RNLXY Earnings Call Transcriptbeta

Operator: Good afternoon, and welcome to Renalytix Investor Presentation. [Operator Instructions] We are joined by Renalytix management team. I would now like to hand you over to Executive Chairman, Julian Baines, to begin the presentation.

Julian Baines: Good afternoon, everyone. Thank you for joining the Renalytix presentation half year report. I'm joined by our CTO, Fergus Fleming; and in the U.S., James McCullough, the CEO of the company, is also online. For those of you who are new to the story, I don't know how many online are, Renalytix was formed out of a spinout of EKF. EKF in 2017 had two biomarkers called sTNFR1 and sTNFR2, which were licensed out of Joslin Diabetes Institute in the United States. These biomarkers would show that if you're a diabetic, it would indicate whether you are likely to go on to get end-stage renal disease or diabetic kidney disease. Many years ago, that would have been a so what test, but these days, this is a very valuable -- these are very valuable biomarkers because they will tell you if you're going to go on to get end-stage renal disease and one of the biggest problems in society today is kidney dialysis. Our test is so important to the kidney market that by utilizing this test, we can actually keep people off dialysis because if we refer the right patients for the right drugs, then they can use drugs such as SGLT2 inhibitors to keep them off dialysis, which is one of the biggest and most costly interventions in diagnostics today. And to keep people off dialysis is really important. In my opinion, this is one of the most important tests I've ever been involved in. And not only does it show massive patient advantage in patient care, it also reduces the cost to society because kidney dialysis in the U.S. alone cost $90 billion a year, very invasive and very uncomfortable, and this improves patient outcome considerably. So that's a very, very brief introduction to how Renalytix was formed. Since that formation in 2018, we have gone on to develop this test. Certainly, Fergus and his team have developed this test into being the first ever FDA-approved breakthrough designation prognostic test for kidney disease. That's the first ever that was achieved. It's fully Medicare reimbursed at $950 per test. It's recommended in the clinical guidelines, and it's available now to over 14 million U.S. diabetic kidney disease patients. It is really important for these patients, and we're able to address over 260 million patients worldwide, albeit we're still a very small business. So the outcome of this is that we're in a very rare uncontested market. We do not have any competition in this market. We're fully derisked now. It's taken seven years. It's taken a lot of investment. I think sometimes people look at the investment that's gone into Renalytix and wonder where the money has gone. Well, it took five to six years to get through FDA approval, tens of millions of dollars, tens of millions of dollars to get through Medicare reimbursement, and we've created a data of over 10,000 patient data in terms of utilizing this test. And now the business has refocused from being an R&D-driven business pre-revenue into a revenue-generating business. And today, I want to talk to you very much about how we are investing in the business, how we're going to grow, what the opportunities are moving forward as we go forward. So I promised when I came back to the market that I promised three major areas. We put into the market revenue forecasts. Those revenue forecasts are $3.2 million revenue for this year, rising to $8.4 million in next year and then $17 million. We're very, very confident of hitting the $3.2 million revenue target. And we also have an awful lot in the pipeline that we promised the market that we would have. So James and the commercial team are developing relationships all the time with new hospital systems, new payers, new distributors, and we're very confident about not only hitting the $3.2 million, but also the $8.4 million next year as we're seeing confidently that many new customers are coming on board and utilizing this test. This is being achieved with a very small team of people. And naturally, as that team grows, the more success we will have. We also promised cost reduction. There was some serious reductions that could be made. I've only been in the company three months, but we have delivered on 50% reduction in admin fees. I've also brought on board Dominic O'Brien, who is the global finance manager for the business, and he's done an incredible job in not only cutting costs, but also putting in the budgets, putting in monthly management accounts, everything you would expect for a company. And now we have the metrics as a business to really understand the company and really look at how we're going to grow this business. The other thing that we brought in, which I've just intimated then is we brought in management KPIs. We have very regular senior management meetings where we actually look at how many doctors are utilizing the test, how we're being reimbursed. How long it's taking us from receiving a blood sample to turning around that test. All of those metrics have improved exponentially over the last three to six months. So we're in a very good growth phase now, and we're very confident that this growth will continue to happen. So moving on. So the financial targets was we promised the market was that revenue would grow by 20% quarter-on-quarter post our funding fund raise back in October, November last year. We have achieved that, and we're continuing to achieve that. The other thing is as more doctors come online, I think that 20% could be exceeded. But at the moment, we are delivering that 20% quarter-on-quarter growth. Commercial testing volume increased to 82% from 60% in the prior period. The thing about commercial testing is, I mentioned earlier on, last August, we got reimbursement for $950 a test from Medicare. This commercial testing is really important to us because historically, anyone who knows this story, we were very reliant on Mount Sinai hospital system for doing the testing. Now we've managed to broaden that significantly, bringing on the now well-known ACPNY hospital system who are testing on a daily basis. Also, our eight salespeople are going out direct to physicians. We're seeing that growing, and we're seeing Medicare reimbursement increase every month. So we are no longer reliant on just one hospital system. Our task now as a business is to bring on more hospital systems and also to bring on more payers and more distributors for the product, which James is driving very heavily at the moment. We are very much on track, as I've already mentioned, of hitting the $3.2 million in '25, and I feel that the pipeline is so strong that there will be some pretty positive news coming over the next few months to demonstrate how we will get to $8.5 million next fiscal year. We have cash of $9.2 million in the bank at the moment. And as I said, our cost reductions are in line with post-funding expectations. Also, we're seeing considerable cost reductions from moving off NASDAQ and going back on to AIM. And now that the business is now totally focused on just on delivering as much growth as we possibly can. So you'll see in the next slide, direct-to-doctor sales strategy is delivering higher than forecast test volume. So our sales guys go out to nephrologists, diabetologists, endocrinologists and they sell the test and the advantages of this test. And as you can see from this bar chart, we're consistently increasing our sales to doctors. You will notice because it's very notable in Q3 2024, we slightly dipped in terms of test sales, but it's important to let investors know that, that is the quarter in which we won ACPNY, and we started to scale up