© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning, and welcome to the Renalytix Conference Call to review First Quarter Fiscal 2023 Financial Results. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Peter DeNardo of CapComm Partners for a few introductory comments.
Thank you, Sheri. Thank you all for participating in today's call. Joining me today from Renalytix are James McCullough, Chief Executive Officer; and James Sterling, Chief Financial Officer, to provide formal remarks; and Tom McLain, President and Fergus Fleming, Chief Technology Officer, are also on hand for the Q&A session. Before we begin, I'd like to remind you that management will make statements during this call that includes 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 KidneyIntelX, the potential for KidneyIntelX to receive regulatory clearance from the FDA, the commercial prospect of KidneyIntelX, including whether KidneyIntelX will be successfully adopted by physicians and distributed and marketed, our expectations regarding reimbursement decisions and the ability of KidneyIntelX to curtail cost of chronic and end-stage kidney disease, optimize care delivery and improve patient outcomes, trends in our market and potential benefits of government policy change, the impact of COVID-19 and other world events on our business, our expectations for hiring, product development, strategic partnerships and collaborations, reimbursement decisions, clinical studies and regulatory submissions, our business strategies and future growth, including plans, expectations and opportunities for financing our operations and revenue projections and guidance. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly you should not place undue reliance on these statements. For a description of the risks and uncertainties associated with our business, please refer to the Risk Factors section in our annual report on Form 20-F that was filed on October 31, 2022, with the Securities and Exchange Commission. All forward-looking statements made on this call are based on management's current estimates and various assumptions. Renalytix disclaims any intention or obligation, except as required by law, to update or revise any projections or forward-looking statements, whether because of new information, future events or otherwise. This conference call contains time-sensitive information and is only accurate as of the live broadcast today, November 30, 2022. I'll now turn the call over to James McCullough. James?
Thank you, Peter. Good morning and good afternoon. Since we reported our year-end results just a month ago, my comments will be focused on summarizing recent achievements in the setup for a successful beginning to calendar 2023. Since July, the start of our fiscal year 2023, we can look back at several important milestones, including publication of key utility data showing effectiveness of KidneyIntelX in the primary care office, expanding on multiple categories of insurance payment for KidneyIntelX including Blue Cross Blue Shield, Medicaid and Medicare, demonstrating continued growth and testing adoption with our first $1 million revenue quarter ending this September and pivoting to a lower overhead structure to extend cash runway. Progress with insurance continues to be an important highlight. In the September quarter alone, we have secured new major insurance contracts and established Medicare payment. This brings our total number of secured contracts to 30, excluding Medicare and Medicaid. We have also begun detailing plans with a large U.S. health insurance company to provide KidneyIntelX testing directly to their own physician care network. This insurance company has also agreed to provide us with coverage concurrent with this direct-to-physician program. We believe partnering with insurance companies to implement testing across physician managed networks can be a significant driver for expanding KidneyIntelX adoption in calendar 2023 and will demonstrate the value of KidneyIntelX for improving care for millions of patients. Our stakeholders should look forward to additional payer contract disclosures in the coming months. A primary contributing factor for our success in securing insurance coverage is real-world evidence that KidneyIntelX is working. This body of evidence, which takes years to design and implement, is now showing that KidneyIntelX can make a real difference in helping doctors and care for patients. This week we announced newly released utility data for over 1,600 patients' results across 75 doctors at 20 clinical sites, showing the importance of KidneyIntelX testing and helping head off the worst effects of kidney disease and diabetes at the primary care office. These results were just published in the widely read Journal of Primary Care and Community Health. We have already started pulling together subsequent monitoring patient test data and expect to continue publishing rolling results on the effectiveness of KidneyIntelX in the real world throughout calendar year 2023. As a reminder, real-world evidence results will now begin to be incorporated from multiple medical center sources, including Wake Forest Baptist Health in North Carolina. From an operations and test processing standpoint, our laboratories conform to the highest quality and regulatory standards. This is obviously essential if we are to be prepared to support patient testing nationally post FDA de novo marketing authorization. Our systems and laboratories have now been subject to and passed 12 inspections from multiple agencies. This level of quality assurance is another important facet that instills confidence in doctors when it comes to KidneyIntelX testing results. Of note, the regulatory environment is evolving. Congress recently passed the medical device user fee agreement or MDUFA 5. MDUFA 5 is a 5-year agreement that provides operation funding for FDA and provides additional incentive funding if the agency meets key performance goals. We believe MDUFA 5 is a factor in improving FDA's ability to help innovative companies bring life-saving technologies to the market. FDA has also issued a proposed rule to drive towards convergence between the current FDA regulations and ISO 13485 requirements. Renalytix has pursued and achieved full ISO 13485 compliance and certification. We welcome this proposed rule and believe that KidneyIntelX is well positioned from a competitive industry standpoint. As we discussed in previous quarterly call, we can expect to look forward to a milestone heavy short term. In terms of our FDA process, while there is never a guarantee, we believe we are reaching a logical conclusion in the process with a de novo marketing authorization decision as early as the March quarter. As previously discussed on our call -- on our last call, Medicare coverage to a local coverage determination is also a potential for KidneyIntelX in the first half of calendar 2023. I would now like to turn over to James Sterling, who will discuss our financial results for the quarter. James?
