshold of crossing through reimbursement regulatory outcomes data. They are starting to be included in the guidelines what is a realistic way to look at business growth.

Speaker 3: And we've modeled what I think is an achievable target, which is a 1% penetration in our FDA authorized use. That's 14 million patients.

And we've modeled what I think is an achievable target.

Which is a 1% penetration.

In our FDA authorized use that's 14 million patients.

Speaker 3: over the next three years. Exactly how that's going to roll out, let's see. But I think that that is very realistic given the value proposition of kidney intellects and given the fact that we are achieving and exceeding our own targets for comprehensive insurance coverage.

Over the next three years exactly how thats going to rollout, let's see.

But I think that that is very realistic given the value proposition of kidney until actually given the fact that we are achieving and exceeding our own targets for comprehensive insurance coverage.

Speaker 3: across the spectrum. Again, we have to stay focused early on, but this is a model that can now be scaled with the addition of additional hospital systems.

Across the across the spectrum.

Again, we have to stay focused early on.

But this is a model that can now be scaled with the addition of additional hospital systems depending.

Speaker 3: depending on where the capital markets are and how we can invest properly in expanding Salesforce. But we're all doing this on an ROI basis. So we want to start to see now very much return on investment for capital invested in specific regions that become productive.

Depending on where the capital markets.

And how we can invest properly and expanding sales force, but we're all doing this on an ROI basis. So we want to start to see now very much return on investment for capital invested in specific regions that become productive.

Speaker 3: And as they become productive, we can now look at expanding to additional regions where we have high insurance coverage. But the 1% target over the next 3 years I think is a very realistic goal, especially because kidney and telex is the only game in town.

And as they become productive we can now look at expanding to additional regions, where we have high insurance coverage.

Peter Denardo: For description of the risks and uncertainties associated with our business, please refer to the risk factor section or an annual report on form 10K that was filed today, September 28, 2023, with the Security States Change Commission. All forward-looking statements made on this call are based on management's current estimates and various assumptions. Renolytic sustains 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.

But the 1% targets over the next three years I think is a very realistic goal.

Especially because kidney and <unk> is the only game in town.

Speaker 3: There is no other early stage AI-enabled prognostic with regulatory authorization and comprehensive reimbursement.

There is no other early stage.

AI enabled prognostic with regulatory authorization and.

<unk> comprehensive reimbursement.

Speaker 3: So we view this is our market.

So we view this as our market.

Speaker 3: To establish a new standard, and we've done all of the hard work to put ourselves in this position.

To establish a new standard.

Operator: This conference call contains time-sensitive information and is accurate only as of the live broadcast today, September 28, 2023.

And we've done all of the hard work.

To put ourselves in this position.

Speaker 3: So that's where we came up with the number. And it's not without precedent. So we're looking back at other historical, again, historic examples.

So that's where we came up with.

Peter Denardo: I'll now turn the call over to James McCola. James.

The number and it is not without precedent. So we're looking back at other historical again historic examples.

James McCullough: Thank you, Peter. Good morning. Good afternoon. In short order around this quarterly period, we crossed major thresholds and reimbursement outcomes data and achieved an FDA-denoval marketing authorization for kidney and TELX. Our progress was further amplified by inclusion of kidney and TELX in the draft leading kidney care guidelines, Cadego, for 2023. It is rare to see all of these milestones pass sequentially measured in months and we believe that these are significant for the broader adoption and clinical acceptance of kidney and TELX for early prognosis of individuals with type 2 diabetes and early stage kidney disease in the United States and abroad.

Speaker 3: of diagnostic services and products that have reached these key points of de-risking across multiple milestones.

Diagnostic services and products that have reached these key points of de risking across multiple milestones.

Understood Thanks very much.

Please standby for our next question.

Okay.

Speaker 1: Our next question comes from Mark Massaro with BTIG. Your line is open.

Our next question comes from Mark Massaro with <unk>. Your line is open.

Speaker 2: Hey guys, thanks for taking the questions and congrats on the milestones achieved in the in the calendar year. The first question I have so obviously you obtained FDA approval for kidney intellect.

Hey, guys. Thanks for taking the questions and congrats on the milestones achieved in the in the calendar year.

The first question I have.

James McCullough: On the growth equation, achieving these collective milestones now allows us to set the commercial target of a 1% United States market penetration over the next three years, and our FDA authorized indicated use population of 14 million adults with diabetes and kidney disease. We intend to do this through expanding hospital system partnerships, working closely with insurance companies covering kidney and telecs, and through our direct to physician sales force whose expansion is continuing in specific areas in the United States under the new leadership of experienced sales executive Howard Doran.

Obviously, you obtained FDA approval for kidney intellects decay D. In.

Speaker 2: DKD. In the press release, you noted that the DKD or the FDA approved version has not yet been launched. Can you maybe clarify when you expect to launch the FDA cleared version and mechanically, like what needs to happen? Is it the label? Is it messaging, marketing? It would be helpful to learn what's needed to go ahead and commercially launch the FDA cleared version.

In the press release, you noted that.

The decay D or the FDA approved version has not yet been launched can.

Can you maybe clarify when when you expect to launch the FDA cleared version.

Mechanically like what what needs to happen is it the label is it messaging marketing.

It would be helpful to learn.

What's needed to go ahead and commercially launched the FDA cleared version.

Yes. Thank you, it's a very important.

Speaker 3: Point and kidney Intel X, D K D. And kidney Intel X, we view as the same effectively the same product or the same service, same biomarkers, same laboratory procedures. But you do have to, for example, build reimbursement around kidney Intel X. D. K. D. We have done we are doing that successfully. Uh, right now, so 1 of the key. Points is we need to make sure that we.

James McCullough: In addition, the international opportunity with FDA in hand is also quite promising, particularly given the large growth in diabetes globally. As a reminder, we have been disciplined in maintaining a $950 price point or greater in our growing portfolio contracted insurance companies. This pricing was originally set by Medicare. Importantly, post FDA authority, we have reviewed our operating cost basis and are taking decisive actions to reduce our quarterly cash burn rate. This reduction in cash burn should become most apparent in the second half of fiscal 2024 and is being undertaken without compromising our sales focus on growing testing volume and revenue.

Point, and kidney and <unk> TKD.

And kidney Intel X. We view is the same effectively the same product or the same service same biomarkers same laboratory procedures, but.

You do have to for example, build reimbursement around kidney and <unk>.

We have done we are doing that successfully.

Now so one of the key.

Points since we need to make sure that we have Medicare.

Speaker 3: payment established for kidney and telex dkb. All of the sales literature and educational literature needs to conform with now regulatory regulated language.

Payment established for kidney and <unk>.

All of the sales literature, and educational literature needs to conform with now regulatory regulated language.

Speaker 3: Uh, the Salesforce needs to be trained specifically, uh, on that language. Uh, in terms of some of the integrations we've done, we also have to shift.

James McCullough: These reductions on top of our net year-over-year op-ex reduction of $11 million. We will continue to look for opportunities to optimize cash expenditure and increase our cash position, particularly through non or less polluted strategic partnering and potential international licensing opportunities. As far as we are aware, kidney and telecs is now the only machine learning-enabled prognostic tool in chronic disease-prevented medicine with an FDA authorization established payment by a broad array of insurance companies including Blue Cross Blue Shield Groups, Medicare and Medicaid, and real-world evidence demonstrating improved outcomes in both diabetes and kidney disease.

The sales force needs to be trained specifically on that language.

In terms of some of the integrations. We've done we also have to shift.