ACPNY. At the moment, the company is so small, our eight salespeople had to go to New York to train all the nephrologists and staff within New York to utilize the test, how to use the test, how to send samples in and how to let the patient know about the test. That took a considerable amount of time, about four weeks of all our team in New York to do that, which obviously led to only a slight dip in forecast sales. Plus we've changed two salespeople and brought in two new salespeople. So there will be a bit of a dip before that increases. As you can see, now with ACPNY fully on board and the two new salespeople fully on board, our expectations for Q4 are much higher and eminently deliverable. So on the next slide, we have test reimbursement with 95% of Medicare claims now paid in under 30 days. The one thing about reimbursement is that we have worked really hard on improving how we deliver the test, and we're making sure that test cancellations are an absolute minimum. Test can be canceled for some reasons, patients don't turn up. But what we have is mobile phlebotomy that goes out to the patient, takes the blood and we run the test. And now over 95% of our Medicare claims are not only accepted, they're paid within 30 days, which, as you can imagine, is having a positive impact on our cash flow and a very positive impact on the company. 52% of testing is now Medicare and Medicare Advantage patients. The DKD tends to hit the over 65s in the main and Medicare covers all over 65s come what may, whether they're insured or not. And that's where our patient focus is, and we're starting to see real returns on that. We now have multiple additional insurance companies, smaller insurance companies in active coverage consideration, and we will obviously announce that as time goes on because we need to broaden the insurance payers as we grow as a business. So the next slide will show you what my expectations are and more is that we're looking at total revenue growth in line with post-funding expectations. We made a promise of 20% quarter-on-quarter growth. We also made a promise that we would hit the $3.2 million target. As I mentioned already, I'm very confident that both will happen as we enter into Q4. And as you can see from this graph, you're seeing all the time as more and more and more doctors adopt this test, you're seeing the growth coming through. We expect that growth to continue and if not increase as we delve into the pipeline and turn more and more hospital systems on to utilizing this system. It is very -- again, I will repeat the size of the company. It's a process that takes time because we have to go out, talk to the hospital systems, persuade them to utilize this test. That doesn't take too long and they realize the advantages they're having and especially the cost savings that this is bringing through. But then we have to go into their data, and this is the time-consuming element because obviously, in a hospital system, not everybody is going to need KidneyIntelX. So we have to extract the diabetics from that data that they have in the hospital system and then extract the ones most likely to go on to get diabetic kidney disease. This takes time. Fergus to my left here, he is the one who forefronts the installation of this, but it can take about three to four weeks before we get behind the system to extrapolate the data and get the right data out to make sure that we test the right patients. But every time we bring a hospital system on, once we're behind, for want of a better word, the wall, then the continuity of testing, continuity of ordering increases as is being shown by ACPNY. So we're continuing operational improvements all the time. So customer billing, logistics and billing improvements are now paying dividends. We have spent a lot of time, as I said, ensuring that we bill on time. We make sure we collect the blood samples on time, deliver them to the lab, and we make sure that the lab test is done in a timely manner. As I mentioned earlier, we're having more orders being processed with significantly, drastically fewer cancellations, which is a really big positive. We turnaround test results measurably improved to under seven days, which was a lot longer. It used to be 24 days. We also have capacity in the system to grow significantly over the next year or 2. So the more orders we get in, we have plenty of capacity in the lab to deliver on those. Time from billing to insurance payment has been reduced by 65%, so another metric that's really important and continuing reduction in bad debt expense above improvements in reimbursement wins. So we're reducing the bad debt. We're testing the right patients. We're getting reimbursed. We're getting the cash in, and we continue to work very, very hard on improving those metrics. So the next slide is one of those metrics. This is the significant reduction in order cancellation rate. As you can see, in May, it was up at 24%. We're now down to 8%, and we hope to reduce that even more. Cancellations can happen for a number of reasons, a poor blood draw, a patient not turning up for the test, et cetera. As I mentioned earlier, we now have mobile phlebotomy that goes and takes the blood sample, delivers it to the lab, and we are seeing that people are much more responsive to that kind of methodology rather than having to always turn up to appointments. So we are seeing far, far fewer test cancellations than we were earlier on, plus getting Medicare reimbursement last August has encouraged as well patients to come and take the test. We've increased lab productivity and turnaround time, as you can see from that slide is that we're now down to seven days on average, a significant improvement on where we were previously, where you can see it was taking up to two weeks to do that. We still aim and hope to get that lower. I won't be able to get it too much lower because the lab would be overrun, but we hope to maintain between six - five to seven days in terms of lab turnaround time, which for us, of course, again, results in more patients going through the system, more reimbursement, better cash flow. So driving this productivity down is proving to be very advantageous for the business. Again, as I mentioned at the beginning of the meeting, my job when I came back in was to drive these metrics to drive the control to improve the performance, improve the cash flow and report in a very accurate manner to all investors in the city. So further progress. We've had full rollout completed with ACPNY, serving 500,000 patients, and we're only just rolling that out. So there's a long time before that those patients run out. We are expecting additional hospital systems to come on board. We've already signed a few smaller hospital systems, but we're looking at larger hospital systems as well as further payers as well as distributors because we are a small business. We know that we're very close to breaking through that glass ceiling, but we need to sign two or three more deals to get through that glass ceiling and start to see real growth in the business. But more and more doctors are getting engaged every single week in terms of utilizing this product. We -- as I said, we've had high support for insurance company initiated supported rollouts. I would like now, actually, because you're probably fed me talking, I'd actually like to hand over for five minutes to Fergus because I think something that's got lost in the last three or four years is how important and how strategic our pharma collaborations are and how important they are to the business. And so as you saw in the statement this morning, I've resurrected that because we've never stopped working with pharma and we never stopped developing with pharma. So if Fergus could give a bit of an update on where we are with pharma, and we will do that.