Good morning. Today we issued our financial results for the quarter ended September 30, 2022, which is our first quarter of the 2023 fiscal year. Figures I will discuss here are based on our GAAP financials and quoted in U.S. dollars, which is our reporting currency. For the quarter, we recorded revenue of approximately $1 million, double the $500,000 we reported for the first quarter of the prior fiscal year. Operating expenses were $12 million on a GAAP basis as compared to $12.1 million in the first quarter of fiscal 2022. Our operating expense reflects a reduction of $2 million to $3 million per quarter since we announced our efforts to reduce expenses. Net loss for the first quarter of fiscal 2023 was $12 million or $0.16 per share. This is compared to a net loss of $10.1 million or $0.14 per share in the first quarter of fiscal 2022. We ended the quarter with $31 million in cash as of September 30. We remain committed to preserving cash where possible while retaining the ability to grow sales. Operator, could we now please open the call for questions.
[Operator Instructions] Our first question, that will come from the line of Dan Arias with Stifel.
James, as we're starting off a new year I was hoping maybe you could just sort of set expectations for where geographically and with respect to certain institutions, we should look for KidneyIntelX usage to ramp most notably in the near term and then across the quarters. And then recently, you did make mention of some new areas that there might be news on or where you're trying to establish commercial relationships. Can you just sort of help us with what we should think about new business development as well?
Yes. Thank you, Dan. As we discussed, we are narrowing the focus and following the coverage -- the insurance coverage that is because where we are developing what I've termed super-majority coverage where you now have a sequence of insurance payers covering a significant majority of the population in a specific region. That's where the business goes. And I disclosed that we are focused on Illinois, New York and North Carolina as 3 primary examples where we can concentrate resources. That also helps us with cost control. So we're not doing ubiquitous distribution across the United States today.
We're really focusing on areas where insurance coverage is prevalent. And that helps in a number of ways, one of which is you significantly reduce the risk that a patient ends up with a bill which is a real no-go, especially at primary care, which is our target audience for preventative health care in diabetes and kidney diseases, that's where you have to do it is the primary care. So I would focus on those 3 areas for the moment. We've made substantial progress. We've announced or we've disclosed recently Medicare and Blue Cross Blue Shield coverage in Illinois. You should expect to see that pattern to continue with broader insurance coverage in New York and also North Carolina. However, if insurance coverage -- super-majority coverage does develop in other states, that doesn't mean we can't reflex and move into those states. And one of the interesting things that we brought online is a direct-to-physician capability through our portal, myIntelX, which is now up and running, and we are receiving physician orders through my myIntelX. So that allows us to move into a territory where insurance company develops without doing the hospital system integration. That doesn't mean, ultimately, we don't want to do a hospital system integration because that helps, but we are certainly now have the capability to move into a territory with developed insurance with -- myIntelX to begin testing in a very short period of time without a significant upfront investment, which is key, obviously, in this current market environment where cash maintenance is very important. I also do expect in 2023, we will continue to see progress with the VA system. And I do expect that, as I mentioned in the call, the insurance-led initiatives are starting to emerge. So the health economics, the cost benefits of understanding who's at risk and who's not in these large populations early and intervening are significant. If you get in early and you practice preventative medicine, you cut the cost for the insurance company down dramatically, especially in this space with diabetes and kidney diseases. So we are initiating an insurance-led program direct to their own physician network. This is a large insurance company. You should expect additional news on this. And we think that this is a very interesting model, obviously, going forward. It took time to get to this point. We had to generate a lot of real-world evidence to show the benefit of KidneyIntelX. We are now doing that and publishing on it, and that's giving us a whole new level of conversation with insurance companies that are now struggling to figure out how do we control the cost here. So in summary, look at Illinois, look at New York, look at North Carolina and look for opportunistic selective moves where we have insurance-led initiatives or where we start to develop super-majority coverage across very large populations and look for direct-to-physician initiatives with myIntelX.
