Q1 2024 Renalytix PLC Earnings Call

Yeah.

Yeah.

Good morning, ladies and gentlemen, and welcome to New Granola next conference call to review first quarter fiscal year 'twenty 'twenty four financial results.

At this time, all participants are in listen only mode.

We will be facilitating a question and answer session towards the end of today's call.

As a reminder, this call is being recorded for replay purposes, I would now like to turn the call over to Peter Denardo of Capcom partners for a few introductory comments.

Thank you Olivia. Thank you all for participating in today's call joining me today from Reno licks robot.

Former remarks, our Janesville Cola, Chief Executive Officer, Howard Doran, Chief Business Officer, Paul Mclean, President, Jim Sterling Chief Financial Officer.

Before we begin I'd like to remind you that management will make statements. During this call that include forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.

Any statements made during this call that relate to expectations or predictions of future events results or performance are forward looking statements. Examples of these statements include without limitation, the potential benefits, including economic savings of kidney until X.

The prospect of getting until X coding, whether keeping our products will be successfully adopted by physicians and distributed and marketed our expectations regarding reimbursement decisions and the ability of chipping intellect to curtail costs of chronic and end stage kidney disease optimize care delivery and improve patient outcomes.

The potential benefits of government policy change the impact of COVID-19, the other world events for our business our expectations regarding product development strategic partnerships and collaborations reimbursement decisions clinical studies regulatory submissions, our business strategy and future growth, including plans expectations and op.

<unk> for financing our operations and revenue projections and guidance. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward looking statements.

Accordingly, you should not place undue reliance on these statements for a description of the risks and uncertainties associated with our business. Please refer to the risk factors section of our annual report on Form 10-K that was filed on September 28, 2023, with the Securities Exchange Commission.

All forward looking statements made on this call are based on management's current estimates and various assumptions renal clinics disclaims any intention or obligation except as required by law to update or revise any financial projections or forward looking statements, whether because of new information future events or otherwise.

This conference call contains time sensitive information.

Accurate only as of the live broadcast today November 14, 2023, I'll now turn the call over to James Mccullough James.

Thank you Peter good morning, good afternoon.

Given lousy sector market conditions in the early stage of our commercial rollout we have been proactively organizing the company to last long term, while we leverage our proprietary technology to unlock value.

First we are in discussions to raise long term funding, which would extend our operating runway considerably.

While there are certainly no guarantees we are targeting funding to be in place before year's end.

Now that we have achieved FDA and published kidney <unk> real world outcomes performance data, we are in a position to substantially reduce our spend rate. This includes a more than 35% reduction in payroll expense.

More than 30% reduction in SG&A, these cuts or across the company, including executive compensation and while it is difficult for those employees affected. It is the right thing to do given the current environment and the opportunity to maximize resources against our sales efforts.

We have and are continuing to shift the composition of the company to focus on sales.

With this commercial realignment approximately half of our employee base is now directly responsible for sales and revenue recognition, our new Chief business Officer, Howard Doran will detail sales force efforts and related initiatives shortly.

Third we are optimistic that short term events in fiscal 2024 can help spur testing growth. These include one kidney <unk> epic integration into atrium health, which should be finalized in December two other anticipated hospital systems coming online with kidney Intel extra calendar 2024, three expected <unk>.

A kidney and <unk> and the final updated international kidney guidelines publication shortly for progress towards the Medicare local coverage determination or LCD with National government services, the Medicare contractor governing our New York Lab, five initiation of payment on kidney Intel likes billing from a second Medicare contractor first.

The options last month, six additional expected major insurance coverage decisions. This fiscal year and seven importantly publication of new kidney and <unk> outcomes data already submitted for peer review.

Following FDA de Novo marketing authorization June 29th draft guidelines inclusion comprehensive reimbursement and proven published performance to improve diabetes, and kidney and kidney health kidney and <unk> is in a unique position to change preventative medicine in this very large and costly population health menace.

Recent news highlighting potential breakthrough performance against diabetes and kidney disease.

Including the early stoppage of the Novo Nordisk slow trial for their GOP, one therapeutic ozimek signal a new era in kidney disease preventative medicine. There are now at least three classes of drugs available for treatment in this space with more to follow as we saw this month at the American Society of Nephrology kidney week conference.

In Philadelphia, there is a market shift towards preventative medicine in the kidney space that will place increasing burden on primary care to understand which patients are at risk and what medications should be used when.