Fergus Fleming: Yes. Good afternoon, everyone. So just to give you a little bit of background and make reference to what Julian said earlier on, I mean, KidneyIntelX and the KidneyIntelX platform fundamentally is about getting the right treatment to the right patients at the right time. And our first indication, the prognosis indication that we have today is really instrumental in making sure that patients who really need treatment and need drug therapy in a timely manner, get it in a timely manner. But that's just the start of the story in terms of what happens in the life cycle of the disease. What we have been doing over the last number of years is working very closely with the leading research organizations on the planet working in this space, together with the leading pharmaceutical companies who have already launched blockbuster drugs into this sector, but are continuing to develop new drugs for the future patient needs. So this disease, this condition of diabetic kidney disease won't just go away with a silver bullet. It's going to be a continuous evolution of new drugs, new therapies. And I think all of the constituents, the research organizations, payers and now in particular, pharma are seeing the role that a KidneyIntelX platform can play in ensuring that they get the right drugs to the right people at the right time, right through from their clinical research programs. And we are currently speaking with a number of the leading drug companies in this space on the role that KidneyIntelX can play in their drug development programs. We expect to have more announcements in relation to that activity coming out in the coming months. And that will all feed into future opportunity and future value of the KidneyIntelX platform because once that test gets intrinsically linked to a therapy, it's linked forever. And therefore, the selection of patients for drug therapy will be intrinsically linked to our test. There's a way to go. There's a lot of activity to flow through that, but you should expect to see some announcements coming out in the coming months to show that, that journey is very much underway, and we have been working diligently through that for many months for many years heretofore. But we really think we're getting close to a tipping point where it's really going to take this concept of precision medicine into a new era in this chronic disease condition as it did in oncology before us. So lots of activity happening, lots of revenue contribution in the first half, more to come in the second half and hopefully, lots of exciting things to happen in fiscal year '26 and beyond. A lot of it built upon a strong foundational platform that is KidneyIntelX built on strong biomarker intellectual property, strong biomarkers coming out of the Joslin Diabetes Center, a lot of the data that we have invested in collecting over the last number of years from our real-world evidence studies and really strong partnerships and being essentially the only show in town here. We are the only company active in this space and pharma and our research collaborators and many other stakeholders are recognizing that quite extensively at the present time.

