Renalytix Plc

Thank you. Joining me today from Renalytix are James McCullough, Co-Founder and Chief Executive Officer; Tom McLain, President, and James Sterling, Chief Financial Officer.

Before we begin, I would like to remind you that management will make statements during this call that include forward-looking statements within the meaning of 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 instead of long-term sensitive care, trends at our market and potential benefits of government policy change, the impact of COVID-19 on our business, 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 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 for Annual Report on Form-20F filed with the Securities and Exchange Commission on October 28, 2020.

All forward-looking statements made on this call are based on management’s current estimates and various assumptions. Renalytix AI 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 accurate only as of the live broadcast today, June 15, 2021. And with that, I will turn the call over to James.

Thank you, Carrie. Good morning, good afternoon and thank you all for joining for the third quarter fiscal 2021 results and our update on business progress.

The opportunity for Renalytix and our shareholders continues to materialize as we cross additional key milestones and reimbursement, regulation, real world evidence and major distribution for our lead program, KidneyIntelX. In the past few months, we have announced the partnership with the University of Utah Health System to enable more than 1,700 clinicians to get EHR integrated KidneyIntelX access in the Southwest.

We have announced a partnership with Atrium Health, Wake Forest Baptist Health that can provide KidneyIntelX access for care teams in 37 hospitals and more than 1,350 care locations in the southeast. We have also received a 10-year contract from the U.S.

General Services Administration for KidneyIntelX testing services, which applies to more than 140 U.S. government departments, including the important U.S.

Veterans Administration. We published peer-reviewed data demonstrating performance in KidneyIntelX in the cohort of 1,146 Type 2 diabetes patients with early stage kidney disease risk.

We have crossed the 40% threshold for contracted state Medicaid programs, with 21 states now completed and we have continued progress with private insurance coverage, including the June coverage determination for KidneyIntelX by one of New York state’s largest not-for-profit insurance companies, with over 1.5 million members. We expect the pace of milestone events to continue into the first half of fiscal 2022 beginning in this July, including a potential FDA clearance, additional major health system partnership announcements, beginning operations in the VA medical system, increasing our portfolio of real world evidence data, particularly at the all important primary care level, potential national Medicare coverage determination, and an acceleration in KidneyIntelX testing volumes.

With the recent Atrium, Wake Forest partnership and the new potential to onboard from 1,293 healthcare facilities in the Veterans Administration Medical System, we remain confident in our previous guidance of 5 to 7 announced major health system partnerships in calendar 2021. Shortly, Tom McLain will detail our progress with reimbursement and plans for scaling operations on a region by region basis with our Cornerstone Health System partnerships and now the complimentary opportunity provided by the General Services Administration contract.

On to our regulatory partnership and operations progress, the Food and Drug Administration has reinitiated review of the KidneyIntelX final submission under breakthrough device ahead of their previously targeted April 15 deadline, following a sector-wide COVID delay. Our regulatory review team and outside advisors will continue to diligently respond to any remaining FDA questions until the conclusion of the breakthrough review.

While we can make no guarantees on timing or outcome, we are gearing our internal plans based on an assumption that the FDA process will be complete in the second half of this 2021 calendar year. As we have discussed previously, clearance from FDA breakthrough device designation will set KidneyIntelX up for an immediate national Medicare coverage determination at $950 per reportable result under the Medicare Coverage for Innovative Technology rule, also known as MCIT.

MCIT is now scheduled for final implementation on December 15 of this year. As Medicare and Medicare Advantage cover a majority of the diabetic kidney disease patients in the United States, FDA clearance and Medicare coverage would have a material positive impact on our business.

To the potential for a covered Medicare population this year, we can now add a significant and wholly accretive population of diabetic kidney disease patients covered under the recently announced General Services Administration 10-year government-wide contract for KidneyIntelX testing. This payment contract was stated pricing of $950 per reportable result, covers KidneyIntelX testing in the U.S.

Veterans Administration Department of Defense branches, including Army, Navy, Air Force and Marines and the Indian Health Services. Notably, our GSA contract is structured as an Indefinite Delivery, Indefinite Quantity, or IDIQ contract providing for an unlimited quantity of services over the contract term.