We firmly believe that knowing the patient biology, with a blood biomarker driven FDA approved and widely reimbursed kidney Intel X will be a critical part of the strategy to balance ballooning treatment costs potential side effects and cocktail therapeutic applications in this era.

We are pursuing programs to validate kidney Intel X technology drug response scores to these various therapeutics with pharma industry players and our partners. The Joslin diabetes center in the Mount Sinai Health system.

Ah kidney Intel X technology therapeutic response clinical program is something we hope to be able to report on as early as next calendar year.

Our experience with the FDA de novo pathway and achieving broad scale reimbursement in artificial intelligence enabled blood biomarker diagnostics should prove especially valuable in commercial efforts here.

We look forward to updating you through 2024 and all of these developments and I will now turn it over to Howard Doran, our chief business officer to discuss aspects and sales good morning Howard.

Thank you James and good morning.

I have been in the diagnostic space for the better part of 30 years. The majority of that time was spent with Sci-tech Corporation and Hologic.

<unk> was a start up focused on women's health and specifically cervical cancer screening method Pap test.

Starting with <unk> in January 1990, 7% over the next 10 years held various sales and sales matched positions leading to a corporate role as VP of sales and marketing in 2004.

And prep became the new standard of care for cervical cytology over this time, representing over 85% of the cervical cancer screening testing market in the United States.

<unk> acquired <unk> in 2007, I transitioned to president of Hologic diagnostics physician I held for three years and oversaw the acquisitions of the visa and third wave technologies.

Postal logic I served as chief commercial officer of Constitution Medical CMI develop the innovative bloodhound and hematology system for accurate diagnosis of blood related diseases CMI was acquired by Roche diagnostics in 2013.

Before my planned retirement I served as president and CEO of life Science, and Diagnostics company, whose MMR late life book LIFO profile tests helped better manage patients with increased risk of developing of cardiovascular disease.

LIFO science was acquired by Labcorp in 2014.

I was introduced to James by renal unexplored member and spent several months evaluating the kidney Intel X technology and traveling with renal lentic sales personnel and personnel meeting with commissions.

What became clear to me was not only did kidney and <unk> provide a vital service to doctors and patients, but that with a targeted sales approach. We can achieve a major impact on patient outcomes and the unsustainable health care costs that come with late stage kidney disease and dialysis.

My experience in the field convinced me to cut my retirement short and jump in to spearhead this significant opportunity for growth and positively impact patients.

I've been very fortunate to have bill leading diagnostic sales and marketing teams that have made innovative products widely use and standard of care. Most importantly, having what most importantly, though having watched two family members suffer through dialysis treatment with one ultimately getting a new kidney I've seen the bad and the really bad in this space I would think of them.

Often why them on this journey as a motivator and reminder of how important it is the kidney Intel X mission that we are working on together.

A few highlights based on my early observations at renal clinics number one to date, we are rapidly completing the retooling and recruitment of the sales organization to focus on direct to primary care sales efforts.

Four highly experienced account executives have accepted offers and will be on boarded through the remainder of this year. The sales team size will be 14, starting in 2024 with a focus on sales and high diabetes density regions in New York, Texas, Florida, North and South Carolina and Ohio.

Two with our full sales team in place. The most important goal remains of assisting our customers and physician offices with consistent direction on how to identify patients that meet the kidney Intel X FDA approved indication of use criteria.

Since I began our ordering requisition process is now being streamlined to keep things as simple as accurate as possible for our customers and physicians.

Three we are moving quickly to ready the kidney and <unk> FDA authorized tests for rollout in the March quarter.

Our marketing materials are already quite good, but we are using the FDA launch opportunity to improve messaging to further reflect the unique advantages of kidney Intel X technology and identifying patients at risk for kidney failure early on publication of the <unk> kidney Intel X one year outcomes data likely this year should have positive impact on sales.

We will also be prioritizing a peer reviewed publication of kidney until X cost effectiveness on population wide testing.

Before.

We began working a summer on more accurate targeting of primary care physicians, serving a high concentration of patients with diabetes approximately 40% of these patients are likely to have existing chronic kidney disease and will meet the intended use criteria for kidney and <unk> testing.

This targeting will allow us to go deep and our top target physicians as opposed to going wide across our clinicians.