Julian Baines: Thanks, Fergus. So it's not just going out to doctors and identifying patients who need to have the test to put them on drugs to keep them from going on to kidney dialysis. But as Fergus has said, the second stream for us and just as valuable is working alongside pharma, creating precision diagnostics where we actually give the right drug to the right patient, which is only ever really at the moment being utilized in oncology, but it will definitely move into further disease states. And we're right at the forefront having KidneyIntelX as our test to support pharma. And pharma are talking to Fergus every day virtually. And I think it's an important additional value add to Renalytix. So it comes back to the fact that we are not just a testing company. Renalytix continues to make progress in broadening its preventative medicine value proposition. We have a testing service. We have pharmaceutical and clinical research opportunities, IP and technology asset development, FDA reimbursement. And I think that the opportunity for this business has never been higher. I really think that we are making huge ground in the United States. And again, we are having to do it on a very limited budget. We're having to control costs to meet the requirements of investors, but we're doing it in a very logical, strategic and positive manner. And everyone in the company is really brought into this. And I am seeing in a very short space of time, just 100 days, a real togetherness in driving this business forward. And I think for any investor, today is a really good day to be looking at Renalytix because we're unique, unique product in a unique area that gives huge patient value. I can't stress that enough, and patients will benefit from this for many, many years to come. So on that note, I will take any questions.

Operator: Thank you, Julian and Fergus. [Operator Instructions] Perhaps Fergus, you might want to take the first question. What makes KidneyIntelX different from other kidney disease tests? And how do you plan to stay ahead of the competition and defend your market share?

Fergus Fleming: Excellent question. So first and foremost, the other kidney disease tests that most people might be familiar with from their regular visits to the GP are tests that diagnose kidney disease. They tell you that there's something wrong with your kidney. They're very non-specific, they're routine tests that are run very commonly across all patients, typically patients with diabetes. But all they do, is tell you that you've got a diagnosis of kidney disease. They don't tell you what your risk is. What's going to happen? Am I going to just die with kidney disease, or am I going to die of kidney disease? What our test does is, it stratifies that population into patients who really don't need to worry, particularly about their kidneys. This should be vigilant, but it's not something that's going to be urgent for them to worry about in the short-term, versus those that are high risk. For our test, where are the ones that really need multiple therapeutic actions, multiple consultations with their nephrologist, or kidney specialists and being really closely monitored? So what our test is different, is it's telling you about the risk of something happening in the near term future. And in our terms, near term future is five years. So we're telling you what - in the next five years, are you truly somebody who could end up on dialysis, or are you somebody who should just remain a vigilant patient?

Operator: Thank you, Fergus.

Fergus Fleming: In terms of the competition question, sorry.

Operator: Oh, yes, of course, sorry.

Fergus Fleming: So how we consider ourselves, we're anchored in the biology, right? So we use the term biomarkers, but we take a contemporary blood draw. So we take a test today that tells you about your future, future risk over the next five years. So that blood draw is really important and how we're staying ahead of the competition, is that we have the best biomarkers that tell you the most information today. But we also have a whole pipeline of biomarkers that we're working with those leading research organizations that I spoke about, we're part of a consortium called PRIME-CKD. We are the ones that are at that forefront of taking that new science, and bringing it into the commercialization pathway. So that's how we're staying ahead. We are the go to place for bringing those new research findings into the clinic, and hopefully ultimately into the commercial landscape.

Operator: Thank you, Fergus. And following on from that question, what specific areas of intellectual property development are you focusing on, and how do these innovations enhance your competitive positioning?

