Renalytix Plc
Q1 2022 Earnings Call Transcript

Published: 8 Dec 2021

[Operator:]

Good morning and welcome to Renalytix conference call to review first quarter results for Fiscal year 2002. 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 DeNardo our CapComm Partners for a few introductory remarks.

[Peter Denardo:]

Thank you, Catherine. And thank you all for participating in today's call. Joining me today from Renalytix Jamesville McCullough, Chief Executive Officer, Tom McLain, President, and Jane 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, statements related to KidneyIntelX's ability to lower healthcare costs, improve patient quality of life, and set the long-term standard of care trends in our market and potential benefits of government policy change. The impact of COVID-19 on our business, our expectations for hiring, product development, strategic partnerships, and collaborations, reimbursement decisions, clinical studies, and regulatory submissions, and our business strategies and future growth. 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 20th that was filed on October 21, 2021 with the Securities and Exchange Commission. All forward-looking statements made on this call are based on management's current estimates and various assumptions. Renovated 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, December 7, 2021. And with that, I'll turn the call over to James Mccullough. James?

[James Mccullough:]

Thank you, Peter. Good morning and good afternoon. As the end of this calendar year approaches, we are confident that our Healthcare System Partnership model is delivering a unique value proposition for changing the course of chronic disease management. As the real-world numbers start to build, lessons learned from the KidneyIntelX implementations at Mount Sinai, Wake Forest, Atrium Health, CDPHP, and now the Veterans Health Administration System are setting the foundation for a national model with the potential to enable a broad section of healthcare providers to drive better outcomes for the greater than 12 million people with diabetic kidney disease in the United States. At Mount Sinai, that KidneyIntelX program experienced growth during the quarterly period. And most importantly, continues to generate key utility data around physician behavior, risk assessment ordering, and follow-on clinical actions. In mid-November, KidneyIntelX testing was extended to the Mount Sinai Networks sites across Long Island and Queens in New York, incorporating several new physician practices to Integrated Electronic Health Record Ordering. We are now able to measure a critical measure, critical metric, and volume growth for the KidneyIntelX program with conversion from pretended to executed orders. Said another way, conversion is the percentage of doctors who actually order KidneyIntelX testing for their patients in response to a centralized Population Health suggested or pretended order. Mount Sinai is now seeing conversion rates as high as 80 % in the quarter ended this September. An outstanding metric of performance, and a direct measure of active engagement in risk assessment by clinicians. Further, Mount Sinai is now leveraging its population health pharmacy management program to support primary care practices on diabetic kidney disease and optimizing therapy decisions early in the disease cycle for those patients that getting the MPLX's prognosed that intermediate and high-risk. Doctors are now demonstrating that assessing risk in their kidney disease patients is important and are willing to take direct action on a prognostic result. Assuming this high rate of conversion to executed orders with coordinated pharmacy management continues, we will have demonstrated important clinical activation beginning at the primary care level. This should provide publishable evidence that health systems implementing KidneyIntelX model have the potential to drive significant improvements to diabetic kidney disease management across large groups of practicing primary care physicians, connected through the electronic health record system. We believe conversion and pharmacy management will support real-world evidence results published in the coming quarters and will accelerate additional healthcare system adoption and payer coverage in 2022. Implementing its scale and account like healthcare environments such as Mount Sinai has required many learnings and continuing innovation. Importantly, we are now demonstrating the KidneyIntelX care model can not only be applied across multiple healthcare systems with different operating environments, but that we can accomplish a full implementation to clinical testing in shorter timeframes. With our Wake Forest implementation, for example, we were able to achieve the startup clinical testing in just six months from execution of contract. A go-live time frame, we are now targeting to reduce the 3 to 4 months with coming system partnerships. We expect implementation in our most recent hospital system Partners, Saint Joseph, will be the most efficient to-date. Implementation such as Mount Sinai, Wake Forest, University of Utah, physician-led payer network, CDPHP, and the VA medical system are complicated by requirements to coordinate electronic health record system integration, broad physician in education, defining a care pathway would general and specialty physicians and setting up a pharmacy management program. This complication, however, is offset by long-term care management relationships that can reach large physician basis and they're patient populations from the outset. A significant competitive barrier to entry. The Mount Sinai, St. Joseph and CDPHP implementations are demonstrating the value and focusing on a healthcare region with concurrent regional implementations, we expect to achieve efficiencies in sales and medical science liaison, personnel deployment, and overlapping insurance coverage across different patient populations. We also see a potential saturation effect beginning to occur, which is generating awareness and near-term demand from other players operating in the New York state region. St. Joseph's also offers an opportunity to accelerate adoption into a larger patient population, as they are part of the Trinity Health System. The fifth largest healthcare network in the United States with 1,600-member healthcare facilities. We expect to announce additional partnerships in the New York region throughout 2022. The KidneyIntelX real-world evidence utility should continue to expand rapidly with tested patients to date now, numbering into the thousands. Real-world evidence testing and care management in the KidneyIntelX diabetic kidney disease population could well exceed 20,000 patients in calendar 2022. This is no small population dataset and provides Renalytix with considerable use case experience and the statistical power to begin addressing insurance payment for repeat testing in high-end intermediate risk patients, potentially expanding. The indicated uses to include diagnosis and therapeutic response monitoring and to other potential related disease indications, such as cardiovascular event risk. In short, the real-world evidence program we have established provides a direct potential pathway to significant increases in the KidneyIntelX's total addressable market and begin to erect a one-stop shop for practicing primary care physicians to assess chronic disease risks. A real-world evidence program also has the potential to provide KidneyIntelX's would the significant competitive advantage through continuous product innovation and performance improvements. With the General Services Administration contract that establishes full reimbursement at $950 per reportable results for any KidneyIntelX's test ordered by a government physician we are on our way to a sustainable revenue pathway. In the VA Health System alone, there are approximately 400,000 diagnosed diabetic kidney disease patients eligible for KidneyIntelX base-line risk assessment today. Again, because we have full reimbursement in this population, we have hired, trained, and deployed sales personnel, in addition to medical science liaison personnel into the VA system to begin supporting KidneyIntelX usage nationally. Given our overall experience and implementation success, we are now targeting 20 large hospital systems, give me IntelX contracts in 2022. These systems could provide us with the potential to achieve 7 figures of diet kidney disease patients integrated into a KidneyIntelX risk assessment model. I would now like to turn the conversation over to our President, Tom McLain, for an update on our commercial progress.