I believe this will produce more routine ordering patterns from those top targets, which create true believers and advanced prognosis believers that are more apt to be repeat orders of our test.

One thing that's abundantly clear, particularly since spending time with James and the renal X team at the American Society of Nephrology kidney week earlier. This month, the kidney space is undergoing a wave of innovation and a shift towards preventative medicine.

A whole pipeline of new drugs ads promise to improving lives, but also complicates the picture, especially for primary care physicians, who will be doing the majority of the deciding when to describe what drugs.

Et cetera.

Particularly at the very business primary care level. This shift to preventive medicine and targeted drug therapy, it's going to require a kidney Intel X gateway that can capture the current patient biology blood Biomarkers and provide a simple accurate result that any primary care physician can use regardless of experience or training.

Thank you for your time today I look forward to sharing more details with you all in the future I would now like to turn the call over to Tom Mclain President.

Okay.

Thank you Howard and good morning.

When we launched kidney Intel X our commitment was to be positioned to offer testing to patients regardless of their ability to pay while more than half of patients eligible for testing <unk> Medicare fee for service or Medicare advantage coverage.

Keeping that requires broad coverage and billing programs that meet patient needs.

For traditional Medicare we continue to see claim payment from National government services. The Medicare contractor responsible for payment of claims for tests that are run in our New York Laboratory.

<unk> began paying under individual claim review for testing dates as of July 2022.

<unk> has also requested a local coverage determination or LCD from and GFS driven by FDA approval in June and GFS, formerly began its LCD review during fiscal quarter, one during the LCD review process and GFS.

Expended claims payment.

Of the 20, <unk> Centurys Cures Act Medicare contractors are mandated to base in LCD and robust evidence part of that process is to convene subject matter experts when necessary to review the peer reviewed published literature and to provide.

Good input that plays a role in the development of the future coverage decision.

And GFS held its CAC meeting to review kidney Intel X on August 28.

The Committee review included Nephrologist and primary care physicians from the Ngls region, who answered predefined questions about kidney and <unk> testing.

The transcript from that discussion has been published on the Mgs website.

In general we believe that comment supported the quality of the published evidence and we noted the primary care clinician concluded the kidney Intel X testing would be beneficial in carrying for early stage diabetic kidney disease patients.

Following the CAC meeting the Mgs medical directors consider that member observations and the peer reviewed literature.

And also evaluate evidence of utilization and outcomes benefits. When a coverage decision is reached the draft coverage policy submitted to CMS for review and comment and then schedule. It for review at an open public meeting.

As an update and GFS resumed payment for claims in November. The next open meeting is expected in February 2024.

Sure.

During Mgs LCD review period, we also submitted claims to first coast options. The Medicare contractor responsible for payment of claims for tests run in our Tampa, Florida Laboratory.

First coast began paying for submitted claims in October 2023.

We will continue to submit claims to both lgs and first coast.

Turning now to private payers with FDA approval in June 2023, we have continued to expand coverage for testing in our key sales markets.

We continue to see payment for kidney and <unk> testing for Medicare advantage plans at Medicare CLS Ax published price of $950.

We are also being paid by other private payers in our key sales regions, including New York, Illinois, Texas, Florida and the Carolinas.

Our focus is on expanding coverage contracts in these regions building on our successes, including emblem health Blue Cross Blue Shield of Illinois, and Blue Cross Blue Shield of Texas.

As a result of all of these accomplishments our policy is to accept all patient insurances to date, almost 90% of patients tested have an out of pocket obligation ranging from $0 to $20.

In order to assure that patients are not surprised by high deductible plans are out of network charges, we do not process tests with an estimated patient out of pocket costs greater than $50 without patient consent. While this does not happen often we hope to avoid office and patient <unk>.

This fraction with this policy.

We're also able to offer a generous patient assistance program to patients who meet specified financial criteria.

While mgs payment was suspended during Q1, we are encouraged that payment has resumed in Q2 and I look forward to keeping you updated on our progress towards a local coverage determination on future calls.

I would now like to turn the call over to James Sterling, Our Chief Financial Officer James.

Thank you John.

Today, we issued the financial results for the first quarter of fiscal year 2024, which ended September 32023.

Our GAAP financials were filed today on Form 10-Q.

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

For the first quarter, we recorded revenue of $460000 compared to $970000 in the first quarter of the prior fiscal year.

Overall testing volume remained steady with total test of 1297 of which 56% were billable.