Speaker 3: again, to the specific regulated language around kidney and PEL-X DKB in the electronic medical record system. So it's not trivial, but it is a process we're familiar with and we have a lot of expertise and we've been just putting one foot in front of the other. So we'll be in a position to actually launch the FDA product.

Again to the specific regulated language around kidney <unk>.

In the electronic medical record system. So it is not trivial.

But it is a process, we're familiar with and we have a lot of expertise and we've been just.

Putting one foot in front of the other so.

We'll be in a position to accident launched the FDA product.

Speaker 3: the FDA service actually most likely sometime early in the March quarter.

The FDA service actually.

Most likely sometime early in the March quarter.

Speaker 3: Of this year, and Tom, I don't know, are you connected. At this point, because you may want to amplify some of that.

Of this year and Tom I don't know are you connected at this point because you may want to amplify some of that.

James McCullough: After a four-year FDA process, which included over 1 million patient calculations, three independent trained test validate algorithm runs, we are proud kidney and telecs has validated a novel pathway for artificial intelligence enabled in vitro diagnostic medicine. Several hard-won regulatory innovations, including validation of a nonlinear machine learning algorithm, use of electronic medical record features, new predicted biomarkers, and importantly accurate and reliable prognosis from the earliest starting point in a chronic disease category, all provide kidney and telecs with unique competitive positioning. Our view as these presidents solidified in a full regulatory process will be difficult to replicate without a considerable investment over a multi-year period.

Okay.

I am here James Yes.

Speaker 3: That's good, because I'm going to go horse taking over both sides of the script. Yeah, do you have any additional commentary on Mark's question on the availability of kidney intel xdkd in the process to put out the FDA server.

And that's good because I'm going to go horse taking over both both sides of the script. Yes do you have any any additional commentary on marks question on the availability of kidney and <unk> in the process to put out the FDA service.

Speaker 4: Yeah, so the timing of the launch is driven by the Medicare process, which will be completed with a price effective for 2024 and the process updates the marketing materials that are needed for the long.

Yes.

So.

Timing of the launch.

Is shrinking.

On the Medicare process, which will be completed with the price.

For 2024.

And on the process updates the marketing materials that are needed for the launch.

James McCullough: In short, we are very pleased with our established long-term competitive advantages.

Speaker 3: And everything required contractually is underway now so that when the conversion to the FDA test happens, it will be simple and straightforward and accomplished on a date.

Everything required contractually is underway now so that when the conversions or the FDA class happens it will be simple and straightforward and accomplished on a date certain.

James McCullough: As I noted earlier, we are pleased to have announced that senior executive Howard Durand has joined renaletics to lead the global business effort, including U.S, directive physician sales efforts. As of September, our directive physician sales force is now active in several territories in the United States, in Texas, Florida, New York, and North Carolina, all where the rates of diabetic kidney disease are high, where we have existing or anticipated hospital partners, and where our insurance coverage in many cases exceeds 90 percent of the FDA authorized indicated use pockets.

Speaker 2: Excellent. That's great color. So you were also included in the draft CODIGO guidelines. Is it your expectation that you'll be in the final guidelines? And can we expect that roughly by the end of the calendar year 2023?

Excellent that's great color.

So you were also included in the draft <unk> guidelines.

Is it your expectation that youll be in the final guidelines.

Can we expect that roughly by the end of the calendar year 2023.

Speaker 3: Yes, we can. We're very excited about that.

Yes, we can we're very excited about that.

James McCullough: We believe a number of pharmaceutical and medical device industry players would benefit from Kidney Intellect's driven patient prognosis and supported care management in the diabetes market. Recently, published data has shown that primary care physicians using Kidney and Pellex are four times more likely to prescribe GLP1 agonists and STLT2 inhibitors early on to diabetes patients at significant risk of Kidney's function decline. By identifying Kidney care disease patients at risk early by using Kidney Intellect's, the potential increase in new drug therapy use particularly at the primary care level for pharmaceutical players is compelling.

And.

Speaker 3: It is actually this quickly.

It is actually this quickly.

<unk>.

Speaker 3: quite thrilling for us to be able to be included.

Quite thrilling for us to be able to be included.

Speaker 3: in such a prestigious guideline. I think this is the.

In such a prestigious guideline I think this is the.

Speaker 3: either the 10-year or the 20-year revision on Cadego. Cadego is the leading guideline in the kidney space.

Either the tenure of the 20 year revision on <unk> <unk> is the leading guideline in the kidney space.

It takes a lot of data.

Speaker 3: generation which we've invested heavily in. Certainly it doesn't hurt to have a full regulatory process behind you.

Generation, which we've invested heavily in but certainly it doesn't hurt to have full regulatory process behind you.

Speaker 3: Uh, so we think this is quite a significant. Event we also expect.

James McCullough: I'm going publication of both our own and third party Kidney Intellect's outcomes and utility data are critical for establishing new broadly used preventative standard of care. At Renalytix, we have invested heavily in real world evidence generation since we began full operations in late 2018. As we presented in this quarter, Kidney Intellect's outcomes data has exceeded our expectation by showing an association with clinical actions that in under 12 months led to observable changes in the core measure for diabetes health and kidney health.

So we think this is quite a significant.

Events.

We also expect.

That there will be other guidelines activities as well.

Speaker 3: coming up hopefully in the near term. You can never tell. And we say this with all humility.

Coming up hopefully in the near term you can never tell.

And we say this with all humility.

Speaker 3: But the goal ultimately is to be included in multiple guidelines around the diabetes, kidney disease primary care framework. and

But the goal ultimately used to be included in multiple guidelines around the diabetes kidney disease primary care framework.

And.

Obviously.

Speaker 3: These are all independent committees doing independent evaluation work. We don't have any control over any of the...

James McCullough: Raising funds to fuel these clear commercial opportunities is essential. Particularly now that we have reduced risks associated with a successful service product launched in adoption to maximize our flexibility to fund business growth. We filed an S3 shell for registration statement to give us the ability to source capital at the right time. Again, we will continue to explore less dilutive and non dilutive capital funding sources, particularly now that we have a unique product proposition post FDA authorization.

These are all independent committee he's doing independent evaluation work you don't have any control over any of this.

Speaker 3: But what you can do is produce evidence and have third parties produce evidence.

But what you can do is produce evidence and have third parties produce evidence.

Speaker 3: in multiple categories, and there's no shortcut here, and it's not cheap.

In multiple categories and there is no shortcut here.

And it's not cheap.

Speaker 3: You have to produce real evidence from a health economic standpoint. You have to produce outcomes data.

You have to produce real evidence from a health economic standpoint, you have to produce outcomes data.

Speaker 3: And as you know, outcomes data is now becoming a critical feature in reimbursement. In fact, I would go so far as to say

And as you know outcomes data is now becoming a critical feature in reimbursement.

James McCullough: I will now turn over to Tom McQuain, our president to discuss reimbursement activities and accomplishments during the period. We are having a communication with Tom with your communication issue. I will go ahead and read Tom's script for the moment. What Tom is going to say is following much hard work to accomplish the momentous task of achieving FDA authorization. We now believe that the Kidney Intellect's deployment road ahead of us is wide open to accelerate test adoption.

In fact, I would go so far as to say if you don't have outcomes data.

Speaker 3: you're going to have a tough time getting comprehensive reimbursement. And generating outcomes data is a very special thing to do, requires a lot of expertise, especially in a chronic disease from an early stage where a lot of the outcomes endpoints take several years to become apparent. And then of course you need utility data. Are we changing behavior?