Okay. That's helpful. And then maybe just a follow-up on that topic of reimbursement. If I remember correctly from the call a couple of weeks ago, I think the application for an LCD has been submitted and accepted. Do you think that a draft coverage policy could show up in a similar timeframe as the FDA approval, which I know you mentioned this is an uncertainty in itself. But just from a timing perspective, does it look like meetings and conversations that you'll have with CMS are tracking towards a first quarter or second quarter of the calendar year time frame?
Yes. So I'll let Tom answer that. And timing is always difficult. But with that caveat, it looks like when it rains, it's going to pour. So we may see a confluence of events here going into the next calendar year. But Tom, why don't you answer specifically?
Sure. Thanks, James. The contractor that we're working with Dan has quarterly open meetings. So it is possible that there could be a coverage determination for consideration at either of those meetings.
[Operator Instructions] Our next question and that will come from the line of Mark Massaro with BTIG.
Thank you for the questions. I think going through my notes and just remembering the last call, I believe the majority of your volumes came from Mount Sinai. I guess, can you just maybe provide us with an update of what procedures you have in front of you with the VA just to try to increase volumes across the VA hospitals. I recognize that working with the VA can be challenging given that I think you have to go hospital to hospital but can you just give us an update there and to what extent do you think the VA can start to really build relative to your overall volume mix?
Yes. It's a very good question, and the VA remains a very important opportunity, especially because we have secured coverage through the 10-year government contract. And it is taking longer because the VA is very complicated, as you point out. But I think it would be helpful, Tom, if you could answer from an operations standpoint and also from a technology standpoint for some of the opportunities coming up in the VA, Fergus, if you could chime in after Tom.
So Mark, VA is a significant opportunity for us. There is a large population that would benefit from KidneyIntelX testing and the traditional approach with the VA, which is to secure contracts like laboratory services agreement and contracted purchase agreements. We are making the initial gains there by entering into those agreements. But with the super-majority insurance coverage that James has spoken about, it's giving us the opportunity to have those government account execs, now also call on physicians in the community. And that is an important opportunity with coverage and payment, like James has described. But it also opens up the opportunity to provide KidneyIntelX testing for veterans who are receiving care in community practice offices. That's allowing us to drive volume in the A centers that will be important evidence of utilization for securing expanded laboratory service agreements and purchase contracts. So it's very synergistic with what we're doing to develop that direct to primary care practice model, and that's becoming an important driver for that part of the business, the VA side of the business as well. On the technology front, Fergus?
Yes. I mean as we scale within the VA and grow those volumes and grow those relationships with individual VA facilities, one of the key drivers is ensuring that we can deliver this solution in a seamless, frictionless way to the ordering provider while at the same time be very cognizant and adherent to the strict data protection and privacy framework that applies within the VA to address those challenges. We have been very fortunate to work with at a national level with the VA on a novel solution whereby we're working on deploying our KidneyIntelX solution within the VA's own cloud infrastructure so that we can provide the same level of ease of use that applies to other health systems to all new physicians within the VA by allowing them to order a test and receive the results within their own IT infrastructure without need for us to extract their data and be subject to the very strict regulatory framework that would therefore apply. So we've caused some significant milestones in recent weeks in relation to that program. And we're now moving into a new phase of implementation, whereby we will be in to deploy our code into the VA's own cloud infrastructure, which they call the enterprise cloud. And we'll be one of the first companies to partake in that type of endeavor. So that's happening in parallel as volumes grow as the ordering as well as service agreements come into place. The ability to be deliver that service through that seamless order and reporting infrastructure will be pivotal.