A slightly higher total test volume been in both the prior quarter as well as the prior year fiscal.

First quarter.

As previously communicated certain study related tests at Mount Sinai are no longer available following the transition from Mount Sinai is payer Q traditional commercial insurance billing.

In the year ago period, 82% of our testing was available.

We expect to billable percentage to increase as commercial testing becomes a higher portion of the total in the quarters ahead.

Revenue reported in the quarter does not include tests billed to certain payers that are not yet being recognized as revenue until there is a demonstrated history of payment from such Payors misrepresented nearly 250 tests in the first quarter or about 34% of the billable total.

This also now includes testing built to lgs Medicare until regular payment resumes pending the outcome of the local coverage determination process.

Yeah.

Operating expenses for the first quarter were $8 $8 million on a GAAP basis significantly reduced from the $12 million for the prior year period.

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

More recently, we've taken a sharper knife to operating costs and implemented a plan to reduce payroll expense by over 35% year over year, and total SG&A by more than 30% year over year.

All while preserving the sales capacity to demonstrate revenue growth in the quarters ahead.

Our focus now on key sales regions combined with completion of milestones already discussed allows us to lighten or eliminate spending in several areas, including clinical trial work.

We will see the results of these changes starting in the immediate quarters ahead and continuing into the next fiscal year.

Net loss for the first quarter of fiscal 2024 was $10 1 million or <unk> 11 per share inclusive of a <unk>.

Foreign currency gain of $289000.

This was down from a net loss of about $12 million or <unk> 16 per share for the first quarter of fiscal 'twenty, three which included a foreign currency gain of $1 7 million.

We ended the first quarter with approximately $13 $9 million of cash as of September 32020.

We are actively engaged in financing discussions and are hopeful to close the transaction, which coupled with our cost reduction activities is expected to extend our cash runway into calendar 2026.

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

Ladies and gentlemen, if you'd like to ask a question at this time, you will need to press star one on your telephone and wait for your name to be announced soon.

<unk> a question press Star one again.

Again, a question Thats Star one one please standby, while we compile the Q&A roster.

Yeah.

First question coming from the line.

Mark Massaro with <unk> Your line is open.

Hey, guys. Thank you for the questions and Howard it's nice to hear from you. Thanks for providing your background.

Maybe if we could there is a lot of ground to cover so.

I know Howard you talked about the initial states that you're targeting.

Just maybe for folks that might've missed everything that you ran through.

Can you just remind us what the territories are and then I know you had a sales team on the ground previously or are you basically looking to optimize that.

Commercial team of 2014.

Just curious where you are in terms of.

Potential changes to that team.

Thank you Mark.

So initially what we did is we made some performance related changes a couple of a couple of months back and started re recruiting for those opportunities.

As stated the primary areas of focus for US right now it will be on a move forward basis, New York, Texas, Florida, North and South Carolina and Ohio.

We currently have 10 folks in the sales organization, most who joined US in August of this of this year and we continue to work and develop those folks to be key contributors in a move forward basis internally as part of some of those performance related.

Emanations, we have been actively recruiting new folks as well and again those are the four folks that will be starting between now and the end of this calendar year and I would say the biggest difference of what we were really looking for is I like to say we were looking for the top 10 per centers and what I mean by that is finding folks that have been in the primary care space before as well.

Calling on specialists, but more importantly that distinguish themselves within their organizations as prior P club winners top producers that whatever category that they were challenged with so I just feel like we've elevated the game with these new folks that will be starting between now and the end of the year.

Okay.

You guys were previously working with.

Ever Sadat is that partnership still active or how should we think about that going forward.

Yes.

Markets James that partnership is still active.

Although Howard obviously changes the game when we originally signed up with ever Sona, we didn't have Howard.

But the partnership with ever sound and will continue.

Excellent okay.

I could use maybe a little bit of help to understand why the.

The payment from Ngls was was stopped and then.

I believe it's now resumed good to see the payment.

Here in November, but maybe can you provide a maybe just an update as to why that payment was suspended does it have something to do with the.

CAC and the LCD discussion.

So are you Tom.

Thanks, James Mark, Yes, So we were notified when the LCD process.

Was initiated this was around the timing of the CAC meeting that they would not continue payment of claims while they were considering all of the evidence the medical directors comprehensively.

With regard to the appropriateness of support for medical necessity overall.