Youre going to have a tough time getting comprehensive reimbursement and generating outcomes data.

As a very special thing to do requires a lot of expertise, especially in a chronic disease from an early stage, where a lot of the outcomes endpoints takes several years to become apparent and then of course you need utility data are we changing behavior.

Speaker 3: Are we providing something that has benefit to, in our case, really primary care?

Are we providing something that has benefit to in our case really primary care.

Speaker 3: because it is at the front end of medicine where you get the most preventative aspects. So we're really approaching kidney disease for the first time from...

Because it is at the front end of medicine, where.

You get the most preventative aspects. So we're really approaching kidney disease for the first time from.

Speaker 3: a very early stage at the front end of medicine where therapeutics had the most benefit, as little damage is done as possible to the organ, patients have better outcomes, the cost.

A very early stage at the front end of medicine, where therapeutics had the most benefit.

James McCullough: As James indicated, Kidney Intellect's.dkd is now the only prognostic in vitro diagnostic tests for assessment of chronic kidney disease progression with FDA authorization. Since we announced this at the end of June, our ability to engage in conversations with partners and payers has been elevated to a new exciting level. Following the announcement of FDA authorization, the Medicare administrative contractor responsible for test claim payment. Coming from our samples processed in our New York laboratory convened a contractor advisory committee meeting or CAC meeting.

As little damage is done as possible to the Oregon.

Patients have better outcomes the costs can be reduced the most if you wait until the patient progresses to late stage disease, which is a lot of what's happening right now in terms of uncontrolled progression.

Speaker 3: can be reduced the most if you wait until the patient progresses to late stage disease, which is a lot of what's happening right now in terms of uncontrolled progression. You can't realize benefits in terms of outcomes, utility, and health economics.

You can't realize benefits in terms of outcomes utility and health economics. So we're starting at the preventative medicine angle and we are generating an enormous amount of data and there are third parties that are now using kidney and <unk> across their networks that are also generating and publishing.

Speaker 3: and we're generating an enormous amount of data. And there are third parties that are now using kidney Intellix across their networks that are also generating and publishing.

Speaker 3: Uh, on outcomes and utility, these are the types of things that can help support guidelines committees. Uh, to look for inclusion, so we're very happy. I don't I have never been able to. Achieve this many milestones this quickly.

On outcomes and utilities. These are the types of things that can help support guidelines committees.

James McCullough: A CAC meeting is recommended under the 21st century Cures Act as part of the advancing the local coverage determination process. The purpose of the meeting was to discuss the clinical literature that supports advancing the development of a local covers determination. There were a number of highly interactive discussions regarding the clinical utility of kidney intellects by independent physicians selected by national government services. We continue to be confident in our ability to secure a covers determination from Medicare.

To look for inclusion so we're very happy.

I don't I have never been able to.

Achieved this many milestones this quickly.

Speaker 3: in the product life cycle in under five years. It's rare to see that done. And I think that's really a testimony to the team that has designed a lot of these real world evidence to show how kidney Intellix can impact.

In the product lifecycle in under five years, it's rare to see that done and.

And I think that's that's really a testimony to the team that has designed a lot of these real world evidence to show how kidney intellects can impact.

Speaker 3: care in a number of ways and health economics in a number of ways.

Care in a number of ways in health economics, and a number of ways. So.

Speaker 3: I'll stop there, but it's very exciting to be included in the draft guidelines. And yes, we do expect that the final guidelines will be published before the.

I'll stop there but.

It's very exciting to be included in the draft guidelines and yes, we do expect that the final guidelines will be published before the end of the year.

Tom McLain: In keeping with our stated strategic goal of focusing our commercial efforts on regional areas where we can bring the benefits of our kidney intellects technology to large populations of adults, we recently announced expansion of insurance coverage in Texas. This was the result of executing a contract with Blue Cross and Blue Shield of Texas, the largest statewide health care plan covering 7 million members in all 254 Texas counties. This organization works with more than 140,000 physicians and health care practitioners and 520 hospitals.

Speaker 2: Excellent. And then last question is a 2 pronged one. You had your CAC meeting. I believe it was with NGS in New York. Can you just give us a procedural update of where we are in your quest to obtain an LCD from either NGS or one of the other local contracting maps.

Excellent and then last question is a two pronged one.

You had your CAC meeting.

I believe it was with Ngls.

New York.

Can you just give us a procedural update of where we are in your <unk>.

To obtain an LCD from either <unk> or <unk>.

What are the other local contracting Max and then also there have been other blockbuster diagnostics that have had FDA approval that have obtained national coverage determinations.

Speaker 2: And then also, you know, there have been other blockbuster diagnostics that have had FDA approval that have obtained national coverage determinations. Can you just give us maybe an update on, you know,

Tom McLain: Furthermore, we also executed an agreement for insurance coverage of kidney intellects with Parkland Community Health Plan. A Dallas-based insurance plan was over 300,000 covered lives and service and 7 counties. As a reminder, these regional agreements complement coverage already secured and announced previously, whereby Blue Cross Blue Shield plans cover our test across millions of covered lives in Illinois, Maryland, Virginia, Iowa and South Dakota. It is unusual to achieve this level of comprehensive insurance reimbursement with such a short operating history.

Can you just give us maybe an update on.

Speaker 2: maybe reiterate, do you still think that you're qualified to obtain an NCD and

Just maybe reiterate do you do you still think that you are qualified to obtain an NCD in.

Speaker 2: Is that a pathway you guys are pursuing? And also procedurally, what needs to happen there to get a sense of how achievable an NCD or a NCD is?

Is that a pathway you guys are pursuing.

Also procedurally what needs to happen there.

To get.

Get a sense of.

Achievable and NCD or LCD might be.

Speaker 3: Yeah, very good questions. Tom, if you're connected, I'll let you take that one.

Yes, very good questions, Tom if you're connected I'll, let you take that one.

Tom McLain: We expect our success with coverage will accelerate now that we have completed regulatory, real world evidence and clinical use milestones. Also, this level of insurance payment is an important validation of kidney intellects and a key component of the intrinsic value of the franchise for potential strategic partners.

Sure.

Speaker 3: So we need either a local coverage determination or a national coverage determination. And as you observed with Medicare, we're pursuing all pathways.

So we need to either.

Local coverage determination or the national coverage determination and.

Observed.

With Medicare we are pursuing all pathways with regard to national government services, which oversee.

Speaker 3: With regard to national government services, which oversees or pays for any test samples that are run in our New York laboratory, they recently convened a CAC panel meeting. It's, as we said, external experts. It's part of the LCD process.

James Sterling: I would now like to turn the call over to James Sterling, who would discuss our financial results for the quarter in the year. James. Good morning. Today we issued the financial results for our 2023 fiscal year, which ended June 30th. Our gap financials were filed today on form 10K and will be followed shortly by our annual report under IFRS accounting. Figures I will discuss here are based on our gap financials and quoted in US dollars, which is our reporting currency.

For any type of samples that are run in our New York Laboratory.

<unk> recently convened.

C panel meeting.

As we said external experts, it's part of the LCD process and when something is as innovative as kidney Intel X under 20, <unk> century cures a contractor wants to make sure they make a clinical community aware of the evidence.

Speaker 7: And when something is as innovative as kidney intellects under 21st century cures, the contractor wants to make sure they make the clinical community aware of the evidence.