[Thomas Mclain:]

Thank you, James. While the implementation timelines, we're not what Mount Sinai planned initially impact to COVID-19, it is now clear that our shared achievements have defined the value of KidneyIntelX testing in our health system focused commercial model. The invaluable lessons learned with the first scaled KidneyIntelX implementation have created a playbook that is being applied, not only in New York, but it's part of the core offering across multiple other Health Systems. KidneyIntelX's now driving increased value for clinicians, patients, and payers and Mount Sinai, Wake Forest Atrium PDPHP, and soon across Saint Joseph 's and the VA Medical System. From the start, we were aware that others have tried to apply broad care solutions in chronic disease based on their technology solution. We studied their successes in their failures in developing our unique approach to care enabled by KidneyIntelX risk assessment. The differentiated features of our test in our core care model are allowing us to demonstrate unique utility.

[Operator:]

Please standby. We're having technical difficulties. Just one moment. Please standby. We will continue momentarily. You may now begin.

[Thomas Mclain:]

Sorry for the interruption and the drop in the call. This is Tom McLain. I'm going to begin my section of the presentation again. While the implementation timelines we're not what Mount Sinai planned initially, in part due to COVID-19 It is now clear that our shared achievements have defined the value of KidneyIntelX testing in our health system focused commercial model. The invaluable lessons learned with the first scale, KidneyIntelX implementation has created a playbook that is being applied, not only in New York, but it's part of the core offering across multiple other health systems. KidneyIntelX is now driving increased value for clinicians, patients, and payers at Mount Sinai, Wake Forest Atrium, CDPHP, and soon across Saint Joseph's and the VA Medical System. From the start, we were aware that others have tried to apply broad care solutions in chronic disease based on their technology solution. We studied their successes and importantly their failures in developing our unique approach to care enabled by KidneyIntelX risk assessment. The differentiated features of our test and our core care model are allowing us to demonstrate unique utility from the earliest stages of diabetic kidney disease. In 2021, we accomplished something we believe no one else has been able to do. We implemented advanced IVD risk assessment in a large chronic disease population across a complex integrated network comprised of hospitals, primary care offices, and specialist physician practices. In this complex environment, we have had to learn how to drive efficiency in the clinical pathway with sensitivity to the demands on Primary care physicians that affect training and adoption timelines. All of this was within our first EHR integrated ordering and result reporting technology application. We have come to truly understand what it takes to be successful in a complex have been heavily regulated environment with precision. I'd like to quickly provide more context around what this accomplishment really means for our capabilities going forward. Mount Sinai is representative of the complexity in the healthcare delivery model in the United States today. The health system was built from the acquisition of independent hospital systems, PCP office's networks, specialist practices, and health centers. It serves disparate patient populations from the heart of New York City, to suburbs in the Long Island, and upstate to New Jersey and Florida. The health system operates across different data platforms, care pathways, and delivery models. Mount Sinai has many different provider contracts with local, regional and national insurers, Medicare and Medicaid, all under unique payer and payer risk models. The reality is that this complexity has been a barrier for many health systems in fully deploying a single care practice model across there diverse patient populations. At Mount Sinai, we learned the importance of the right sponsorship for implementation programs, especially the roles and collaboration needed between clinical medicine, population health, and the teams. We have also learned the essential roles of our health systems partnerships, medical affairs, client services, and sales account executives to support the roll out. We have defined the key metrics and information that are helpful to quickly align on and assess the benefits of