So when we receive that can we appreciated receiving that communication from and GFS.

We have not heard from Ngls as to why they have resumed payment of taxes being effective November one but.

We would.

We would understand that that had to factor in what they heard during the meeting.

And also the evidence review that the medical directors have done as a group.

Okay, Great and then it is very nice to see first coast come on it looks like they are.

Paying claims.

Maybe could you just remind me if youre pursuing an LCD with first coast and what timing might look like there.

Okay.

We knew with first coast that for tests like kidney Intel X.

They have entered into a process, where they pay claims and don't require an LCD, we have met with the medical directors.

To go through the evidence for kidney and <unk> before we submitted those additional claims we will be meeting with them again during the first quarter.

For an update on FDA and all of the published evidence that has been developed since our meeting earlier this year and as part of that meeting we will discuss.

Weather going forward with the LCD process is going to be necessary in this case or whether we can just continue to operate under the model that we have right now where they are paying for our claims within the.

The seven day window Thats typical for payment with Medicare contractors.

Okay great.

Maybe last question for me I know you don't need it but it might be a nice to have to have the national coverage determination can you just clarify the comments you made.

Have you submitted for that and can you just maybe brief us on any conversations you've had with respect to both the filing and perhaps the expected timing of obtaining an NCD.

So mark I would refer you.

As you know there is a rule moving forward that would guide the coverage of breakthrough technologies by Medicare at a national level on this is for any medical device. So anything approved through CD R. H.

That rule Medicare clearly stated that with regard to diagnostic tests.

Is there a preference the diagnostic tests are covered through the local coverage determination process through the Mac and that they believed that the Mac was the most effective way for those.

Coverage decisions to be reached however.

Diagnostic tests.

That we're facing challenges at the local level or on diagnostic tests that had a national Medicare had national Medicare policy implications that they could be considered at a national level.

So the typical pathway for a test like kidney and telex is to be LCD.

That said as you.

As you correctly recalled.

Because of the delays that we had faced with Ngls, we had met with national CMS nationally and notify them that we intended to apply for a national coverage determination.

And they and why because of the what we felt was a very slow movement forward with Ngls, we're now going back to.

CMS because.

<unk> does appear to be moving forward with the LCD process to understand with that development will they consider the review of our application for a national coverage determination.

A lot packed into a few sentences did that all follow or do you have any follow up questions on that mark.

Tom I really appreciate that I, followed everything and I appreciate all of those update so I will hop back in the queue. Thanks guys.

Okay.

Yes.

Thank you and our next question coming from the line of Paul <unk> with Stifel. Your line is now open.

Yes, good morning, just calling in for Dan area.

Just wondering if you can give some color on what to expect once this atrium health to wake Forest health system to get online.

Next month with the integration can you talk about sort of.

How thats going to rollout in terms of.

Reimbursement rate initially and then over the course of the next few quarters as well as <unk>.

Volumes, and if there'll be a bit of a pause there or what we can expect to see for the next few quarters.

That kicks in.

So the good news with atrium wake Forest.

As.

They have a superb.

Graded program.

From population health and primary care and other physicians.

We really view it as a model.

For how care should be delivered and supported.

Specially on the preventative medicine side, so kidney Intel X slots right into that system.

And.

The other good news is that we've spent the last couple of years.

With the leading clinicians at atrium wake Forest.

Using kidney Intel X.

In an IRB controlled real world evidence program, so they've used kidney Intel likes in the system.

In this care pathway.

With physicians.

Looking at risk and diabetic kidney disease.

Believe that we've passed through 600 patients tested.

And these results will be published.

We've already seen.

Obviously, the preview of this and we're very pleased with.

The fact that kidney <unk> appears to be performing very similar.

To the real World evidence program, which.

Which is completely independent and a different area of the country and a different system is Mount Sinai. So.

This is this is prime a fascia evidence for us that <unk> is doing the job in the care pathway to assess risk and help manage disease because wake forest is now familiar.

With kidney Intel X, we would anticipate a relatively smooth rollout.

Cros.

Certainly primary care treating physicians throughout the system.

The integration of kidney until X in the wake Forest Epic system is complete.

And should be completed in the atrium.

<unk> system in December.

Commercial testing will start shortly thereafter.

In terms of the reimbursement.

We are continuing to contract with multiple insurance companies and obviously with Medicare Medicaid.