James Sterling: We recorded total revenue of $3.4 million for fiscal year 2023, which was up about 15% over fiscal 22. During fiscal 2023, we recognized services revenue of nearly $300,000 upon completion of two services contracts, including our projects with AstraZeneca. For the fourth quarter, we recorded revenue of $520,000 compared to $830,000 for the fourth quarter of the prior fiscal year. As we noted on last quarter's call, revenue has been impacted by the successful transition to commercial payment for testing at Mount Sinai.

Speaker 7: and seek their evaluation of the evidence as part of moving the LCD forward.

Their evaluation of the evidence as part of moving the LCD forward.

Speaker 7: As we said, we're very pleased with the outcome. In particular, as you know, kidney Intellix is intended for use by primary care physicians.

As we said, we're very pleased with the outcome in particular as you know keeping an <unk> for use by primary care physicians in the community based primary care Doctor on the call.

Speaker 7: and the community-based primary care doctor on the call spoke very highly of the value that this risk assessment would have on ability to deliver appropriate care for patients.

<unk> spoke very highly of the value that this risk assessment would have an ability to deliver appropriate care for patients.

Speaker 7: NGS will now take that into consideration with what we believe was an important endorsement for the value of the test. They would draft the local coverage determination, review it with CMS, which is required, and then release that local coverage determination and hold an open meeting.

We'll now take that into consideration.

James Sterling: While total testing volume has remained relatively steady, certain clinical trial tests that were billable under the prior contract at Mount Sinai are no longer billable under the commercial model. Upon completion of study enrollment, we expect the percentage of billable tests to increase over the latter part of fiscal 2024. Operating expenses for the fourth quarter were $9.8 million on a gap basis, significantly reduced from $13.2 million for the prior year period. This reflects the result of actions we previously took to lower operating expenses through program, vendor, and employee reductions.

With what we believe was an important endorsement or the value of data.

<unk> draft.

The local coverage determination.

With CMS, which is required and then release that local coverage determination and hold an open meeting.

Speaker 7: So that is where we are in the cycle. We would expect it would be possible to see something early in calendar year 2024 based on the timing of the meeting with regard to other contractors. We do have a laboratory in Tampa, Florida that is under the jurisdiction of First Coast, which has also been a contractor.

That is where we are in the cycle.

We expect it would be possible something early in calendar year 2024 based on the timing of the CMC meeting.

With regard to other contractors, we do have a laboratory in Tampa, Florida that is under the jurisdiction of harvest coast, which has also been a contractor.

James Sterling: Net loss for the fourth quarter of fiscal 23 was $11.1 million or $11 cents per share. This compared to a net loss of $5.2 million or $7 cents per share for the fourth quarter of fiscal 2022, which included a foreign currency gain of $5.1 million. Excluding the foreign currency gain, net loss for the year-ago period would have been $10.2 million or $14 cents per share. We've continued to maintain a tight focus on controlling expenses.

Speaker 7: that pays for innovative diagnostics under individual claim review. We will submit initial claims to First Coast to begin that process and we will

That pays for innovative diagnostics under individual claim review.

We will submit initial claims to first coast.

In that process and we will.

Speaker 7: Also submit an application for a local coverage to terminate.

Also submit an application for a local coverage determination.

Speaker 7: And that just gives us more support, more opportunities to get local coverage determination adoption.

And that just gives us more support more opportunities to get local coverage determination adoption at a national level as you know under breakthrough designation.

James Sterling: As a result, for the year ended June 30, net cash used in operating activities was about $33.4 million. This was down 27% from $45.9 million in the prior fiscal year. We ended the fourth quarter with approximately $24.7 million in cash as of June 30.

Speaker 7: At a national level, as you know under breakthrough designation, there are some devices that are given parallel review. We have been under informal parallel review, which means that we have been working with CMS at a national level as we've gone through the FDA review process.

There are some devices that are given parallel review we have been under informed on parallel review, which means that we have been working with CMS at a national level as we've gone through the FDA review process as we came to the conclusion of the FDA review.

James Sterling: As James mentioned, we're in the process of taking steps to further reduce our operating expenses to extend our cash runway.

Operator: Operator, we can now please open the call for questions. To ask a question, please press store 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press store 1-1 again. Please stand by while we compile the Q&A roster.

Speaker 7: As we came to the conclusion of the FDA review, we are able to submit for a national coverage determination.

We are able to submit for a national coverage determination.

Speaker 7: Typically, with diagnostics, CMS looks to the local contractors to make those determinations. But after receiving FDA approval, we did meet with CMS and let them know of our intention to apply for an NCD. We will do the submission for that, we believe, within the next two to three weeks, and wait to have feedback after they're able to review our dossier.

Typically with diagnostic CMS looks to the local contractors to make those determinations, but after receiving FDA approval, we did meet with CMS and let them know of our intention to apply for an NCD.

Daniel Arias: The first question comes from Daniel Aries with faithful. Your line is open. Thanks for taking the questions. Paul on for Dan here. Just wondering about the sequential cadence looking forward into 2024 fiscal. Could you give some color on what you're looking for into Q1 out of Q4 and from there, you know, how does that play out through the year? Oh, Joe, you want to. Yeah, that's fine. And so we indicated in the R&S or the press release this morning that test volumes to state fairly consistent through the period and into this first quarter.

We will do that submission for that.

We believe within the next two to three weeks and wait to have feedback after theyre able to review our dossier and then we also continue to monitor.

Speaker 7: And then we also continue to monitor a new rule, which is TSET, which would provide coverage to break through devices that are FDA approved. The industry hopes that that rule can be finalized by the end of 2023.

A new rule, which is T <unk>, which would provide coverage to breakthrough devices that are FDA approved the industrial hopes that that rule can be finalized by the end of 2023, and we would expect kidney Intel X would be eligible to also.

Speaker 7: and we would expect that Kidney Intellix would be eligible to also submit for a national coverage determination under that T-SET rule. Again, the important criteria there is that we are an FDA-approved breakthrough designated.

For a national coverage determination under that T sat role again the important criteria. There is that we are an FDA approved breakthrough designated device.

Daniel Arias: Billable volumes, billable portion of that just about half of our 1200 were so quarterly testing volume. And do expect that to increase over the course of the fiscal year, both as a function of higher volumes as well as a higher percentage of billable testing among the tests that we do. Not giving specific guidance on a quarter by quarter basis yet at this time. Sure, sure. And then just for the follow up in terms of the week for us, EHR integration that you're working on, do you see like a big inflection point in terms of how that cadence will roll out over the year or is that more of a.

Speaker 2: That's super helpful. There are quite a few avenues ahead of you, but thanks so much for all the color. Thank you.

That's super helpful. There are quite a few avenues.

But thanks, thanks, so much for all the color.

Thank you.

Please standby for our next question.

Speaker 1: The next question comes from Jen's Lindquist with InvesTech. Your line is now open.

The next question comes from Jamie Lin Please with Investec. Your line is now open.

Speaker 8: Hi guys. Just coming back to the CODIGO guidelines for a moment. I assume you've seen at least part of the draft report. Now, can you share any colour, unless you've been sworn to silence by the CODIGO Committee on the recommended positioning and use of kidney intellects in the revised guidelines, in terms of eligible patient groups, potential repeat use, et cetera. And is this consistent with your own view on how to best deploy the tests?

Yeah, Hi, guys, just coming back to the could die go guidelines for a moment I assume you have seen at least part of the draft report.

Can you share any color unless you've been sworn to silence, but let me say on.

On the recommended positioning and use a kidney intellects in the revised guidelines, how many tons of LNG.

Eligible patient groups potential repeat use et cetera.