The GSA contract is a major win for Renalytix and for patients with diabetic kidney disease under government physician care and carries important strategic implications this year that Tom will discuss shortly. As we have stated since inception, we view insurance reimbursement as one of the biggest hurdles to our long-term growth, achieving a government-wide payment contract, which mirrors our national Medicare pricing represents a significant de-risking of our business model and will require us to accelerate build-out of sales, customer service, education and other supporting components for initiation of the 2020 rollout in select VA Hospital systems.

From a strategic view, the VA Hospital provides KidneyIntelX with a perfect complement distribution channel to our three Cornerstone integrated disease network partnerships, Mount Sinai, University of Utah and Atrium, Wake Forest. All of the health systems have significant diabetic kidney disease populations and share treating physicians with their nearby VA Hospital facilities.

At Mount Sinai, we now have approximately 120 physicians from primary care to specialist nephrology, who have been on-boarded to EHR integrated KidneyIntelX score ordering and reporting. By the end of this calendar year 2021, we expect to have on-boarded an additional 500 physicians and will continue to expand customer service sales and medical science liaison personnel to support system-wide care.

We are now recognizing revenue from testing at Mount Sinai and expect this revenue will grow in the second half of this calendar year 2021 as more physicians are on-boarded and COVID-related restrictions recede. Most importantly, as the real world evidence continues to mount, our KidneyIntelX integrated care model approach with Mount Sinai, is providing us with invaluable insights.

The Mount Sinai partnership is doing exactly what we thought it would when we designed the launch back in 2018. As a result, we are now able to move into a national launch phase with solid evidence as to what works and what doesn’t to maintain kidney health on both an individual and a population health basis.

Our announcement last month with Atrium, Wake Forest for advancement of kidney disease – excuse me kidney health creates an anchor partnership in the Southeast region of the United States also referred to as the diabetes belt. Atrium, Wake Forest presents us with a major opportunity to integrate the KidneyIntelX care model with a fully developed population health program supporting primary care, endocrinology, nephrology and care teams, serving patients in 1,350 care locations.

At the core of the partnership is the ability to generate data that will be critical to optimizing care and improving outcomes using kidney protected medications, specialist referrals and lifestyle changes. Mount Sinai, University of Utah, Atrium, Wake Forest, and soon to be the VA Health system, will provide a powerful and deep real world evidence generation program across its demographics, treatment regimes and racial barriers.

This evidence will build upon a growing body of recently published peer-reviewed evidence that supports the KidneyIntelX care model’s role in maintaining kidney health and slowing the advancement of kidney disease beginning at the primary care physician’s office. As we have stated previously, our goal for the remainder of this year is to establish as broader distribution channel as possible for the KidneyIntelX solution through both EHR integrated implementations and through our independent online secure ordering portal for those physician practices, where KidneyIntelX is unavailable on an EHR integrated basis.

Ultimately, we are building towards a footprint where any primary care or specialty physician in the United States is able to access easily the KidneyIntelX risk assessment and care support. We have just signed an agreement with Quest Diagnostics ExamOne, which will now allow any patient to receive an at-home blood draw for their KidneyIntelX assessment in all 50 states.

We believe firmly that broad open access to KidneyIntelX early stage risk assessment is key to stemming the kidney disease epidemic and maintaining population kidney health. Finally, we are now processing billable KidneyIntelX patient samples in both our Salt Lake City and New York City laboratory facilities.

Our Salt Lake City laboratory should receive full CLIA certification in July of this year, at which time we believe we will have processing capacity in excess of any forecasted need through fiscal 2022. With that, I would like to turn the call over to our President, Tom McLain to provide additional detail on reimbursement and commercial strategy.

Tom?

Thank you, James. The successful launch of a risk assessment test like KidneyIntelX requires an established care pathway, clinician education, payer coverage and patient engagement.

As James mentioned, the milestones we have achieved in 2021 are building a strong foundation for the rollout of KidneyIntelX testing across the U.S. From the beginning, our primary focus has been on reimbursement.

We have worked on alternative reimbursement pathways to provide multiple shots on goal and are securing payment from three Cornerstone institutions. Those are: number one, Medicare; number two, the Veterans Administration; and number three, through regional contracting with private payers, including Medicare Advantage and Medicaid patient coverage.

Collectively, those three institutions cover healthcare costs for the vast majority of individuals with chronic kidney disease in the United States. So, starting with Medicare, we are pursuing both the MCIT-enabled national coverage determination pathway and the local and more traditional local coverage determination pathway through regional Medicare contractors in New York and Utah, where our laboratory facilities are located.