At the $950 Medicare prescribed price.

We will not.

Contract off of that price.

At the moment, so you can expect that to be the the.

The price that we're moving forward with but we're very excited about atrium wake forest is a significant system.

And having the data that's been generated internally, we think that gives us.

And the clinicians a lot of experience to move forward with kidney Intel X on a broad basis.

In calendar 2024, we're not going to project the uptake.

In that let's let's see how it goes but.

Again, this is going to be a coordinated.

Effort.

So that we make sure we have proper support from the renal side as well as the internal support.

Which is being generated from population health and other leading physicians within wake Forest Tom.

Tom would you like to comment on that any further.

No I think you covered that very well.

And just to reiterate that because of the study that they have done across primary care within the wake Forest and atrium health systems.

They do have experience with that they understand what it can do in terms of pharmacy management appropriate referrals patient engagement.

So the debt that is something that they have firsthand knowledge that take advantage of as they are ready to expand our testing broadly within the health system and so we're very excited about it.

And I'd just like to add one thing.

Several years ago, we made the decision.

To invest heavily in real world utility.

And real world outcomes data.

Actually since the reimbursement.

Paradigm is moving towards the outcomes data not just utility data.

And so we've invested heavily for example in the Mount Sinai Health system Real World evidence program, we've invested heavily in the atrium wake Forest real World evidence program. All of this is now starting to bear fruit, we're having multiple publications.

Come out on that real world evidence.

This real world evidence is a critical part of establishing a broader reimbursement.

And obviously.

This real world evidence is going to help.

In terms of generating adoption with clinicians it takes time.

It takes a long time to get this done, but we've done all of the fundamental work.

Leading into calendar 2024 to make sure of that.

We do have an extensive.

Risk assessment program.

Throughout the atrium ROIC for our system to benefit.

Patients in need so.

Beginning to bear fruit now off of the investments that we've made going into this real world evidence core part of our program.

That's very helpful really appreciate the color just one more from us.

In terms of the growth outlook that was provided last quarter.

Could you just touch on sort of what you see happening in the near term in terms of you mentioned the sales team is still being built out.

Towards those objectives.

What.

What are you kind of expecting to see.

Just directionally.

Sequentially through the fiscal year.

<unk>.

One <unk>.

In terms of volume and so forth is that something that youre looking for a step up or waiting a little bit more towards the back half as we wait for the sales team to kind of kick into.

Full year.

Yes so.

Going into calendar 2024, we'd like to see a step up.

And equally as important wed like to see.

Growing evidence of commercial traction in multiple areas.

Right.

Right now with our reduced cost structure.

With market conditions the way they are.

The critical objective for the remainder of fiscal 'twenty four is to demonstrate commercial.

Proof of concept in all of the key markets that we have targeted.

It's very focused.

Very specific territories.

In territories, where we have extensive reimbursement, which again has been our goal from the very beginning we are starting to see territories, where we have over 90%.

Form of insurance payment against patients with any indicated use of kidney <unk>.

With Howard Salesforce, now coming online, which will be full force and effective going into the March quarter.

Of next year.

With groups like atrium wake forest coming online with additional data publication.

This should all.

Move to stimulate.

Additional testing volume.

In these territories.

What we're focused on and again I mentioned this early on.

Because we've crossed regulatory thresholds because we've crossed.

Data production thresholds.

We're now in a position where we can realign the resources in the company.

Significantly towards sales and marketing away from development regulatory.

Other activities.

Which require a.

Our significant investment and take a long time, we've now crossed the threshold. So really this is very much a sales and marketing game.

We are very much focused on.

How can we drive sales in the short term.

And certainly all of the.

Milestones that we've talked about.

Should stimulate that we're not going to forecast.

But I am I am optimistic about 2024, and now we need to prove it.

Understood. Thanks for taking the question.

Thank you.

And our next question coming from the line.

Randy Baron with Pinnacle Associates. Your line is open.

Hey, guys good morning.

I have one question for James and one for Howard.

James I, just would love you to drill into the first bullet point that you addressed which is the fundraise you said youre going to.

Hopefully be funded through <unk>.

Calendar 'twenty six I'm, just curious what that means in terms of directionally as much as you can give us the size of the right range for the size of the range. What your cash burn is going to be per quarter assuming.

No ramp.

And sales et cetera, whatever whatever you can share and Howard My question for you now that you're in the company is as you've looked through the business.