KidneyIntelX inform care. We have developed a model for integrating payers and economic data to demonstrate value. And importantly, we have developed the core parameters to effectively apply risk inform patient management across different care and payer models that exist within the same health system. This program is also demonstrating the benefits of a value-based care model that drive savings for payers and providers through better care for patients. Our team is confident that what we accomplished together with Mount Sinai, what we have learned an experience, it equips us to streamline and accelerate implementation timelines, and positions KidneyIntelX to succeed in subsequent health systems roll-outs. As James noted earlier, we have already demonstrated that wait for us to Atrium where the time from contract to first clinical tests with 6 months, that timeline will be further accelerated in future system roll outs. James Sterling, our Chief Financial Officer, will now provide more detail on our financial results. James.

[James Sterling:]

Good morning. The earnings release we issued today presents our U.S. GAAP financial results for the First Quarter of fiscal year 2022 ended September 30 2021. Then I'll review a summary of these results now, all figures are in U.S. dollars, which is our reporting currency. For the quarter, we recognized about $450 thousand of services revenue related to testing under the Mount Sinai clinical utility study, and $30 thousand of services revenue from AstraZeneca. We did not post revenue in the prior year period. We recorded $230 thousand of costs attributable to those revenues. Our operating expenses were $12.1 million for the quarter as compared to $5.4 million for the prior-year period. The increase was primarily driven by higher headcount, higher R&D Franchise-related to studies at Mount Sinai, Wake Forest, and University of Utah, as well as increased consulting and professional services fees in support of our growth. Net loss for the first quarter of fiscal '22 was $10.1 million or $0.14 per share, compared to a net loss of $7.2 million or $0.10 per share for the same period a year ago. We ended the quarter with cash and equivalents of $54.3 million as of September 30, 2021, compared to $65.1 million at the end of June 30, 2021. I'll now turn the call back to James Mccullough for final remarks before we open the call to questions.

[James Mccullough:]

Thank you, James. Finally, we have all experienced November, December, and have presented a challenging capital markets environments, where the tools and diagnostics sector in particular, has become, in our opinion, oversold. Renalytix stock has fallen substantially with the rest of the sector in recent weeks to pricing levels, we believe do not reflect the series of value milestones achieved since our Nasdaq listing in 2020. In the coming year, we intend to focus on increasing the liquidity analyst coverage and visibility of Renalytix stock. And while we will continue to refrain from footprint, from providing specific revenue guidance at this early stage of our business scale up, we will provide core elements to support financial modeling, such as select specific testing run rates, addressable markets, and routes to expanding addressable markets such as repeat testing. For 2022, we are targeting a series of catalysts, including one, achieving insurance payment for greater than 12 million individuals with diabetic kidney disease, including with Medicare and Medicare Advantage Payment profiles, 2. Announcing a series of new Healthcare System Partnership, 3. Publishing real-world utility evidence from our Mount Sinai and other study programs, 4. Announcing new strategic partnerships in the services and pharmaceutical categories, 5.5. achieving FDA De Novo marketing authorization, and six, demonstrating revenue growth across multiple market segments. We appreciate your patience and support in 2021, please have a safe and happy New Year. And with that operator, we'd now like to open the call for questions.

[Operator:]

Thank you. To ask a question you may press star one on your telephone, to withdraw your question, press the pound key Our first question comes from Tycho Peterson with JP Morgan. Your line is open.

[Tycho Peterson:]

Hey, good morning. First question, just on the sales ramp, I know you hired that Jen Spoken (ph.). I think this plan needs to hire 40 people

[Tycho Peterson:]

support him. Is that all dedicated to the VA? Can you talk a little bit about scaling up there, and then just broader friends from Salesforce?