Potential FDA clearance in 2021 will contribute to our success with both of these pathways. With MCIT becoming effective December 15 of this year, we would expect a national coverage determination for KidneyIntelX to become effective at the beginning of 2022.

If MCIT does not become effective in December, coverage under a local coverage determination pathway is expected in the summer of 2022. Again, Medicare and Medicare Advantage plans account for more than 50% of the patient population being tested with KidneyIntelX.

With regard to MCIT, we were pleased to see the medical industry and a bipartisan caucus in Congress rallying around MCIT following the implementation delay and we applaud their efforts to clarify MCIT eligibility. These clarifications will interrogate the relevance of an MCIT covered device to the Medicare population as well as the appropriate real world evidence developments surrounding the utility of that device.

With over 60% of Medicare beneficiaries at risk for kidney disease progression and because we have already planned and published large multi-center international real world evidence studies with leading population health specialists and primary care clinicians, we believe KidneyIntelX should exceed any appropriate clarifications to MCIT eligibility during the coming period. In fact, in the first week in July, Medicare will publish its annual rule update, representing an opportunity to address specific MCIT implementation questions.

We expect MCIT final implementation will take place as announced on December 15. Moving on to the VA, as James discussed earlier, under our federal government GSA contract, we are able to offer KidneyIntelX testing in VA centers, military bases, Indian Health Services facilities, and through other government managed healthcare programs.

Notably, our GSA contract is structured as an IDIQ that is Indefinite Delivery, Indefinite Quantity contract, providing for an unlimited quantity of testing services over the 10-year contract term. The Veterans Administration has been a leader in chronic kidney disease, or CKD care management.

They were the first to establish clinical guidelines for CKD and they have led in CKD care innovation, with risk assessment being a key part of their recent updated guidelines. Significant for KidneyIntelX adoption, the VA has standardized care based on these updated guidelines using defined performance metrics that all physicians in the system follow.

This creates a unique opportunity for adoption of a novel covered risk assessment test like KidneyIntelX. And finally, on regional contracting, our partnered health system approach is leading to regional payer agreements that also include Medicare Advantage and Medicaid patient coverage.

Working with regional payers and health system providers, we are developing novel value-based care models to improve patient outcomes and lower healthcare costs. Renalytix is uniquely focused on early stage kidney disease patients.

Securing these regional payer coverage agreements will also make it easier for other health systems in that area to adopt KidneyIntelX testing. Also of great strategic importance to Renalytix is our continued progress with contracting with the state run Medicaid programs serving the healthcare needs of an estimated 55 million people, about 2 million of which have existing diabetic kidney disease.

So far this year, we have added several new contracts with Medicaid programs and are currently contracted with 21 states, representing roughly 40% of the total Medicaid population in the U.S. We expect the number of contracts to grow this year and have engaged in more in-depth discussions with leading Medicaid programs around value-based care arrangements.

These value-based care arrangements would we believe result in an innovative approach to diagnosing and managing high risk populations of diabetic kidney disease patients. We should be able to provide more specifics on the potential significant value of the partnered Medicaid care mode in the near future.

And finally, we continue to make progress with private healthcare insurance coverage for KidneyIntelX. For example, in June, KidneyIntelX was issued a coverage determination by one of New York State’s largest not-for profit health insurance companies with over 1.5 million members.

New York State remains a region with large concentrations of diabetic kidney disease patients and a core model for early adoption and real world evidence generation with KidneyIntelX. I would now like to turn to our commercial strategy.

We plan to implement a region by region pathway to expanding our market opportunity in the U.S. We will approach our KidneyIntelX deployment focused on four geographic regions: the Northeast, the South Atlantic, the Midwest and West.

We have announced health system partnerships already to provide the foundational relationship in three of these regions. In calendar years 2021 and 2022, we will build out from those health systems focused on patients in Medicare, VA and Medicaid enabled care.

To support this regional strategy, we recently announced key additions to the commercial team focused on developing health system and payer relationships and leading the sales effort in individual PC offices – PCP offices, excuse me, and VA Health centers. We also have developed an educational partnership with the National Kidney Foundation to develop and deploy doctor and patient directed educational programs.

These programs will introduce the importance of early stage risk assessment and risk informed care paths. With these milestones achieved in 2021, our clear expectation is that our payer driven regional deployment strategy will create significant commercial and revenue opportunities for 2022 and 2023.