Okay. Great. It's nice to see that you're getting paid through the ICR process for Medicare. Would it be possible for you to clarify -- are you getting paid on the majority of the claims that you're submitting to them or are you getting paid on all of them? Just any sense for how the ICR process is going?
No, we're not commenting on specific payment practices of the contractor. That's something that works itself out over time but we're -- what I can say is we're very pleased with what that payment practice has been to date.
Okay. And then maybe just last one for me. It looks like you picked up a couple of commercial payer contracts, which is nice to see. Can you give us a sense for what your outlook looks like for a commercial payer contracts for fiscal 2023? And do you think that some other payers are looking to other key achievements, whether it's a Medicare LCD or perhaps even an FDA approval? Or do you think that a lot of the conversations you're having with payers is really around your dossier and the data that you've presented?
On that one, Mark, the pivotal piece of evidence always for a payer is published peer-reviewed evidence that clinicians adopt the product that you're offering and that it impacts care delivery, and that is the importance of the publication that was announced this week. That is real world evidence that shows a test like KidneyIntelX, which is directed to change chronic disease care in the primary care office, which has been a goal of population health initiatives across the country for a long time, but it's showing that this test is utilized by physicians. It does change what they're doing in the care management of patients, and it benefits them clinically in as little as 6 months. So for us, that type of evidence for any product like KidneyIntelX, that is the definitive evidence for payers that drive those coverage determinations. So with the publication of that data, we are strongly optimistic about our ability to expand and execute new coverage agreements in 2023.
[Operator Instructions] We do have one more question, and that will come from the line of Yi Chen with HCW.
You mentioned that the -- during the quarter, 80% of the tests were billable. Do you expect the percentage to improve or remain stable going forward?
We would expect -- thank you. We would expect the percentage ultimately to increase with increasing coverage. But we're actually very pleased with that percentage at the early stage. Tom, do you have anything to add to that?
No, I think that's fair. With things like being on the clinical lab fee schedule with the coverage determinations that are in place with Medicare payment, all of those factors impact how the test is paid for, whether or not there are coverage agreements in place. And yes, overall, looking at KidneyIntelX and the stage that we're at with commercial launch, we're very happy with the level of coverage that we're seeing.
I think it's important to note again that there is a large intrinsic value, which has been accumulating through the real-world evidence program. The data results just published, as Tom mentioned, showing benefit within 6 months, we believe is exceptional and quite novel in this space. And these data results take years to put together. They're very expensive. But once they're in place, they now begin to continue to accumulate. So the real-world evidence program is not only very strong, but it's growing, and it will continue really on an every 6-month basis to put up new and additional longitudinal data to support use of KidneyIntelX at primary care. And this, as Tom mentioned, goes directly to generating coverage determinations, percentage of coverage, et cetera. So we're really, I believe, with insurance payment, we're very much at an accelerating point. In 2023, we'll continue to see regions, including large population center regions developing comprehensive coverage across large populations.
Were all the billable tests were paid at $950 per test?
So our list price for the test is that at $1,200, our contracts for payment of the test has been at $950 or more.
Got it. And could you share with us the latest feedback from the FDA regarding the de novo application. Is the FDA awaiting additional clinical evidence or is the existing clinical evidence sufficient for the FDA to make a decision?
At this moment in time, the FDA have all the information that they have requested and we provided all the data and analysis that has been requested through the breakthrough process. So there is no outstanding data requests from the FDA at this moment in time.
I'm currently showing no further questions in the queue. Thank you all for participating. This concludes today's conference call. You may now disconnect.