[James Mccullough:]

Yeah, hi. Tyco. It is primarily dedicated to the VA. One of the rules of the road. We are adhering to is that we will not hire a significant fixed overhead until we have direct visibility on secured reimbursement and with the VA Medical System, we are going to expand into that rapidly. There 171 Medical Hospital systems in the VA Medical Group. And we're now going to start with that sales force, customer service and medical science liaison on a national rollout scale. We have hired other salespeople, which will be supporting our efforts at Wake Forest, and again at Atrium, and also now on the Mount Sinai. And as we get additional insurance coverage that come into those systems, we will continue to scale that up as well.

[Tycho Peterson:]

And then LCD timing, I know you previously said summer of 2022. Are there any chance that FDA approval could accelerate that? Or any risks and push out? What's the related software.

[James Mccullough:]

Yes. Great question, it's a 3-dimensional chess board. So, we're playing all dimensions. The LCD is certainly one Ralph that we're focused on, we've been focused on it from the very beginning. We the guidance we've given to the market is that we do expect an LCD by the summer, but there are other pathways to Medicare payment. And it's interesting to follow the track of what's going on post-MCIT now, back down in Washington. So, I think that other pathways will also open up in 2022. FDA is not a requirement. It is certainly something we want to have but if we do get FDA, will that help in terms of timing perhaps. I don't know Tom, if you want to add any color to that.

[Thomas Mclain:]

Certainly. Anything on additional with the task that evidences its validation is helpful. But as you know, the majority of clinical diagnostic tests reimbursed under Medicare, under local coverage determinations today. The majority of them are laboratory developed tests, not FDA approved or cleared tests.

[Tycho Peterson:]

On the development roadmap. I know you've also talked about repeat testing for treatment response monitoring. How far out is that in your view?

[James Mccullough:]

Yes. We haven't put a specific timeline, but I'm very encouraged by the development of real-world evidence. So, I think one of the core value propositions for what we've done is we've now recruited in multiple centers across geographically diverse implementations, across a diverse patient population. We are looking at the real-world evidence of equation in different ways. We can now start to measure physician response. Obviously, we talked about conversion, which is a key metric of performance for us. We can take a look at therapeutic prescription. We can take a look at different clinical workflow strategies. We can look at physician referral behavior. So, with the real-world evidence machine that we've set up, 2022 is going to generate a huge amount of data. And I think moving into the March quarter, and certainly the June quarter, we're going to start to be able to put some real guidance down in terms of the data development. We're going to be publishing on that, and it's a matter of time. But certainly, we're already getting requests from physicians about repeat testing, particularly in the high-end intermediate risk group, that's a natural thing to do. Once you baseline risk assessment of patient with KidneyIntelX, and then you prescribe the drug, you want to see if it's making a difference. If you're starting to follow the patient, if you're educating the patient, if the patient is changing their own behavior, you want to start to see how that affects kidney health and kidney risk. So, it's a very natural extension for us now to roll into monitoring. And another thing which is important, the landscape for therapeutic development is starting to mature. So, we are seeing strong pipelines in multiple pharmaceutical companies. Obviously, we have the SGLT2 inhibitors. Bayer has . There are number of other therapeutics which are coming online. And this is the cancer equation all over again. You want to have the ability to risk assess early? Do you want to have the ability to characterize the disease and you want to start to now identify patients that are appropriate ultimately for therapies? And you want to be tracking therapeutic response. All this needs to be validated all of this needs to be done in a regulated pathway. But I think what we're going to see is an acceleration of precision diagnostics and therapeutics coming to play. And there'll be a lot of options for patients and physicians. And that's going to require upfront risk stratification, understanding and following. So, it's a very rich area of development, right now. We see it happening very quickly, much quicker than it did in the cancer field. And it's going to be interesting in 2022 how the data comes down.

[Tycho Peterson:]

Great. Last one for me, I know AstraZeneca revenues are still small. When does that start to become more material? And I guess similar question for David, I think you're launching in three markets this year. So, when do you start to recognize revenues from that?