Just in a layman's perspective, what do you think the number one hurdle that <unk> needs to overcome to achieve sales then why has that not been overcome yet and I get you're scaling up the salesforce et cetera, but any kind of anecdotal stuff you can give us for how that could change going forward would be helpful. Thank you.

So Randy Thanks compound question.

Okay.

We're in discussions to raise funding, it's a very very difficult market as you know.

And as everybody knows.

Our goal is to put our balance sheet.

What should be largely focused on commercial efforts.

In place before the end of the year.

And we have significant players institutional players at the table.

In discussions to do that I'm, not going to characterize that because we're in the middle of the process.

But we're looking at a number of options and.

And obviously, we will do everything we can to maximize the value.

In that raise process, but again very difficult market.

Rob.

Concentration on.

Really going after the cost basis.

Has been helpful.

We will continue to do that.

As necessary in 2024 to extend the runway.

As far as possible.

2026 is an aspiration.

It's based on a model we've created with <unk>.

Cost reductions.

And a capital financing.

And let's let's see how it goes through the remainder of the year, but im optimistic that we'd get there.

And just on that note James before Howard.

What do you what do you think directionally not to a number but just directionally how much lower is cash burn going with all I mean, if I pencil out the math that OJ talked about like how much lower does it go to $6 million is it $5 million a quarter does it go to two just directionally.

Yes, Oh J you want to you want to address it.

Yes sure.

Speaking generally.

We are working towards.

<unk>.

$3 million to $5 million cash burn quarterly by.

By the end of this fiscal year, and getting down to $1 million to $2 million quarterly by the end of fiscal 'twenty six to give you.

Sense of what we're working on.

And then just unclear that would assume.

De minimis sales growth or what does that assume the sales behind it to get to $1 billion by 2000.

It assumes some reasonable sales growth in.

In addition to the cash.

Cost reductions that we've been talking about.

Okay.

Okay, and Howard I'd Love your take on kind of why sales Havent happened and what you think is changing now.

Randy Thank you for the question.

And Mike obviously spending some time in the field in the summer and it's certainly since I've come on board.

Full time.

I think it really comes down to one thing.

It's been a challenge at the clinician level to identify patients that meet our criteria and with a little bit unique about the situation is not only do we.

Require certain features to be on our requisition form for processing that test, but we have a very targeted set of patients that we're looking for.

And.

What I've been really impressed with how quickly the clinicians and get our message and why it's important.

Kidney and <unk> can do for them.

But there is kind of glaze over when you start talking about these are the patients that we need to define in a lot of it is in their systems. It's just finding the right person that can extract that so that was sort of like an early on timing.

I saw very very early on so we have been trying different tactics with targeted practices to kind of find that champion and I think one of the first things. We have done is as we start converting new offices, we let them know that theres. Some skin in the game. They have to have here theres. Some sweat equity. If this is going to work finding those patients.

<unk> is actually Paramount and we've been giving them. Some additional things that they can do to make that process. Similar so that to me was one of the biggest hurdles in the past it's still an ongoing going project, we will continue to hone on it.

Over time, but I think we've made some tremendous strides and what we're seeing early on is evidence that.

That the new clinicians that were closing in the last couple of months once they start we see a greater cadence sort of re frequent orders and that can occur unless they are identifying patients more effectively.

That to me is our I think our number one challenge.

Thank you.

Yes.

Thank you.

And as a reminder, ladies and gentlemen to ask a question. Please press star one.

And our next question coming from the line of Jens Lynn Lewis with.

With Investec your line is now open.

Yes.

I've got two or three questions, perhaps firstly on the clean risk model, which also made some headlines doing kittiwake and it's also mentioned alongside kidney flex in the in the draft Cadaga Guide could you provide any more color on this does clean risk represents a competitive threat to kidney intellects that's all in.

And if not why not.

And secondly on the on the planned cost reductions just to make sure that I understand it correctly could you could you just confirm if both period this will be achieved.

Does this refer to the current financial year versus last year, what is the level of annualized savings are ultimately achievable, possibly still for that thanks.

So Clinton risk, we're very familiar with Cowen risk.

It has a population based risk score.

So it's very different.

Then the kidney <unk> approach, which is an in vitro diagnostic.

And it is our firm belief that you need the biology.

You need the patient's biology.