Importantly, these programs and deployment will include real world evidence development and health economic impact analyses that are core to securing long-term payer coverage determinations and driving regional health system adoption of KidneyIntelX testing. I would like to now turn the call over to James Sterling, our Chief Financial Officer to provide more detail on our financial results.

James?

Good morning. During our fiscal third quarter, which ended March 31, we recognized $550,000 of services revenue related to work performed for Mount Sinai and nearly $100,000 of testing revenue representing the initial month of revenue from KidneyIntelX testing in March.

We recorded $169,000 of costs attributable to those revenues. We did not post revenue in the prior year period.

Our operating expenses were $8.5 million for the quarter compared to $2.7 million in the prior year period. The increase was mainly driven by higher headcount as we continue to scale the company for rollout of the KidneyIntelX platform in the United States.

Net loss was $8.8 million or $0.12 per share for the fiscal third quarter as compared to $700,000 or $0.01 per share for the third quarter of fiscal 2020 on a GAAP basis. We ended March 31 with cash and equivalents of $70.1 million.

We are now happy to open up the call to questions. Operator?

Good morning, guys. Thanks for the questions.

James, maybe just to start with Mount Sinai, can you just add a little bit of color to the rollout and the ramp that you are seeing there and the expectations that you have? I appreciate the number on on-boarding docs, I am just curious if you are seeing that the number of docs using the test is growing?

And then along those lines, how many of the Sinai site that you live in and drawing from at this point? And are you starting to have a line of sight on the timing associated with capturing that $6 million, I believe in revenues that that those guys have kind of signed on for?

Do you have any sense for what you will be picking there?

Yes, thanks, Dan and all good questions. I think, we got to be – obviously, we got to be careful, because we are not going to forecast until we are down the road, but the – we did specifically talk about the number of doctors we expect to be on-boarded this year, which is well into the hundreds, which is a significant ordering base.

And I think that investors can expect to start to see evidence of that scale up now in the second half of the year. We obviously, going late last year and going into this year, we have had a number of COVID related delays.

We have been having difficulty even getting into the hospital system with the lockdowns, all of that is starting to ease. We are now having in-person meetings, which is an absolute pleasure.

It’s amazing coming off the Zoom culture, which you can actually get done when you sit around the table with people and start to work through specific problems. I think the most encouraging thing for me is that population health is very much onboard.

With the system-wide rollout, we are starting to get all the support that’s needed to the physicians. So, I am quite optimistic about the second half of this year starting to address that $6 million contracting number.

And obviously, this quarter, we are putting down evidence that we are now recognizing revenue from testing, which is a big deal, it takes you a long time before you can onboard physicians getting them up and running, reorder rates and you can actually start from an accounting basis to recognize revenue. So, we are pleased with what’s going on.

And again, I have to emphasize this. The integration with Mount Sinai is doing exactly what we wanted it to do.

It is a very high quality information source, looking at all the multi-factors associated with utility adoption, reorder rates, uptake, etcetera, it’s providing us with a very, very clear picture, it’s clearer than any picture I have had in my career history going into a diagnostic launch. And that obviously is very valuable for sustainable uptake and ramp.

So, second half of this year as we represented in the previous quarter is really where we do expect to see that adoption accelerate.

Okay, helpful. And maybe just along those lines are thinking about the Sinai experience in the context of Wake Forest and Utah.

I mean, what should our expectations be when it comes to a ramp there? Do you think that, that process takes longer than what you have seen at Sinai, because they are less familiar or shorter, because you are kind of able to learn from the Sinai experience and work through some of these integration kinks or at the end of the day, do you think the curve just sort of looks more or less like what you are seeing at Mount Sinai today?

Well, the real answer to that is we have to deliver it. And we have to demonstrate it to the investment community that is the intent this calendar year to demonstrate it in multiple locations.

What I can say is that obviously Mount Sinai was always going to be the hardest. I have said this before, if you can make it in New York, you can make it anywhere for a variety of reasons, but it’s a very complicated environment.

And so, it’s rich with learning experience. The experience we have had so far with University of Utah, and Atrium, Wake Forest is actually easier.

There are mechanisms that we can immediately move into that we didn’t have with Mount Sinai. The operating environments are much easier, which is fascinating.

And I think that, well, again I want to be careful, because we have to demonstrate it. But I think we have learned an enormous amount over the last year.