[James Mccullough:]

Yeah, the pharmaceutical equation, I think is going to be very interesting in 2022. I do believe it's going to expand. And we have learned a lot from our AstraZeneca collaboration. We've been in with real-world tracking now in the Mount Sinai Health System. So, I do expect 2022, I'd like to expect the first half of 2022 will be very fruitful when it comes to our pharmaceutical partnerships. And the same is true with the veto, we are moving along, we're having a number of different discussions. It's a learning process, as we get deeper into this. The understanding of kidney disease risk, and how that should be applied into the clinical pathway is sporadic across the country. It's sporadic with different physician practices, the education level around kidney risk, especially in the diabetes population where we're focusing is uneven. That's no surprise. We've done an enormous amount of physician survey, network survey, and we've also now seen from the real-world deployments. What's actually going on in the clinic. And it's been a little bit of an eye opener, but this is the novel understanding that we're developing through these real-world deployments. And that's going to feed back up now into the strategic partnerships and applying them in 2022 to start generating revenue and to take a look at new clinical strategies. Do you have anything you want to add to that, Tom?

[Thomas Mclain:]

I think you had that covered it. They're the opportunities here because this area has been under a dressed for so long and the challenges of being able to target the appropriate interventions to the right patients really underscores the needs for a KidneyIntelX risk assessment driven approach, and of course, we have already seen the value of that in health systems roll-outs. And now we're starting to see that more broadly.

[Tycho Peterson:]

Thank you.

[James Mccullough:]

Thank you, Tycho

[Operator:]

Thank you. Our next question comes from Anita Dushyanth with Berenberg Capital. Your line is open.

[Anita Dushyanth:]

Hi, good morning. Thanks for taking my questions. James, could you please share some of the trends that you're seeing having KidneyIntelX's or from the cost billion up until now.

[James Mccullough:]

Yes. Thank you, Anita. The -- what other things I in particular having focus on is conversion. So, we've set up an integrated population health model. This is important. We have engaged population health in the cars to support primary care physicians and specialists to understand that, we need to do risk assessment early in diabetic kidney disease patients. And so, in a system like Mount Sinai, population health provides visibility of their primary care physician, and said, this is a patient that should have risk assessment. Now you move into the behavioral economics component, which is, does that primary care physician then take the ball and start running, which ends up in a converted executed kidney Intelex test order. Now we're not involved in that. This is Mount Sinai system. This is all done independently at Mount Sinai but what we're seeing, it's a very high conversion rate now, especially a new practice that are coming online and we mentioned this in the scripted discussion. We're seeing conversion rate from pretended or suggested orders by population health around 80 % for actual orders. That is very high. And we're very pleased with that. And if that trend continues, and you couple that now with population health pharmacy management, where you can actually prescribe the drug to high-risk patients. You've completely changed the equation and you completely change the equation of primary care. So, the holy grail here, and the way that you stop disease progression, you keep a healthy kidney, you create a better lifestyle, and you start to cut down on cost of progression of dialysis, as you get the primary care physician to act. And what we're demonstrating what that conversion is, we are getting action. I would expect the conversion rate without population health engagement and we've experienced this before with another diagnostic test launches in the past, is substantially lower. This integrated population health model that we are now demonstrating is really working. Now we have to scale it. But we're also demonstrated scale. We're now adding Wake Forest, we're adding Atrium, we're adding University of Utah. We're adding CDPHP. And now we're moving into the entire VA Health System, St. Joseph's, others. So, we are demonstrating a change in behavior starting early in the disease cycle at the primary care physician level, we are demonstrating that we've engaged population health and the model is working. So, I expect 2022 will continue to demonstrate that and we'll now have thousands and thousands of patients from which we can derive real-world evidence, peer reviewed, published results. And when you get to that point, that's a tipping point because now everybody's was okay. This thing is working, we have to adopt this. That's certainly my hope.

[Anita Dushyanth:]

That's helpful. And as a follow-up to that, I know you mentioned that you might have some publications coming, maybe end of Q1. I'll check the calendar year, next year or so, would one of the topics be around what the outcome is, with the support for Population Health versus from those without?

[James Mccullough:]