Fergus Fleming: Very much about biology again. So again and we've worked very closely with JOSLIN Diabetes Center all the way back to the EKF days. There're a powerhouse of discovery so that - getting those new biomarkers and there's a whole suite of IP patents filed around those biomarkers, to which we have exclusive access. The other area that we use to build the strength of our kind of future offerings is data access. So, because of our real-world evidence study, because of our own biobank that we've created. We are the only ones that really can develop new tests in this area, because we have access to the data and access to the biorepositories, or the samples that we can use to develop those tests. But a really important one as well is something that we've worked on and again, it reflects in some of the data that we present. We work very closely on building relationships. And a lot of the data that we present, we don't present it ourselves, it's presented by some leading lights in this field. So building those relationships gives us the opportunity to be at the forefront of where the science is going, where the clinical need is going and where the payers are really responding to. So it's multifaceted biology from the biomarkers, data from our programs that we have in place, but also those relationships and partnerships that we have fostered over the years.

Operator: Great, thank you Fergus. And perhaps back to you, Julian or James online. Based on your performance in the first half of FY '25, do you believe the growth you're seeing can continue over the next two to three years? What challenges or risks might slow down your progress?

Julian Baynes: Why don't we ask James that question? Because poor old James, otherwise none of the investors will hear from him. So if we hand over to James to answer that question?

James McCullough: I think you two are doing a fabulous job. There are always challenges as you continue to scale the business, but we're continuing to show progress, and I think that this is going to be sustained over the next couple of years. As Julian said, we're going to need additional distribution capacity. We're going to take advantage of strategic partnering. We've been very good at doing that in the past. We've got a lot of discussions going on right now. There are just not a lot of 15 million patient wide open markets available in the United States, 15 million patients who have diabetes and kidney disease. We've established a very firm price point at the front of that 15 million patients. We do not have competition, direct competition for KidneyIntelX. This is the only FDA approved prognostic test in early stage kidney disease, with Medicare reimbursement. We are in the clinical guidelines. We're getting much, much better at understanding how to communicate with physicians, at all different practice levels. We're getting operationally better. So yes, the trend is our friend here. It will continue. And I think the need is even clearer today. There's been change in the political landscape in the United States, if anybody didn't know. And there's been a very specific focus on chronic disease in the United States. And this is really the challenge of our lifetime today, is how do you manage chronic disease? Because you can't treat everybody. The populations are too big and prognosis understanding risk early is the cornerstone of preventative medicine and chronic disease. That's KidneyIntelX. That's how we designed it. We designed it to be regulated and paid for, to be adopted on a broadscale basis so anybody can use it. You don't need a PhD to understand a result. With KidneyIntelX, a primary care, a generalist physician can use it, and so can a specialist. And if you don't understand risk early in the chronic disease space, then you've lost the war. You've got to understand, who's at high risk and who's not early. When drugs have the best chance of working, when specialist involvement has the best chance of working. And what we've been experiencing over the last 40 to 50 years in kidney disease, is really a dialysis equation. We're waiting for people to show up in the emergency room. We're waiting for people to develop significant symptoms before we treat them. And today, KidneyIntelX is the gateway for preventative medicine and chronic disease. It's early, it's accurate, it's regulated, it's paid for. And if you identify patients who are in trouble, we now have a whole portfolio of therapies, really since 2019 that can treat these patients. So there's absolutely no reason, why KidneyIntelX shouldn't be adopted on a broadscale basis, and we think the trend is just going to continue. And we're seeing that interest in the pharma level. As we talked about, we're seeing this interest on the physician level. Large care networks like ACPNY with 140 physicians that are exposed, to KidneyIntelX now treating about half a million patients. And we've also got insurance companies who have a very big stake here, in controlling chronic disease cost and outcome. So KidneyIntelX, is the right technology at the right time. And we are small, as Julian said. But that's okay, because we're going to continue one foot in front of the other. And I do think that, there is strategic partnering available to expand that distribution. And most importantly, we've locked in the price point, and the margin and we're getting very good at what we're doing right now.

Operator: Thank you, James. Potentially another question for you. How does your direct to doctor sales strategy work? Please, could you elaborate a little bit on this?