And there are mistakes that we have made that everybody makes when you initially get into this that we are not making now with new on-boarding of medical systems. And there are lots of points that we hit from the very beginning with the executive teams at these healthcare systems, which are much more refined the legal framework, the supporting framework, to be able to have Mount Sinai and now University of Utah as a reference point to new institutions, for example, the University of Utah, ITT talk directly without us on the line to the Mount Sinai, ITT.

And there was a lot of comfort generated from there. So, my anticipation is in fact I am actually quite confident that subsequent on-boarding will be much smoother.

We will be able to get to the populations quicker and the entire structure of the setup, going into integrate and reach out to the primary care physicians is going to be much more efficient than what we experienced as to be expected when you do your first rollout. So again, we are talking – we have guided the market to between 3 and 6 months to onboard an institution and actually begin live testing and I will stick to that timeframe for the moment.

But certainly, our experience, again with the Sinai System has been absolutely invaluable and will prevent us from making key errors in the future and gives us an incredible insight when we talk to new institutions, which is quite exciting.

Yes, okay. Very helpful commentary.

Well, maybe just more for me and then I will get out of the way, just on the commercial team. I mean, it’s pretty clear that the MCIT pathway and their VA deal have kind of changed the calculus for you guys a little bit in terms of meeting a sales force.

So, I guess where are you at this point with the commercial build out? I think you had talked about 50 to 100 reps initially.

So, where should we thinking about finishing the year there and how are you prioritizing VA testing opportunities that you could hunt down versus existing systems and getting things going there and then just new accounts, hunting down new health systems, new payers, etcetera?

Yes. The VA is obviously a major inflection point.

As I have said from the beginning, our biggest risk is reimbursement, how do you get paid and to have payment now secured at our national Medicare price is obviously a big deal. So, VA is very high on the priority list.

And I think in terms of ramping into a commercial support team, which includes all of the standard functions, like sales, like medical science liaison, customer support, things that we have been careful to build, because we don’t want to drive up a high recurring fixed overhead. I have said this from the very beginning of the company inception, stay away from that fixed overhead until you have either direct line of sight on payments or you have already secured payment.

And I am pleased that the payment infrastructure is ahead of what I thought it would be right now, the government services contract meaning, an example national Medicare pricing, a distinct CPT code and now private insurance coverage coming in. So, I am in a position where we are now beginning to build all of that infrastructure around.

We are not going to put a number in terms of feet on the street. We can do that in a little bit.

But the important thing now is we are concentrated on geographies around the integrated disease network. So in the Northeast, for example, it’s Mount Sinai Health System and we had a quote from the Head of Internal Medicine at the Bronx VA, as an example of approximate VA Medical Center, which is a very easy reach for us and Mount Sinai and the Bronx VA have the same physicians that are practicing in parts in both systems.

So, applying a sales force customer service, medical science liaison into that region now gives you a lot of leverage, because they can focus on though Mount Sinai system and on the Bronx VA, for example. And I think that’s a very powerful compliment.

It gives us a lot of distribution. It allows us to leverage the fixed overhead that we are spending on the commercial team against a high concentration of patients in our indicated use diabetic kidney disease and then of course, we have other partners that we expect will get involved in supporting the basic education message, which is critical.

You need to risk stratify, if you have diabetes and chronic kidney disease early. That’s a baseline message that needs to be put out to the primary care physicians who are treating 85% of these people.

It’s a baseline message that needs to be put out to the patients. So just from educating at that early stage in these concentrated geographies gives us a lot of leverage in terms of the capital we need to deploy against the human resources to support this adoption building.

And we are going to do the same thing in the Southwest with University of Utah, the Mountain West, which also has contiguous VA hospital systems and we are going to do the same thing now in the Southeast. And again, investors should expect we have other anchor large healthcare system partnerships, which again will have contiguous VA Healthcare facilities that we can now concentrate resource deployment to make sure that we get adoption, uptake education, etcetera.

Okay, very helpful comments. Thank you.

Thanks, Dan.

Hey, thanks. I am going to piggyback off the last question.

I am just wondering if you can help us size the opportunity around the GSA contract, I mean, I know you talked about 950 protests to 140 government departments, but how are you thinking about, how material that opportunity could be over the next couple of years and how quickly it could ramp?

So, I will let Tom talk more about the VA, but the VA medical system is fascinating. Unfortunately, it tends to skew the patient population that’s treated towards our indicated use.