Yeah, that's the benefit of the real-world evidence format, right? Up our control group has had effect. What's going on right now which is quite confusing. In the clinical space. I mean, we generated a lot of awareness now in different settings over the lack of standard of care that's being applied. And so, when you now introduce a controlled population health engaged EHR integrated advanced risk assessment, you start to see change very quickly. I do expect we were already generating significant results that will be submitted for publication in the short-term. And we have many short-term utility endpoints which could have a significant downstream effect. Just creating awareness of the need to risk assess in the diabetic kidney disease population of primary care changes the game. Talking -- for a health system to engage pharmacy management to prescribe new drugs on a system-wide basis to high-end intermediate risk patients. Early changes as the game for primary care physicians to increase referral patterns of high-end intermediate risk patients changes the game. So, there is a lot of low-hanging fruit here unfortunately, in this space. And again, we have, we have the advantage because we've done this in oncology for many, many years. So, applying the Oncology Precision Medicine model that we've practiced now for decades, into the naive kidney space. We believe it’s going to have significant and immediate impact. And then of course we move into the intermediate and long-term utility categories, where ultimately, we want to slow progression of kidney disease. We want to prevent large population groups from upstaging to late-stage kidney disease. We can do that with applied clinical management. And then ultimately, we want to reduce the number of people who end up on dialysis starts. We certainly want to start to reduce the number of people who are crashing into the dialysis. And just as a reminder today, somewhere on the order of 50 % of people who start chemo dialysis in the United States. That's a $100,000 a year event, do it through the emergency room. This is completely unsustainable. This is the model that we're applying on the front-end now. And the data out. So real-world evidence generation across multiple systems in a variety of healthcare environments, the market demographics, etc., into the thousands and thousands of patients. This is the definitive proof that is ultimately required to change standard of care across eventually 40 million Americans with chronic kidney disease.

[Anita Dushyanth:]

Okay. Thanks for answering that. And then just one last thing about the number of patients that will be screen by second half next year. It's about 6,000 at milestone. And I so the run rate of about 300 patients per week, is that a low end of what can be achieved?

[James Mccullough:]

I just want to point out one thing, we are not screening. This is important. We are prognosing in an already diagnosed patient population. Apologies. I just have to point that out. That's very important. And that helps adoption, right? Because this is an existing disease population, it's already at risk. We're now coming in to say, focus on these patients and the rest can go home. We'll see you next year. So, revenue generation and run rates, again, we're not going to forecast because I will inevitably be wrong. But we do have specific components. Mount Sinai has signed up for 6 thousand paid testing patients. We're now rolling that out. We expect to be complete with that program moving into the June quarter of next year. The 300 tests per week run-rate was a figure that Mount Sinai and Renalytix came up with is a target. We do expect to achieve that moving into the March quarter. Is that a low side? I think that that's a very good target for everybody to focus on when we talk about system roll outs. We'll see how those numbers spill. Certainly, the patient population is available. Mount Sinai Health System alone has 71,000 diabetic kidney disease patients in their registry. That is a significant population. We believe all of them should be baseline risk assessed. And then obviously, as the data comes out and were able to substantiate this -- the high-end intermediate risk groups should be monitored. We'll see what the frequency is. The VA Medical System, again, 400 thousand diagnosed diabetic kidney disease patients. Again, we believe many of them should be baseline risk-assessed. And again, high-end intermediate risk patients should ultimately be monitored with clinical treatment. Atrium Health and the other health system like Wake Forest. Those two systems are operating in the diabetes belt in the Southeast region. Again, they have significant diabetic kidney disease populations. University of Utah, and then now we're moving into other healthcare systems, like St. Joseph's. So, there's lots of addressable market, a lot of it is paid for, what I'm impressed with is we are now making the move in 2022 to the secure broad insurance payment. We're already ahead of our expectations in terms of securing private payer coverage. We announced that we achieved our first Blue Cross Blue Shield coverage determination, which actually gave us Blue Cross Blue Shield coverage in two different states. That was a significant achievement for us and creates an opening to achieve other Blue Cross Blue Shield coverage determinations and we do believe that we're on track to receive Medicare payment in 2022. So as the coverage continues to build, we will have more and more systems deployed, which creates a footprint across a significant number of diabetic kidney disease patients that we can now baseline risk assess. It's going to be an interesting equation in '22.

[Anita Dushyanth:]

Great, thank you for that, James. Very helpful.

[James Mccullough:]

Thank you, Anita.

[Operator:]

Thank you. As a reminder, we have a question from Dan Arias with Stifle. Your line is open.

[Dan Arias:]

Yeah. Good morning. Thanks for taking the questions. James, on the 20 institutions that you're targeting for 2022, just a couple of clarifying points there. Number one, is that a goal for fiscal or calendar 2022? And number two, by my tally, that's 14 new partners that you think you can sign up in that period. Is that right? And then what if it is right? What do you envision the make-up of that group being just in terms of hospital systems, payers, farmers, etc.