That is going to drive the accuracy in early prognosis.

And ultimately.

That drives the characterization.

Of the disease the biomarkers in the blood.

Around therapeutic response development et cetera. So.

We think that kidney and <unk> as an in vitro diagnostic with Biomarkers captures the patient's biology that is totally unique.

Clinton risk as a population health or a population developed.

Risk score.

The other thing Thats important to notice or to note is that.

We firmly believe in a holistic commercial model that's going to be required to go back to what Randy was asking and Howard is answering why does it take so long.

To get adoption because it comes back to education at primary care and it comes back to pushing.

Standard of care educating all of that requires funding.

And so you need a commercial model.

That can generate a margin.

At the front end of the disease, which is what kidney Intel X has it has an established price it has a CPT code.

It has been regulated so we're fully validated now which is very important.

And I think the challenge for a lot of the other general algorithms, which are being used on large datasets is how do you get them, how do you get them validated.

Ultimately I believe theyre going to have to run through FDA and thats going to be highly challenging and it's going to take a long time I don't know if ultimately they can run through FDA.

Youre also going to have to generate a margin. So that you can educate because that requires a salesforce.

Requires all sorts of activities, so youre going to have to have a reimbursement paradigm in place.

So I think kidney <unk> stands alone.

Because it captures the biology from an actual blood draw it's been validated by the food and drug administration and we now have broad based reimbursement coming in so it's a very different animal.

Then an algorithmic of general population algorithmic approach not that there isn't value.

I think theres a lot of value.

In the algorithmic approach, but at the end of the day.

You've got to have something thats regulated reimbursed and especially as we move into this.

Poly therapeutic poly pharmaceutical application in precision medicine, where you have cocktails of therapies like the Olympics or the world SDLP two inhibitors.

Youre going to have to be able to capture today's biology on that specific patient that's going to require a blood draw and then youre in IBD land that requires regulation et cetera, I'm going to.

Ask com, if you have any additions to that because I know you've looked at all of these.

All of these things.

Sorry, James Yes.

We we definitely have stepped back looked at the full landscape and with what we have evergreen analytics and the value proposition that we bring.

We believe that we have identified the best path forward for having the greatest impact on clinical cure and have and patient outcomes and doing it in a way that is very efficient for health systems and clinicians.

And I am sorry, yes.

Second part of your question was what we went off on.

Yes.

On the timing of the cost reductions, whether the customer you're referring to.

Refer to the current financial year versus last year with DSO annualized savings to be achievable over time. Thank you.

No we are so.

Go ahead Roger.

Sure so the.

The reduction effort is in process already when we talk about a 30% reduction and thats, what we expect it to be over that.

In SG&A.

It is intended to be this quarter next year compared to today.

In.

Accordingly, first quarter versus first quarter, but youll see the evidence of that.

In the immediate quarters ahead, as well as we work towards it.

And I think.

Youll see that reduction having been achieved even.

The fourth quarter.

This fiscal year, so I can.

Before we get to the first quarter next year.

Okay.

Okay. Thank you could you just have an <unk>.

Final question, sorry to take up some us over time.

Doing the math on the on the pricing of billable tests, you get to number.

Significantly below the 950 per test could you, perhaps elaborate a little bit on what discuss it being applied at the moment because my understanding was at Mount Sinai was painful painful price. Thank.

Thank you.

Okay.

Yeah.

Yes, the short answer to that.

Mount Sinai transitioned to the full commercial reimbursement model in other words, we had a contract with Mount Sinai that paid $950 on testing that contracted ended I think sometimes in February and.

And we shifted to a commercial reimbursement model where.

Where we started billing.

A whole sequence of commercial payers.

In the New York region.

And.

That obviously impacted.

Some of these.

Tests are moving up on reimbursement.

Pricing is $950 thats, our contracted pricing.

But not all of the tests were paid for which impacted the.

The average pricing and also.

There were.

Sequence of study tests, which I think went into the total testing volume is that correct O J.

Okay.

Non non billable studies estimate.

Yes, that's correct.

Yeah.

Okay. Thank you.

Yes.

Thank you.

And again, ladies and gentlemen, as a reminder, if you'd like to ask a question. Please press star one.

And we will give it a moment.

Thank you and I see no further questions in the Q&A queue. At this time. Thank you ladies and gentlemen. This concludes today's presentation. Thank you again for your participation you may now disconnect.

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