And so the opportunity for KidneyIntelX is actually quite rich. And we obviously have to execute on it, but the addressable markets of diabetic kidney disease patients runs well into the hundreds of thousands.

So, it is not a small market and at 950 per reportable results, with an IDIQ Indefinite Quantity 10-year contract gives us a lot of room to be able to support the VA in terms of rolling out system-wide risk assessment. And we have a very specific strategy around that.

We are not going to talk in too much detail. But again, we start with the regional focus.

So, we have an integrated diseases network like Mount Sinai. We are already up and running and integrated.

We are hiring into that to support the Mount Sinai deployment that can also be shifted and added on to for the regional, the nearby regional VA systems. And we expect from there we actually move all the way up to a national level in the VA medical system for a complete integration.

That’s going to take a couple of years. But we can start with individual hospital systems and then move just like we have with Mount Sinai and Wake Forest and University of Utah into a fully EHR integrated and deployed KidneyIntelX across the country.

Tom, do you want to add some additional color to that?

Sure. Yes, happy to James.

I think just giving an example of the regional deployment strategy. If we look at University of Utah Health as an example, that 50% of the faculty inside University of Utah Health have appointments at the local VA facility.

So for us, the initial launch into the VA through clinicians who are already familiar with KidneyIntelX testing is going to be a big advantage. So, that’s contracting on a VA center by VA center basis for deploying KidneyIntelX.

The next step would be to leverage those opportunities into regional on commercial agreements with the VA and that would be the visions, the regional networks that are established across the U.S. There are 18 of those.

And as James said, longer term, we have spoken at a national level with the VA about their care guidelines. They are going through a major EHR conversion right now to the Cerner system that has a long lead time to it.

But through the regional and the local processes are the partnerships that we will be undertaking, we are putting the foundational elements into that, so that we are also working towards the opportunity to be incorporated into Cerner and into the care guidelines longer term on a national level, but those local and regional deployments will prove that value proposition.

Okay, that’s helpful. And then, on the health systems, obviously, you are going to hit your target this year of five to seven deployments.

But as we think about next year, I am just curious, how much the scale up potentially could be? And where do you think you will be in terms of capabilities to implement next year?

I mean could you do 2x, 3x, 4x that number. I am just curious how you think about your capacity to scale up additional health systems heading into next year?

Yes. If we include the VA medical systems, it could be substantial, tough to forecast.

And I also – the most important thing is the quality of the rollout. I don’t think we will have trouble attracting additional health systems.

And it’s clear the inbound traffic that I am getting, the questions I am getting from other major systems who are all struggling with how do we manage our chronic kidney disease population is just continuing to increase. The validation of KidneyIntelX is increasing as we announce a wide variety of systems on-boarding.

So, I don’t think we are going to be rate limited by the number of systems that we can bring on. We just have to make sure that we build carefully.

And we make sure that we continue a very high quality of rollout, that’s my biggest concern. I don’t think we are going to be in a position where we are needing to find additional systems.

In terms of the scalability, what we are finding already, as we have added University of Utah, Wake Forest/Atrium is that there is so much that’s translatable again, from the Mount Sinai model. So, we are getting quite confident that we know how to do this.

We know how to do it well. And we are seeing less and less new stuff that’s associated with on-boarding one of these major systems.

Each one has its own quirks. And they are different business models and care models in each one of these systems.

There are ACOs, there are fee for service, culture. Their care culture is slightly different here in the Southwest than it is in the Northeast.

So, there are nuances, but the basic legal framework, the basic IT framework, the education framework, the personnel support framework, we are starting to get a really good handle on. So, could we on-board, 2x, 3x, 4x the number of systems in 2022, I think so.

We just have to make sure that the personnel base catches up to that. So, we are still a young company.

And we really didn’t start operations until 2019. And we are obviously growing our employee base, as reasonably and quickly as we can.

But obviously, these are all high class problems. But I do think ultimately, this is broadly scalable across institutions.

And importantly, now we are introducing the ability for any independent physician to be able to order whether or not they are integrated into a large medical system EHR. So, we are launching an independent portal.

And that’s very important. It’s important to our payer partners because they want to make sure that we have the broadest reach possible for primary care physicians whether or not they are part of an EHR integrated system care model.

The other thing is that we are going to be focused on expanding access. This is a logistical issue for as many patients as possible.