[James Mccullough:]

So, thank you, Dan. I'll give myself calendar '22. The consistency will be a mix of regional hospital system players, intermediate and large size. And we have a number in the pipeline. And then of course the upside event here is how far we get with the VA Medical System. So, as I said, there are 171 171 hospitals, I believe, in the VA Medical System. As we've said from the beginning, we are working with VA on both individual hospital systems on the level, which is the regional level and then we're also working nationally with the VA. So that could very much swing vote, which puts us in a different position in calendar '22. I think we have figured out over the last two years how to do this and do it well, certainly the way we present the value proposition to the hospital systems has evolved. And we are much more efficient in our discussions in the health economics. And the clinical programs have only become more attractive. So, as we engage in discussions with new hospital systems, the talks are much easier. And of course, the key for us is we have to reduce implementation time. So, we did talk about that in the preamble today with Wake Forest, where implementation time was reduced from contract to go live testing in six months. We expect that bring that down even further to 3 or 4 months. As we actually get a more streamline simplified programs to create a testing environment with care management and pharmacy management in each one of these systems. So, we said 20 is a target for 2022, I very much believe that that is doable. If we end up with success to VA Medical System, we may exceed that. Let's see how it goes, but certainly, I think the management team is very pleased now that we've proven the model. It started generating results and this engagement with population health is a significant differentiated advantage. We are partnered now to turn on large groups of primary care physicians and support them, and enable them to do risk assessment early with specific action. So., we know the model works. Now it's time to lean forward and accelerate it.

[Dan Arias:]

Okay, just one more clarification on top of that. is the VA counting as a 1 underneath that 20 institutions or are you considering multiple news ones under the VA as part of the '20?

[James Mccullough:]

That's a great question. The VA is an open field for us. So how I'm counting it, that's a good question. I actually think if we're looking at individual hospital systems, I think the VA could contribute a number towards that 20. If we end up with a national component or even a VSINs component, that number could increase rapidly. So now the VA is its own category and again, I have to emphasize this. We have a 10-year General Services Administration contract which pays for all testing at $950 per reportable result. We have no reimbursement limitation there. Nor do we need any other regulatory component this is an immediate, addressable market opportunity for us. And obviously that's why we're hiring sales force. We're hiring medical science liaison, customer service, but back to your original question, I think the VA will present multiple hospital systems for deployment of KidneyIntelX in 2022.

[Dan Arias:]

Okay. So, if you were to sign up for revisions in 2022 and then that would be 4 counting towards the 20 and goal that you have.

[James Mccullough:]

So, Tom, jumping on this one.

[Thomas Mclain:]

The VA has a 171 health centers which are health systems. They are -- they operate independently with their own network of Seabox (ph.). So, there are multiple health systems in each

[Dan Arias:]

I'm sorry, guys. I'm not trying to belabor it play, but what's your assumption before the VA within that '20 institution goal that you have for 2022.

[James Mccullough:]

So, I don't have a number, it should make up a quarter of that. If I have to stand on something. But again, if we're successful at the VSIN level, it could well exceed that. If we're successful at the national level, then we're talking about a whole different game. But when I talk about the 20 hospital systems, I'm really looking at large key independent hospital systems like Mount Sinai, Atrium, Wake Forest, etc. The VA is a lot of upsides, but let's see how it plays in the March quarter.

[Dan Arias:]

It's a good question .

[James Mccullough:]

Thanks, Dan.

[Operator:]

Thank you. And our next question comes from Mark Massaro with BTIG. Your line is open.

[Mark Massaro:]

Hey guys, thanks for the questions. I guess obviously the FDA has been busy reviewing COVID submissions. I do think one value creating milestone for you would be to secure FDA approval. Can you just give us a sense for how that review process is going, whether or not the dialogue is moving to conversations going back and forth, or has there been months’ worth of not hearing anything I'm just trying to better understand how that conversation is going and just try to handicap when you think comfortably, do you think you can get FDA approval by the end of fiscal year '22?

[James Mccullough:]

So, I am to be pinned down to FDA timing. Thank you. Mark. It's good to hear you on the call. This has been -- let me answer the question first and I will give you my -- I will give you some color. I won't give FDA timing as I've said from the beginning, that's approvals game and I've been that full before. I don't have the peak had full again, the process is moving well, we believe we have a good application. We have a very good understanding. We have a significant amount of third-party expertise, which is at the table. Many of these folks don't take prisoners. They're very data - oriented, statistical -oriented. We've mentioned some of the folks that have been involved. So, I think we have one of the highest iterations and solid basis for an FDA regulatory process that I've experienced in my career. That being said, I am not going to comment on timing because I will inevitably be wrong. The agency, as more than anybody has been under a considerable amount of stress. And there's been consequence across the board for that I talked to many other CEOs, all of whom are having similar experiences. But I'm confident that we're on the right track, and the communication with FDA has been very good, and very comprehensive. So, FDA will come when FDA will come. In the meantime, obviously, we intend to build a very significant business. And obviously FDA is important. But if you ask me what the number one risk factor associated with growth, it's reimbursement. And I've said this from the beginning, when we started the Company, we talked to the management team and I said, look, we've got three things we have to worry about. We know how to -- we ultimately know how to do FDA, we know how to build the sales force, we know how to build a product, we know how to build the business. We've got to focus on reimbursement because if you don't get paid for your product then you don't have a revenue stream you can't access the capital markets to fund all of the other things that unique. So, reimbursement has very much been a focus. And we're succeeding there. FDA will help that. Do. I expect an FDA De Novo marketing authorization in this fiscal year? I do. That is my expectation. We are building for that component. But again, nobody can guarantee this, especially in the COVID era. How's that Did I answer that question well enough?