Daniel Arias: You can start scaling some volumes before that's fully integrated, and it'll be a little move there. So we've been working with Wake Forest for a while and things are going quite well. There are a lot of physicians using kidney and telecs. At the moment, we're switching that over to a commercial model later this year. The integration into a major system like atrium Wake Forest through Epic is a key proof point for us.

Is this consistent with your own view on how to best.

The test.

Speaker 8: And second on the question raised earlier by Chris Gasper, can you be just a bit more specific on the art of the possible, please, with regards to cost reductions? You know, broadly what proportion of OPEX would you see as realistically variable without jeopardizing the medium-term performance of the business? Are we talking about single digit or potentially double digit milling over the current year? And I find it for OJ.

And secondly on the question raised earlier by Chris Gasper.

Can you be just a bit more specific on the auto the possible pace with regards to cost reductions broadly what proportion of Opex would.

Would you say is realistically.

Variable without jeopardizing the dip to the medium term performance of the business, so I'll be talking about single digit or potentially a double digit.

And over the current year.

And I find it for O J.

Speaker 8: What's the reason for the unexpected increase in payables? Please come to see that unwind over the coming couple of quarters. Thank you.

Daniel Arias: We've already done that in Mount Sinai. Everybody's asking, okay, that's great with Mount Sinai. Let's see it in another large system. Well, this is it. So Wake Forest atrium is quite large, larger than Mount Sinai. And having kidney and telecs fully integrated into Epic and available for many practicing physicians that order online is going to be a key milestone for us. And being able to do this with an independent Epic integration.

What's the reason for the unexpected increase in payables based on can we see that unwind over the over the coming couple of quarters. Thank you.

Speaker 3: Yeah, we want to be careful about commenting on the guidelines.

Yes, we want to be careful about commenting on the guidelines.

Speaker 3: I think it's important to recognize that kidneyintellix.

I think it's important to recognize that.

Kidney and telex dot decay D.

Speaker 3: is an in vitro diagnostic. That's very important. It's not an algorithm. It has an algorithm.

Is an in vitro diagnostic.

That's very important its not an algorithm.

It Hasnt algorithm.

Daniel Arias: So we're doing this directly in conjunction with Wake Forest IT Group. It's been a tremendously successful process. We've learned an awful lot since we first did this with Mount Sinai. And I do very much believe in fiscal 2024. It's going to start to produce evidence of increased testing use. And I'm very excited to see this system come online. I do believe that with a fully integrated kidney and telecs in Epic in a system like atrium Wake Forest, you now open up the possibility for practice alerts to come out, especially now that we've passed through all of the significant milestones from outcomes data to utility data to FDA, inclusion in the draft guidelines, expansive reimbursement.

It happens to have a nonlinear algorithm.

Speaker 3: We use random forest, which is a form, which is a machine learning enabled out.

We use Rand up for us, which is a form which is a machine learning enabled algorithm.

Speaker 3: Uh, so it is unique and it took us a long time to figure out.

So it is unique and it took us a long time to figure out.

Speaker 3: how to navigate the regulatory framework with FDA around this nonlinear algorithm. That was quite an achievement.

How to navigate the regulatory framework with FDA around this nonlinear algorithm that was quite an achievement.

Speaker 3: Uh, and we knew we needed to use that to generate the performance or the perspective.

And we knew we needed to use that to generate the performance.

Daniel Arias: All of these milestones collectively add up to something that a large healthcare system can feel quite confident that kidney and telecs should be part of standard of practice and should be something that should be broadly used across their primary care physician networks to be able to understand risk and diabetes and kidney disease and help mitigate outcomes and also cost. So the Wake Forest atrium deployment for us is a very high priority. And everyone should stay tuned. We'll have more news on that coming up shortly. Great. That's helpful. Thank you. And I think that's another program. Thank you.

Or the perspective, if we were going to start at.

Speaker 3: at the beginning of a chronic disease. So these are substantial innovations.

At the beginning of a chronic disease. So these are substantial innovations.

Speaker 3: Uh, and they required an enormous investment of time, uh, data generation and money and expertise.

And they required an enormous investment of time.

Data generation and money and expertise.

Speaker 3: All of which mean that kidney Intellix is quite unique, especially in terms of...

All of which mean that kidney <unk> is quite unique.

Especially in terms of positioning to your question.

Speaker 3: in the clinical space. So there are a number of innovations which go into an in vitro, an artificial intelligence enabled in vitro diagnostic.

Operator: Please stand by for the next question.

In the clinical space so.

There are a number of innovations, which go into in in vitro and artificial intelligence enabled in vitro diagnostic.

With an FDA regulatory authorization and then of course, we get into the whole issue of bringing an electronic medical record features.

Speaker 3: authorization. And then of course we get into the whole issue of bringing in electronic medical record features, which

Which many people are doing.

Speaker 3: in algorithms and it's interesting, but try running it through FDA. And that's a totally different validating process.

In algorithms and it's interesting, but try running it through FDA.

And that's a totally different validating.

Process and the level of validation required.

Speaker 3: get through a regulatory process when you're including electronic health record features with all the variables associated with the vaccine.

To get through a regulatory process when you are including.

Electronic health record features with all the variables associated with that which I can't go into into the call, but understanding how those variables impact the non linear algorithm output.

Speaker 3: which I can't go into into the call, but understanding how those variables impact the nonlinear algorithm output, understanding this entire equation is very complicated.

Understanding.

This entire equation is very complicated.

Chris Glasper: The next question comes from Chris Glasper with singer capital markets. Your line is open. Yeah, morning, guys. Just a couple of questions, please. Firstly, can you just give us a little bit more color on the target penetration that you've outlined. I'm assuming that the cumulative over over three years. And then second question really just again quantifying a little bit of detail around the further cost savings that you're expecting to make. Thanks.

And obviously, if you can do it it has.

Speaker 3: significant advantages in terms of prediction and prediction from a very early stage of disease.

Significant advantages in terms of prediction and prediction from a very early stage of disease. So there are a number of innovations that went into kidney and <unk> as a product service.

Speaker 3: So there are a number of innovations that went into kidney Intellix as a product service. We think.

We think that those.

Speaker 3: Uh, will be pointed out, or at least put us in a very distinct category. In the guidelines, and I'm not just speaking about. I think there will be future guidelines available to us in different disease categories and different clinical categories. Because kidney and black back.

We'll be pointed out or at least put us in a very distinct category.

Chris Glasper: Yeah, we'll start with the cost savings and then OJ, please comment on top of me. You know, market conditions are fabulous as everybody knows and market volatility is high. This is not an easy environment. So we're taking cost reduction very seriously. We've already started to take specific steps so that we can lower our quarterly burn rate. We do not want to compromise our revenue generating capacity. So it's really a focus in the shift of priorities with a very heavy weight towards commercialization.

In the guidelines and I'm not just speaking about <unk> I think there will be future guidelines available to us in different disease categories and different clinical categories.

Because kidney Intel exit so unique.

Speaker 3: And it goes right to the heart of the matter, which is how do you predict risk early on in a chronic disease?

And it goes right to the heart of the matter, which is how do you predict risk.

Early on in.

In a chronic disease.

A lot of us really hasnt been done before.

Speaker 3: certainly not in a regulated format that's capable of being paid for broadly by insurance.

Certainly not in a regulated format, that's capable of being paid for broadly by insurance.

And the level of validation required is enormous.

Speaker 3: And for us, the intrinsic value in having achieved this over a four-year period with FDA, again puts.

And for us the intrinsic value and having achieved this over a four year period with FDA.