That’s why we put in the ExamOne, Quest Diagnostics’ ability to take a blood draw from any patient’s home. You can send a phlebotomist out to actually take a blood draw in their home.

These are all important things about expanding access. So, we do believe this is scalable.

Really our focus right now is building the personnel base to support into such a broad population.

And in terms of the ongoing integrations, can you – I didn’t hear you mention DaVita, can you just touch on how that’s going? I think you talked about launching in three markets this year in the last call, is that still on track?

That is still on track. There are so many things to mention.

We had to be with the time a lot of selective of how short we put on the table, but our partnership with DaVita is moving forward. And we do expect to be putting news out on that this year.

Okay. And then last one for me just on pharma.

I am curious, with the interest and then the pipeline looks beyond the AstraZeneca agreement and how far are you away from kind of recognizing pharmaceutical services as kind of a separate line item?

Yes. Pharma, I am glad you asked that question.

Pharma for me is actually a growing area. We have again an increasing inbound interest from a number of different pharmaceutical companies large and small.

I think that that is going to be very fruitful. As in general, we are entering the age of precision medicine therapeutics.

With pharma, the SGLT2 inhibitors have been a phenomenal success in terms of efficacy and treatment. Everybody needs a way to stratify risk early for treatment and everybody needs a way to look at mechanism from a biomarker level at kidney disease, which is not just kidney disease, right.

It’s a whole sequence of diseases. And there are different types of kidney disease and KidneyIntelX ultimately is a precision medicine in vitro diagnostic that is able to characterize the disease in many different ways.

So, I think pharma is going to play a major role in KidneyIntelX development. It’s one of the reasons that we signed the broader agreement with the Joslin Diabetes Center to get a hold of such a really a prolific set of biomarkers that Andre [indiscernible] has been working on with Joslin for decades.

We believe that that will play very well with new drug developments and characterizing drug response. You should expect to hear more about the canagliflozin trial that’s the SGLT2 inhibitor trial that was setup by Janssen.

And of course, we now have access to that. And we are taking a look at a whole series of parameters we press released on the first one.

There will be additional news coming out of that particular study with KidneyIntelX. So, pharma is again a wholly accretive effort, an area to just pulling in on-boarding systems for adoption.

And I think one last thing I will say about that is what’s becoming clear is that now that we have several major systems in a geographically diverse area that are integrated. And we have access now to data flowing out of these institutions around the care pathway.

None of this is comprehensive. So, we are not only looking at early risk stratification, we are looking at drug prescription.

We are looking at care navigation. We are looking at clinical workflow.

This is developing a very comprehensive picture around how kidney disease is managed from an early stage through the different clinical channels, and how its risk assessed. And that network should be incredibly valuable to pharma as it understands how to treat these large populations with new drugs that are rolling off.

So, we do expect to have a pharma services revenue line, which is going to be growing. And obviously having AstraZeneca as a cornerstone partner, we couldn’t ask for a better partner.

Their renal division is world leading and comprehensive and it expands across multiple indications.

Okay. Thank you.

Thank you, Tycho.

Hey, guys. Thanks for taking my questions.

So, I think it was a week ago, you press released, the hire of three Vice Presidents, one VP of Sales East, VP of Commercial Partnership, VP of Marketing, a Director and a Senior Manager. So clearly, you are gearing up on the commercial side.

I know Dan asked you to what extent you might scale a direct effort and you weren’t ready to comment. But maybe can you just speak to the activities of the new hires, what they are doing, speak to maybe any funnels they are building, and maybe some structure around the folks that might work with them?

Yes. And again, we have been cautious about the overhead build until we had direct line of sight to payment, which has always been the number one risk from the beginning.

We know how to build an in vitro diagnostic. We know how to develop a marketing program.

We know now how to deploy though a partnership based model. But we have always wanted to be careful about running up the fixed overhead.

And we have been clear about guiding the Street as to where the revenue begins to pick up. And now with the government services agreement, we really have to start ramping up sales service and support to take advantage of that opportunity.

And so the hires that you have seen come from quite a diverse background with some very interesting experience and value based care, obviously, government services, sales and marketing. We have recently launched a new website.

We are starting to hone in on our message. That was not a right effort.

Around the marketing component we are continuing to develop, so that we come out of 2021 with a very specific marketing sales and education component. And we will continue to hire at the Vice President and Director level to support that.