[Mark Massaro:]

You did. That was perfect. And then my last question is on the real-world evidence study from Mt. Sinai. Should we expect you to publish that in a peer-reviewed journal? And then can you remind us what you expect the primary and secondary endpoints of that study to be?

[James Mccullough:]

Yes. You should expect multiple peer-reviewed publications out of Mount Sinai and other real-world evidence studies that we're running at. This is a very powerful cornerstone for Renalytix. It's not easy to set up these larger real-world evidence programs. We did it from the very beginning, understanding that Real-World evidence ultimately drives a regulatory pathway through multiple product versions. It ultimately drives reimbursement. And of course, it proves the case for physicians and healthcare systems that this is the right way to go to manage chronic disease. So, the real-world evidence machine that we've set up is extensive, its comprehensive, it is looking at multiple short intermediate and long-term end-points, short-term readout which we expect in 2022, start with things that we've already talked about like conversion. If you engage Population Health, which is very important for a capital efficient diagnostic deployment, right? As opposed to creating a huge fixed overhead hiring and massive sales force for a strictly push marketing approach. By engaging population health., it changes the entire return on investment capital liquidation. We're now able to reach upfront large treating groups of physicians and patients with population health leading the way. And we're already starting to see proof of that with conversion. So, when we talk about a conversion of prepended or suggested orders by Population Health to actual executed orders, especially the primary care physician level, approaching or exceeding 80 %. I have never, before in my career, seen that type of utility. Now that's one metric. Now you have to look at the downstream follow-up. What happened to those patients? Were the high-risk patients referred to nephrology. Did they have new drug intervention? Do they have behavior modification? So, this is a very rich environment in a relatively open field, we would not experience this in oncology and cancer. But in kidney disease, it's just wide open for innovation and is wide open for novel data around utility, especially around this thing, behavioral economics, which is physician and patient behavior. When presented with information, in this case, prognostic information early in the disease cycle, where we should be able to generate maximum with clinical action, and prevent people from moving onto late-stage kidney disease. That's the whole point. Let's maintain kidney health. And can we really drive the utility equation around maintaining kidney health? And that has short-term implications like conversion. But ultimately, we would like to show that we are slowing down progression of patients into late-stage disease. Ultimately, we'd like to show that we are limiting the number of patients that have to experience dialysis. And this real-world evidence machine that we've set up is important. This has not gone unnoticed by strategic partners, pharmaceutical partners, medical device manufacturers, service providers. How did we get into a position where we are now integrated with large healthcare networks, and starting to generate this type of real-world evidence? This has implications across the entire industry for different devices, drugs, services, clinical management strategies can ultimately be applied. So, this is going to be an ongoing equation for several years. But in 2022, we're going to be able to submit for peer reviewed publication a number of significant utility endpoints across, again, thousands of patients, which will then evolve into multiple treating facilities, in different demographics across different patient populations. I can tell you from my own experience sitting here in Salt Lake City, my care and the people I speak to is very different than sitting in New York City. So, in New York City. your interaction with physicians really come down to primary care and specialty interactions on almost a one-for-one ratio. Out here in Salt Lake City, I have much more interaction with primary care and nurse practitioners, than I do with specialties. So, you have to understand the details in all of these settings if you're going to be successful at driving a new standard of care for advanced prognosis. Sorry, I'm going off the deep end here, but this is what creates such an exciting equation for 2022.

[Operator:]

Okay, thank you. question.

[James Mccullough:]

What sounds like we've answered most of the questions? Again, everybody thanks you for dialing in, and please have a safe and Happy New Year. Operator, back to you.

[Operator:]

That concludes today's conference call. Thank you for participating. You may now disconnect.