James McCullough: So it's a combination. I've always referred to it as a surround sound component. So especially with very busy physicians, it's important that you provide a direct to physician communication. It's also important, and we can do this, because the technology allows us to do this. We've gotten very good at it, and we proved it. You can integrate KidneyIntelX in an electronic medical record system. All hospital systems use them. Large physician group practices, you can take KidneyIntelX, and you can actually put it in the electronic medical records system, with software support to identify patients that are eligible for KidneyIntelX testing. And we can actually send out best practice alerts to the doctor, when those patients have been identified. This is very powerful leverage, right. This is creating the surround sound component. So not only do you have this ability to identify patients in a large system like ACPNY or Mount Sinai Health System or Singing River, or other groups that we're moving into later this year. So there's an automated function, there's a baseline function to find those patients that should be prognosed by KidneyIntelX. But then you have direct-to-physician sales, where you're actually going in and communicating, and supporting those physicians. We also have a customer service component, albeit limited, but very good and very sharp that, is supporting the direct-to-physician salespeople. And then of course, we have billing as well. So you create a surround sound functionality where you limit the workload on the physician. This is key. You've got to make it as simple as possible, and you've got to make it easy for the doctor to be able to deploy this technology, and to be able to identify the patients that need treatment. So a combination of direct-to-physician sales, integrating into electronic medical record systems, taking advantage of the software capability that we've been demonstrating now for a couple of years. This makes KidneyIntelX deployment a very powerful function to go right at the front end of this huge chronic disease population, and start to identify high risk patients and stop kidney disease in its tracks. So it really, KidneyIntelX really is a gateway at the front end of chronic disease to manage it properly.

Operator: Thank you, James. And just following on from that, are you able to provide any guidance on your current number of prescribing doctors? You said in H1 2025, it was 142?

James McCullough: Yes. So at the moment the figures we can give you, were just over 800 independent ordering physicians, which is terrific. That's a pretty big group. It's a mix of specialties. Primary care, generalist, physician here in the U.S. up to nephrologists. We do have some cardiologists ordering, endocrinologists and we've now reported out over 15,000 test results, clinical test results, and that number is growing.

Operator: Thank you. Next question is, given the success in the U.S., do you have plans to introduce KidneyIntelX into other countries? How do you see international expansion unfolding?

Julian Baynes: Well, I would love to have make that happen, but it comes back again to a lot of the thread in the presentation today is that at the moment we're not big enough to expand into other countries as regulatory issues. There's acceptance issues and training and we need to be, at the moment, we need to grow significantly to get to the point where we could introduce it into other countries. It is a crying shame, because just in the U.K. alone, £1.2 billion a year is spent on kidney dialysis. But people in the U.K. would benefit just as much as the people in the U.S. But we're a relatively small business, and I think that at the moment, most fund managers I've spoken to want us to focus, concentrate and deliver on what we promise today, which is very much U.S. centric. But I really do hope that people will wake up and realize how beneficial this test will be - globally throughout the world. I do know that James regularly speaks to people in the Middle East, and Fergus has been talking a lot to people in the U.K. But we need to be, we need to have a bigger team to be able to enter these markets.

Operator: Thanks, Julian. And another question for you. Having been appointed as the Executive Chairman, how do you think your leadership will impact the company over the next year?

Julian Baynes: I think two or three things. It's probably better for Fergus or James to answer this, but because, but two or three things. I think that I've been running AIM companies for 21 years now. I know the markets really well, but I also believe that I can introduce the disciplines as a Chairman and Exec Chairman, and I'm certainly not a hands off Chairman. I'm sure James and Fergus will agree that, that I'm involved very heavily within the business. I'm involved in talking to fund managers, but also getting these business principles in place. I introduced the company to Dominic, who's brought in some amazing financial controls. We've put in the business metrics that we said we would, so that we can focus on what we need to deliver. And this is experience over 20 years of running AIM listed businesses, and controlling costs, driving growth, looking at opportunities. So I just think it's the old gray hair. I've been around a while, and I know quite a few people and I can help the business significantly in terms of controlling the costs, and growing the business in the right way with the right metrics.

Operator: Thank you, Julian. As this is a two part question, can you clarify what is meant by the following Annual Report 2024 statement to target to achieve 1% of U.S. market penetration in three to four years. How is this quantified? Is this test sales revenue?

James McCullough: Because I didn't get a chance to answer and I think it's important. Julian and Fergus and I began together in 2017 talking about the need for this type of strategy, to manage chronic disease. And so this is not a, this is a long-term relationship that has been in place. There's been a lot of discussion and iteration. This has been a very difficult market and it's a difficult process to reorganize a company in this market. And Julian's addition here has been superb. So we have a very close working relationship. There's no holds discussion that goes on a regular basis. Operationally, strategically everything is discussed, and I think that's incredibly important. It's one of the strengths that we have here, is the experience and the senior management that's capable of working together. And now collectively making decisions going forward, in a very different market environment that we started in, which included this incredible volatility up and down with the pandemic. So Julian is a critical part of what's going to happen in terms of the success, and the communication internally is superb. I'm sorry, I interrupted you. Please continue.