As we roll out regionally, we will be adding additional sales, medical science leaders and customer support function. And I am comfortable with that, because we are not just throwing people into the wild, we have anchor partners, we have paying partners.

And we can concentrate the resources on a geography by geography basis, so we can maintain control over it. We can maintain the quality of message.

We can get feedback and then we can start to scale from there, rather than scatter shouting across the United States. I think that’s a tough approach.

So, you should expect to see a build out on the people that we have already hired, creating depth in each one of those divisional teams, the commercial team, the marketing team, the sales team, etcetera, and also the IT team, the product development team, the regulatory team, because even if we do get FDA clearance in the second half of this year, that’s just the beginning of what will be sequential product development regulatory pathways that are opened, additional reimbursement pathways that were open. And we are not stopping with our clearance at a breakthrough device designation.

How rapidly that scales. Let’s see.

I want to demonstrate revenue uptick in the second half of this year. I want to do it on the backside of an FDA – our first FDA clearance.

And I want to be able to do it, again, in a quality fashion showing we can bring these enormous systems up online. These integrated disease networks with corresponding VA systems on a regional basis.

I want to show those working well. And I want to show that we are getting good physician response, re-order rates, and we are starting to see real world evidence around the utility equation.

So, it’s a good problem for us to have. And our recruiting infrastructure is obviously growing to be able to support that.

Okay, great. And maybe just my last question, obviously, you have talked at length about Medicare, Medicare Advantage, Medicaid and the VA.

Obviously, those are very large patient populations for chronic kidney disease. Can you also talk maybe a little bit about some conversations you have had with some of the large commercial payers like the Uniteds, the [indiscernible], the Blues?

How important are they and where are you in those conversations?

Yes. And so Tom might comment after me.

They are important. But obviously, the majority of our indicated – our initial indicated population diabetic kidney disease, which represents roughly 40% of the chronic kidney disease.

The total product kidney disease market is centered around government support. So Medicare, Medicare Advantage, Medicaid, these are really the cornerstones that we need to put in place.

And once we do put them in place, we already have established pricing and reimbursement. Now, you add recently the government services administration, we are looking at millions of patients coming out of 2021, which will have full insurance coverage from these different systems at $950 per reportable result.

That gives us a significant amount of leverage when it comes now to filling out the rest of the private pay groups. So, we are having discussions with a number of large payers.

I think the health economics value proposition here, again, is one of the strongest that I have seen. We expect to provide an ROI to a private healthcare system with KidneyIntelX between 12 months and 24 months.

That is quite attractive, because the cost associated with missing just a few people who progress on through upstaging of kidney disease and then ultimately end up on dialysis is so high, that it’s an attractive proposition. So, first let’s anchor the entire market with Medicare, Medicaid, Medicare Advantage, with government services agreement, and then we will expect to see an increasing volume of private pay to come on-board.

I was very pleased we can’t name the payer, but in the New York region, which is obviously one of our launch groups to be able to pull on a significant private payer into that regional cluster of coverage that we are developing. So Tom, would you like to add to that?

Just to build a little bit on what James just described, in the same way, we believe there is power in the regional deployment model for KidneyIntelX testing. And the synergies between large health systems and VA centers, and what we can bring across those populations, we see the same synergies in approaching coverage that way.

So when we talk about Medicare Advantage and Medicaid coverage, those are programs administered by those regional payers. And that includes an assortment of plan types, including Blue Cross Blue Shield plans, and others.

And what we have noted in the regional deployment, when we look at health systems, when we look regionally, while Aetna and Cigna are significant nationally, when we look at what drives coverage in a specific area, like New York City, those national plans fall into the single digits. They don’t move the needle in the same way on a regional basis that they do nationally.

So, we on our market access strategy, we are keeping a very strong regional focus as well. To support all of that, we have a market access team.

Their whole job is coverage agreements. We have a tactical plan for what that team needs to accomplish to support our commercial strategy as we go forward.

We are in the position today, where they have been successful in establishing 14 non-government contracts, 15 with – the contract that we just described in the New York Metro region, and we will keep driving those numbers up as we go through the remainder of 2022 and 2023.

Okay, thanks so much.

Thank you, Mark.

Well, thank you, everybody. I think we have said enough for this quarter.

We are going to go back and put our heads down and continue to execute. Thanks so much for joining this call and we will be speaking to you all shortly.