Chris Glasper: Which is good and appropriate at this stage of the company now that we're on the other side of FDA. So we will continue to look for ways to narrow that burn rate. Obviously, other ways that you can narrow the burn rate is to increase the revenue. And we're working on that as well, specifically with the introduction of the Director of Physician Sales Force. We talk about atrium weight force. There are other things in the pipeline that will give us additional exposure in select regions.

Again puts us in a unique position.

Speaker 3: And I think that that's going to pay dividends. In fact, we know it's going to pay dividends.

And I think that's going to pay dividends.

In fact, we know it's going to pay dividends.

Speaker 3: going forward because there's really no other way for the ability to do safe, reliable, and effective risk progn-

Going forward, because theres really no other way.

Four.

The ability to do safe reliable and effective.

Risk prognosis early on.

Speaker 3: in a disease state in a regulated, reimbursed format.

In a disease state regulated reimbursed format.

Speaker 3: It's kidney Intellects and that requires years of investment.

It's kidney Intel X and that requires years of investment.

Chris Glasper: So we're really focused now on select regions where we have high rates of diabetes and high rated kidney disease and high rates of insurance coverage for kidney intellect. So these are optimal areas for us to expand and grow now. So it's really a focusing of the company at the right time at the right place. And we'll continue to look for ways to optimize cash use as we go forward. But obviously we're taking cash burn rate very seriously.

Speaker 3: and a lot of money, which we've been fortunate enough to be in a position.

And a lot of money.

Which we've been fortunate enough to be in a position.

Speaker 3: to have so that we could invest in the real world evidence, the outcomes data, the validation required to do this. So the franchise value here we view is quite significant.

To have so that we could invest in the real world evidence the outcomes data the validation required to do this so the franchise value here, we view is quite significant.

Speaker 3: I'll stop there, but OJ, you want to take on the art of the possible. On the cost side.

Top there but.

Jay you want to take on the art of the possible on the cost side.

Speaker 4: Sure, and to start with the payables question that's

Sure.

Start with the payables question.

Chris Glasper: And I'm sorry, I lost the first part of your question. I was focused on the cash burn rate. What was your, what was the first part? Just around the 1% target penetration rate within three years. Yeah, I, we've discussed this heavily internally. We've looked at historical examples of companies that have been successful in what their growth rates are once they have reached the threshold of crossing through reimbursement regulatory outcomes. They're starting to be included in the guidelines.

Speaker 4: Primarily a timing factor, there's an element of a good bit of that is clinical trial related payables. Those get invoiced in sizable chunks irregularly over the course of the year. So that comprises a bit of the payable growth there.

Primarily a timing factor there is an element of.

A good bit of that as clinical trial related.

Payables.

Those get Invoiced in sizable chunks.

Youre regularly over the over the course of the year so.

That comprises.

A bit of a payable growth there.

Speaker 4: As far as the further cuts, so we eliminated 11M over that.

As far as further cuts so we eliminated $11 million.

Chris Glasper: What is a realistic way to look at business growth? And we've modeled what I think is an achievable target, which is a 1% penetration in our FDA authorized use that's 14 million patients over the next three years exactly how that's going to roll out. Let's see. But I, I think that that is very realistic given the value proposition of kidney and tell us and given the fact that we're achieving and exceeding our own targets for comprehensive insurance coverage across the across the spectrum.

Over that.

Speaker 4: in the past year relative to the year prior.

In the past year relative to the <unk>.

Speaker 4: and further cuts available is likely, we're likely looking at single digit millions.

Prior.

And further cuts available.

Likely we're likely looking at single digit millions I.

Speaker 4: I don't want to get into too much specifics, we're still going through the detailed exercise of identifying where the cuts are and then presenting that to the board for approval and so forth. So, subject to that approval, I don't want to get into much more detail.gas notes Chat areas

I don't want to get into too much specifics for still going through the detailed exercise of identifying where the Qatar and then.

Presenting that to the board for approval and so forth so subject to that approval.

And again thats much more detail, but.

That's probably that.

General quantum there.

Okay. Thanks, guys very helpful. Thank you.

Speaker 1: As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. Please stand by for.

As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced.

Chris Glasper: Again, we have to stay focused early on, but this is a model that can now be scaled with the addition of additional hospital systems, depending on where the capital markets are and how we can invest properly and expanding sales force. But we're all doing this on an ROI basis. So we want to start to see now very much return on investment for capital invested in specific regions that become productive. And as they become productive, we can now look at expanding to additional regions where we have high insurance coverage.

Please standby for the next question.

Speaker 1: The next question comes from Yuchen with the HC Wainwright. Your line is open.

The next question comes from me Chen with H C. Wainwright Your line is open.

<unk>.

Speaker 9: Thank you for taking my questions. My first question is, could you comment on the test volume in B-H patrons verse

Thank you for taking my questions. My first question is could you comment.

The test volume in the Cisco versus small sir.

Okay.

Okay.

Speaker 4: The Sinai still represents the majority of our overall volume, but it's getting closer to half, whereas previously it was a higher percentage.

Sinai It still represents the majority of our overall volume, but it's getting closer to half, whereas previously it was it was a higher.

Chris Glasper: But the 1% target over the next three years, I think, is a very realistic goal, especially because kidney and tell us is the only game in town. There is no other early stage AI enabled prognostic with regulatory authorization and comprehensive reimbursement. So we view this as our market to establish a new standard and we've done all of the hard work to put ourselves in this position. So that's where we came up with the number and it's not without precedent.

Percentage, obviously is when we started it was curious.

Speaker 4: It was entirely Mount Sinai for a while. So seeing increases in independent primary care as well as the Wake Forest Natrium testing continues to increase. None of that Atrium Wake Forest testing is available yet. It's all study tests. So we do, as we talked about, we do expect that to transition to commercial testing over the course of this fiscal year. But...

Almost entirely due its entirely sorry amounts on it for a while.

So seeing increases in independent primary care as well as the wake Forest Natrium testing continues to increase none of that Adrian workforce testing.

Is available yet it's all study tests, we do.

About would you expect.

That's the transition to commercial testing over the course of this fiscal year.

But finite.

Yeah.

Just over a bit over half now the total volume.

Chris Glasper: So we're looking back at other historical again historic examples of diagnostic services and products that have reached these key points that be risking across multiple milestones. I want to say thanks very much. Please stand by for our next question.

Speaker 9: Is there a specific reason the VA health system is not...

I mean is there a specific reason.

VA health system is not.

Generating high testimony.

Speaker 4: And I Tom jump in as well, but.

And.

Tom jump in as well, but go ahead.

Speaker 3: I think there are lots of specific reasons. The VA system turned out to be substantially more complex.

I think there are lots of specific reasons.

Yeah.

The VA system turned out to be substantially more complex.

Mark Massaro: Our next question comes from Mark Massaro with BTIG. Your line is open. Hey guys, thanks for taking the questions and congrats on the milestones achieved in the calendar year. The first question I have, so obviously you obtained FDA approval for kidney intellect, DKD. In the press release, you noted that the DKD or the FDA approved version has not yet been launched.

Speaker 3: than we could have imagined. We are still making progress with the VA system, but I think

Then we could have imagined.

We're still making progress with the VA system, but I think.

Speaker 3: For us, we're resetting expectations around the VA as a business segment.

For us.

We are resetting expectations around the VA as a business segment.

Speaker 3: Uh, I do think it will eventually become a significant contributor. But, uh, as we've said in previous calls, uh, the complexity of operating inside the VA system, uh, has been a.

I do think it will eventually become a significant contributor.