Operator: Sorry James, I jumped ahead there. You stated in the 2024 annual report that your target is to achieve 1% of U.S. market penetration in three to four years. How is this quantified? Is that test sales or revenue? And with that aim to reach 1% market penetration, what are the key milestones and challenges that you anticipate along the way?

Fergus Fleming: Yes, I'll start the answer, I think that's a very attainable goal. So 1% market penetration in the U.S. for example, would equate to 150,000 patients having had a KidneyIntelX test, and at a gross price of $950 a test, you can equate that to dollars, potentially attainable dollars of revenue per annum. If you were to get to a 1% penetration per annum rate. However, to get there will require significant investment, and infrastructure over and above what is available to us today. That's based on having entered into quite expensive, but extensive collaborations with leading electronic health record system companies, companies like EPIC, which would give us access to the patients, to the patient data in a much more efficient and cost effective way than we have today. But you've got to invest in that. So I think the key, my response would be that that's a very attainable goal, but it's probably in the years two, three and four time frame rather than in, what we're talking about today in terms of year one and two, because it's really about stabilizing the revenue growth, based on the resources we have available to us today. But doing all the things that James, and others are doing in terms of finding the right strategic partnerships, to help us grow that level of distribution, level of penetration that really can access that 1%, of the eligible patient population, which is not a big number, 1% is, is something that needs to be done for the patient's perspective, needs to be done from the payer's perspective. But to get the building blocks in place, to get to that point is beyond what's available to us today from a resources point of view. But we're looking towards partnering and strategic partnerships that will help us bridge that gap.

Julian Baynes: Yes, I agree with Fergus. There are a lot of opportunities ahead of us, but we need to restore confidence in investors. We need to deliver on what we promise today, and in the last three months. And once that confidence is restored, then we can start to talk to investors about if we do this, we can accelerate growth. I mentioned the glass ceiling earlier in the presentation. We have numerous ways of breaking through that ceiling and one of them, as Fergus just said, is to accelerate that by investing in what is called EPIC. But that is too soon for us at the moment. So once we've regained the confidence and I get the backing from investors, then the world is our oyster. We can rapidly expand the business from a sales perspective pretty quickly. But as I put in my statement this morning, I'm acutely aware what people want to see, and investors want to see at the moment, is us delivering time and time again. Once that confidence is back, then we will be looking at expanding into faster growth.

Operator: Thank you. Next question. Are you able to tell us a little bit more about potential pharma relationships? Would this be using the existing KidneyIntelX or would there be requirement for further test development?

Fergus Fleming: I think we've answered that. I don't know if there's anything to add.

Julian Baynes: I don't think there's anything much to add, I think, Fergus except that the good news is the current test, current FDA approved test is a major stimulus to activity. But we think over the coming years we will continue to develop new tests, new indications, new technology that will feed into those future pharma programs. But the current offering is…

Julian Baynes: To your perspective for existing market with KidneyIntelX. Today there are multiple therapeutics that are being prescribed, into the kidney disease diabetes space. They typically cost several thousand dollars per month. And these costs run for the lifetime of the patient. And the advantage of this, is if you have kidney disease and diabetes really for the first time now. You've got options and insurance covers those options. The problem is it's quite expensive. And the minute you go on these drugs, you're on these drugs typically for life, and they do extend your life, right, because we're slowing the disease process. So KidneyIntelX offers a very valuable proposition coming into this equation now, which is when you apply KidneyIntelX to somebody who's got this chronic disease. It challenges the intuition. And we often find that a patient that's in very early stage chronic kidney disease is actually at high risk and should be on therapies. And that's a small minority of people, but that's a critical minority of people that's going to drive all the downstream cost. And conversely, now that we add KidneyIntelX view, we find that people that are in moderate stage kidney disease. Mid stage kidney disease, that a physician would typically start to treat immediately with expensive drugs and therapies and so forth, that they're actually at low risk for progressing, and you may be able to hold off on applying all these expensive therapies. So if we're really going to get serious about controlling cost in the NHS, with Medicare in the United States, we've got to understand risk early. We've got all of these new wonder drugs, incredible therapeutics, which are coming out, which are amazing, but who do you apply them to? Because you can't treat everybody. It's way too expensive to go out and treat all 15 million people. You just can't put these new drugs in the water. You've got to have a way to understand early, who's at risk and who's not. And with KidneyIntelX, the view changes in this patient population. So this is the critical equation that we faced. How do you control cost? You've got to understand risk early that's KidneyIntelX. And you have to do it in a regulated way. You have to do it in a reimbursed way, in a guideline stripping way, so everybody can use it. You can't home brew or create your own algorithm, or figure something out. That's what we spent so much money, and so much time doing and perfecting. And we're there now, and we're there at the right time, in the right place, because now all these therapeutics are out. So pharma looks at KidneyIntelX in a very interesting way. What Fergus has done is incredible. We've got a whole trove of biomarkers, including JOSLIN Diabetes Center that look at therapeutic response monitoring, et cetera. So there's a lot more to develop downstream. But obviously we're sitting at the epicenter right now, of who's at risk and who's not, who should get drugs and who shouldn't. How do we view this simply, quickly and accurately? So we can apply this across all physician levels. It's a fascinating time and a place.

Operator: Thank you, James. The next question is about Medicare. So given that Medicare now covers 52% of tests at $900 per test, how do you expect. How do you expect this momentum to drive growth? And what role do you expect new insurance partnerships to play in expanding both revenue and cash flow?

Julian Baynes: Dr. James?

James McCullough: So our market is Medicare and the associated Medicare Advantage. And just to explain it to people who are not in the United States. It's complicated, but all the private insurers have what's known as Medicare Advantage plans, which pay for Medicare patients. So really what we've spent so much time doing, generating an abundance of evidence, validated evidence in a regulatory format. Was getting Medicare to make a decision, to provide medical policy coverage for KidneyIntelX dkd. It took us over four years. We went through multiple public hearings. As Fergus knows, we had to submit an enormous amount of clinical data, around utility outcomes the benefit. This is a very complex process, to do and difficult to achieve. And in June of last year, late June, Medicare said, yes, we're going to provide coverage. And that all of a sudden opened the gateway to us, because not only do we get the Medicare patients, which is about 50% of our addressable market of 15 million, 14 to 15 million, but we also get all of the private Medicare Advantage plans as well. So it depends on where you are, but we can comfortably say that with the Medicare coverage decision, which really started to get into effect in terms of payment cycle, September, October, November. So we're relatively new, which is important, an important thing to say, and that's going to continue to accelerate. We now have, in many instances, 60% of the population with full insurance coverage. And again, as Julian mentioned, and this is brilliant, we get paid in under 30 days with Medicare. So that has a significant impact on cash flow. That also provides us with the ability to now go out to other Blue Cross, Blue Shield plans. Other national carriers, other regional carriers, which we're doing to say, hi, we have Medicare coverage now. And here are the results. And what happens is this becomes a cycle that, starts to build on itself. Now that you have coverage, you get more utility and use in different areas. That stimulates more conversations with more insurance coverage, more carriers. So really, we've only had a very short period of time, it's only been really less than two quarters, where we've been able to extract experience, full Medicare coverage and Medicare Advantage, that's important for the investor. This has had a significant impact on the percentage of testing that's paid for by insurance on our commercial business, which has now gone up significantly. That trend is going to continue. And as we get more and more coverage, we get more and more utility. Our average sales price across all of these payers. I know, it's complex, continues to go up and the equation starts to fill out. And we know how this works, because we've seen it with other significant major examples, including examples like Cytyc, our President and Head of Commercial Howard Doran led Cytyc, to a significant multi hundred million dollar sales cycle. Went through the same thing with coverage. We look at Exact Sciences, Genomic Health, all of the major examples in the diagnostic field, have gone through a similar process that we have. And again getting Medicare coverage going into the first quarter of the fiscal year last year, was an absolute critical gateway for us, and it starts to stimulate everything. So insurance reimbursement remains central. We have a brilliant person who is running that at the moment, who actually came out of Genomic Health, and we are starting a very aggressive move in 2025 currently, including with the new administration who has made this a little bit more favorable for us. And we expect the insurance coverage to continue to fill in, which drives utility, which drives revenue, which drives average sales price. So it's all these things have now come together, and actually in a relatively short period of time, I think it took some of the other major examples over 10 years, to get to this point. We've gotten to the point where the majority of our market, which is insured by Medicare, is now being paid in just about five years, worth of the company growth.

Operator: Thank you, James.

Julian Baynes: Very pleased where we are on insurance.

Operator: Thank you. So we've tried to answer all of the questions. There were a couple that were along the same kind of themes and topics. But if you do have any further questions you can always email [email protected] and we can liaise with the company, to get those answered for you. Thank you for joining us today, and for all of your questions. That's all we have time for. So that concludes the Renalytix Investor presentation. Please take a moment, to complete a short survey following this event, and I hope you enjoyed today today's webinar.