James McCullough: Can you maybe clarify when you expect to launch the FDA cleared version and mechanically like what needs to happen? Is it the label? Is it messaging, marketing? It would be helpful to learn what's needed to go ahead and commercially launch the FDA cleared version. Yeah, thank you. It's a very important point and kidney intellect, DKD and kidney intellect. We view as the same effectively the same product or the same service, same biomarkers, same laboratory procedures, but you do have to, for example, build reimbursement around kidney intellect, DKD.

But.

As we've said in previous calls.

The complexity of operating inside of the VA system.

Has been a bit of a surprise.

Speaker 9: OK, so going forward, do you expect a steady growth in test volume from quarter to quarter, or do you think there will be a very

Okay.

So going forward do you expect a steady growth in testimonial current quarter to quarter or do you assume there will be their ratios of fluctuations.

Speaker 4: Yes, I am anticipating growth from your.

Yes.

Anticipated growth from area.

No go ahead, a J I apologize.

Speaker 4: No, at the extent of it, so yes, it's been pretty steady state the last few quarters and into this quarter. We are expecting growth from here.

No.

Yes, so yes.

It's been pretty steady state the last few quarters and into this quarter, we are expecting growth from here.

Speaker 4: for a lot of the reasons that we talked about on this call, especially as we roll into the FDA version of the test later in this fiscal year.

For a lot of the reasons that we talked about on this call, especially as we roll into the FDA version of the test later in this fiscal year.

Speaker 4: but that combined with changes that we're also making on the sales and marketing front.

But that combined with changes that we are also making on the on the sales and marketing fronts.

James McCullough: We have done, we are doing that successfully right now. So one of the key points is we need to make sure that we have Medicare payment established for kidney intellect, DKD. All of the sales literature and educational literature needs to conform with now regulatory regulated language. The sales force needs to be trained specifically on that language. In terms of some of the integrations we've done, we also have to shift, again, to the specific regulated language around kidney intellect, DKD in the electronic medical record system.

Okay. Thank you.

Speaker 1: As a reminder to ask a question, please press star 11 on your telethon.

Yeah.

As a reminder to ask a question. Please press star one on your telephone.

Speaker 1: Again, as a reminder, to ask a question, please press star 11 on your telephone.

Again as a reminder to ask a question. Please press star one one when your tablet.

Speaker 1: I show no further questions at this time. This concludes today's conference call. Thank you for participating. Have a great day. You may now disconnect.

I show no further questions at this time.

This concludes today's conference call. Thank you for participating have a great day you may now disconnect.

James McCullough: So it's not trivial, but it is a process we're familiar with and we have a lot of expertise and we've been just putting one foot from the other. So we'll be in a position to action launch the FDA product, the FDA service actually most likely sometime early in the March quarter of this year. Tom, I don't know, are you connected at this point because you may want to amplify some of that.

Speaker 10: Big Sound

Okay.

[music].

Okay.

Okay.

[music].

James McCullough: Yeah. I am here, James. Yes. That's good because I'm going to go horse taking over both sides of the script. Yeah, do you have any any additional commentary on Mark's question on the availability of kidney and teleXDKD in the process to put out the FDA service? Yes. So the timing of the launch is driven by the Medicare process, which will be completed with a price effective for 2024. And the process updates, the marketing materials that are needed for the launch and everything required contractually is underway now so that when the conversion to the FDA test happens, it will be simple and straightforward and accomplished on a date certain. Excellent. That's that's great color.

Okay.

[music].

James McCullough: So you are also included in the draft, Kadego guidelines. Is it your expectation that you'll be in the final guidelines and can we expect that roughly by the end of the calendar year 2023? Yes, we can. We're very excited about that. And it is actually this quickly, quite thrilling for us to be able to be included in such a prestigious guideline. I think this is the either the 10 year or the 20 year revision on Kadego.

James McCullough: Kadego is the leading guideline in the kidney space. It takes a lot of data generation, which we've invested heavily in. Certainly, it doesn't hurt to have a full regulatory process behind you. So we think this is quite a significant event. We also expect that there will be other guidelines activities as well coming up, hopefully in the near term, you can never tell. And we say this with all humility, but the goal ultimately used to be included in multiple guidelines around the diabetes kidney disease primary care framework.

James McCullough: And obviously, these are all independent committees doing independent evaluation work. You don't have any control over any of this. But what you can do is produce evidence and have third parties produce evidence in multiple categories. And there's no shortcuts here. And it's not cheap. You have to produce real evidence from a health economic standpoint. You have to produce outcomes data. And as you know, outcomes data is now becoming a critical feature in reimbursement.

James McCullough: In fact, I would go so far as to say if you don't have outcomes data, you're going to have a tough time getting comprehensive reimbursement and generating outcomes data is a very special thing to do requires a lot of expertise, especially in a chronic disease from an early stage where a lot of the outcomes endpoints take several years to become apparent. And then of course, you need utility data. Are we changing behavior?

James McCullough: Are we providing something that has benefit to in our case, really primary care? because it is at the front end of medicine where you get the most preventative aspects. So we're really approaching kidney disease for the first time from a very early stage at the front end of medicine where therapeutics had the most benefit as little damage as done as possible to the organ. Patients have better outcomes. The costs can be reduced the most if you wait until the patient progresses to late stage disease, which is a lot of what's happening right now in terms of uncontrolled progression.

James McCullough: You can't realize benefits in terms of outcomes utility and health economics. So we're starting at the preventative medicine angle and we're generating an enormous amount of data and there are third parties that are now using kidney and telecs across their networks that are also generating and publishing on outcomes and utility. These are the types of things that can help support guidelines committees to look for inclusion. So we're very happy. I have never been able to achieve this many milestones this quickly in the product life cycle in under five years.

James McCullough: It's rare to see that done and I think that's really a testimony to the team that has designed a lot of these real world evidence to show how kidney and telecs can impact care in a number of ways and health economics in a number of ways. So I'll stop there, but it's very exciting to be included in the draft guidelines. And yes, we do expect that the final guidelines will be published before the end of the year.

James McCullough: Excellent.

James McCullough: And then last question is a two-pronged one.

James McCullough: You had your CAC meeting. I believe it was with NGS in New York. Can you just give us a procedural update of where we are in your quest to obtain an LCD from either NGS or one of the other local contracting Macs? And then also, there have been other blockbuster diagnostics that have had FDA approval that have obtained national coverage determinations. Can you just give us maybe an update on just maybe reiterate, do you still think that you're qualified to obtain an NCD?

James McCullough: Is that a pathway you guys are pursuing? And also, procedurally, what needs to happen there to get a sense of how achievable an NCD or LCD might be? Yeah, very good question. Tom, if you're connected, I'll let you take that one. Sure. So we need either a local coverage determination or a national coverage determination and have you observed with Medicare, we're pursuing all pathways. With regard to national government services, which oversee the pays for any test samples that are run in our New York laboratory, they recently convened a CAC panel meeting.

James McCullough: As we said, external experts, it's part of the LCD process. And when something is as innovative as kidney and telecs, under 21st century cures, the contractor wants to make sure they make the clinical community aware of the evidence and seek their evaluation of the evidence as part of moving the LCD forward. As we said, we're very pleased with the outcome in particular, as you know, kidney and telecs is intended for use by primary care physicians.

James McCullough: And the community-based primary care doctor on the call spoke very highly of the value that this risk assessment would have on ability to deliver appropriate care for patients. NGS will now take that into consideration with what we believe was an important endorsement for the value of the task. They would draft the local coverage determination, review it with CMS, which is required, and then release that local coverage determination and hold an open meeting. So that is where we are in the cycle.

Tom McLain: We would expect it would be possible to see something early in calendar year 2024 based on the timing of the CAC meeting. With regard to other contractors, we do have a laboratory in Tampa, Florida. That is under the jurisdiction of First Coast, which is also then a contractor that pays for innovative diagnostics under individual claim review. We will submit initial claims to First Coast to begin that process, and we will also submit an application for a local coverage determination.

Tom McLain: That just gives us more support, more opportunities to get local coverage determination adoption. At a national level, as you know, under breakthrough designation, there are some devices that are given parallel review. We have been under informal parallel review, which means that we have been working with CMS at a national level as we have gone through the FDA review process. As we came to the conclusion of the FDA review, we are able to submit for a national coverage determination.

Tom McLain: Typically, with diagnostics, CMS looks to the local contractors to make those determinations. But after receiving FDA approval, we did meet with CMS and let them know of our intention to apply for an NCD. We will do the submission for that. We believe within the next two to three weeks and wait to have feedback after they're able to review our dossier. And then we also continue to monitor a new rule, which is T-SAT, which would provide coverage to breakthrough devices that are FDA approved.

Tom McLain: The industry hopes that that rule can be finalized by the end of 2023. And we would expect that kidney intelligence would be eligible to also submit for a national coverage determination under that T-SAT rule. Again, the important criteria there is that we are an FDA approved breakthrough designated device. That's super helpful. There are quite a few avenues ahead of you, but thanks so much for all the color. Thank you. Please stand by for our next question.

Tom McLain: The next question comes from Jen's Linquist with InvestTech. Your line is now open. Hi, guys. Just coming back to the Codago guidelines for a moment, I assume you've seen at least part of the draft report. Now, can you share any color unless you've been sworn to silence by the Codago committee on the recommended positioning and use of Kidney Intellects in the revised guidelines? I mean, in terms of eligible patient groups, potential repeat use, etc.

Tom McLain: And is this consistent with your own view on how to best deploy the test? And second on the question raised earlier by Chris Glasper, can you be just a bit more specific on the order that possible please with regards to cost reductions? You know, broadly what proportion of off-backs would you see as realistically variable without jeopardising the medium term performance of the business? Now, are we talking about single digit or potentially double digit million over the current year? And I'll find it for OJ. What's the reason for the unexpected increase in payables, please, I can just see that I'm winding over to coming couple quarters.

Jens Lindqvist: Thank you. Yeah, we want to be careful about commenting on the guidelines. I think it's important to recognise that Kidney Intellects.dkd is an in vitro diagnostic that's very important. It's not an algorithm. It has an algorithm. It happens to have a nonlinear algorithm. We use random forest, which is a form which is a machine learning enabled algorithm. So it is unique and it took us a long time to figure out how to navigate the regulatory framework with FDA around this nonlinear algorithm.

Jens Lindqvist: That was quite an achievement. And we knew we needed to use that to generate the performance or the perspective if we were going to start at the beginning of a chronic disease. So these are substantial innovations and they required an enormous investment of time, data generation, and money, and expertise. All of which mean that Kidney Intellects is quite unique, especially in terms of positioning to your question in the clinical space. So there are a number of innovations which go into an artificial intelligence enabled in vitro diagnostic with an FDA regulatory authorization.

Jens Lindqvist: And then of course we get into the whole issue of bringing in electronic medical record features which many people are doing in algorithms and it's interesting but try running it through FDA. And that's a totally different validating process and the level of validation required to get through a regulatory process when you're including electronic health record features with all the variables associated with that which I can't go into into the call. But understanding how those variables impact the nonlinear algorithm output, understanding This entire equation is very complicated.

Jens Lindqvist: And obviously if you can do it, it has significant advantages in terms of prediction and prediction from a very early stage of disease. So there are a number of innovations that went into kidney and telux as a product service. We think that those will be pointed out or at least put us in a very distinct category in the guidelines. And I'm not just speaking about Kedigo, I think there will be future guidelines available to us in different disease categories and different clinical categories because kidney and telux is so unique.

Jens Lindqvist: And it goes right to the heart of the matter, which is how do you predict risk early on in a chronic disease. A lot of us really hasn't been done before. Certainly not in a regulated format that's capable of being paid for broadly by insurance. And the level of validation required is enormous. And for us, the intrinsic value of having achieved this over a four year period with FDA again puts this in a unique position.

Jens Lindqvist: And I think that that's going to pay dividends. In fact, we know it's going to pay dividends going forward because there's really no other way for, you know, the ability to do safe reliable and effective risk prognosis early on in a disease state in a regulated, reimbursed format. It's kidney and telux. And that requires years of investment and a lot of money, which we've been fortunate enough to be in a position to have so that we could invest in the real world evidence, the outcomes data, the validation required to do this. So the franchise value here we view is quite significant.

James McCullough: I'll stop there, but OJ, you want to take on the art of the possible on the cost side. Sure. And to start with the payables question, that's primarily a timing factor. There's an element of a good bit of that is clinical trial related payables. Those get invoiced in sizable chunks irregularly over the course of the year. So that comprises a bit of the payable growth there. As far as the further cuts, so we eliminated 11 million over that in the past year relative to the year prior.

James McCullough: And further cuts available is likely, we're likely looking at single-digit millions. I don't want to get into too much specifics for still going through the detailed exercise of identifying where the cuts are and then presenting that to the board for approval and so forth. So subject to that approval. I don't want to get into much more detail, but that's probably the general quantum there. Okay, that's good. It's very helpful.

James McCullough: Thank you.

Operator: As a reminder to ask a question, please press store one one on your telephone and wait for your name to be announced. Please stand by for the next question.

Yi Chen: The next question comes from you, Chen, with the HC Wainwright. Your line is open. Thank you for picking my questions.

Yi Chen: My first question is, could you comment on the test volume in BE has system diversity of smell sign? So, Sinai still represents the majority of our overall volume, but it's getting closer to half, whereas previously it was a higher percentage. Obviously, when we started it, it was almost entirely, it was entirely, so I have not done it for a while. So, seeing increases in independent primary care, as well as the Wake Forest nature and testing continues to increase none of that nature and Wake Forest testing is available yet with all study tests. We do, as we talked about, we do expect that to transition to commercial testing over the course of this fiscal year, but Sinai just over a bit over half now, the total volume.

James McCullough: Is there a specific reason the VA health system is not generating high test volume? And I'll jump in as well, but go ahead. I think there are lots of specific reasons. The VA system turned out to be substantially more complex than we could have imagined. We are still making progress with the VA system, but I think for us, we're resetting expectations around the VA as a business segment. I do think it will eventually become a significant contributor, but as we've said in previous calls, the complexity of operating inside the VA system has been a bit of a surprise.

James McCullough: Okay, so going forward, do you expect a static grows in test volume from quarter to quarter, or do you think there will be variations of fluctuations? Yes, I'm anticipating growth from your effort. Now, go ahead, OJ, I apologize. No, I think that's that of it. So yes, we've been pretty steady state. The last few quarters and into this quarter, we are expecting a growth from here for a lot of the reasons that we talked about on this call, especially as we roll into the FDA version of the test later in this fiscal year. But that combined with changes that we're also making on the on the sales marketing front.

Operator: Okay, thank you. As a reminder to ask a question, please press star 11 on your telephone. Again, as a reminder to ask a question, please press star 11 on your telephone.

Operator: I show no further questions at this time. This concludes today's conference call. Thank you for participating. Have a great day. You may now disconnect.

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