Renalytix plc

("Renalytix" or the "Company")

 

Half Year Report

 

LONDON and SALT LAKE CITY, March 30, 2023 - Renalytix plc (NASDAQ: RNLX) (LSE: RENX), reports its financial results for the six months ended December 31, 2022.

 

Recent Highlights (Including post period events)

·         Expanded insurance coverage for KidneyIntelX including:

o  One of the largest not-for-profit health insurers covering over three million lives in the Northeast U.S.

o  Largest private payer in Illinois with over eight million members

o  35 state Medicaid plans including recent additions of Texas and Florida

·         Achieved Medicare payment for KidneyIntelX through the individual claims review (ICR) process based on our Medicare clinical lab fee schedule (CLFS) pricing of $950 per test

·         Over 2,500 KidneyIntelX tests performed in the first half year of fiscal 2023 of which over 80% were billable

·         Increasing diversity of commercially billable testing volume, particularly among primary care physician practices ordering through the MyIntelX portal

·         Continued progress with FDA De Novo authorization review; FDA has indicated a target date for completion in the second calendar quarter of 2023

·         Completed $20.3 million equity financing led by new institutional investors

·         Core participant in $10 million Horizon Europe Grant to advance personalized medicine in treating chronic kidney disease

·         Agreement with Veterans Administration to integrate KidneyIntelX testing with VA hospital electronic health record systems

·         Publication of new real-world evidence in Journal of Primary Care and Community Health in which KidneyIntelX resulted in a 4.5-fold increase in new drug prescriptions (for SGLT2 inhibitors) for high-risk compared to low-risk patients; early evidence suggested that the introduction of SGLT2i  contributed to an observed reduction in HbA1c levels most notably in high-risk patients, and a more than a 20% change in dose or type of antihypertensive therapeutic prescriptions in high vs. low-risk patients

·         KidneyIntelX clinical utility and health economics validated in multiple data releases at American Society of Nephrology Kidney Week 2022, and multiple presentations on clinical utility data accepted for presentation at National Kidney Foundation Spring Clinical Meeting 2023, American Diabetes Association 83rd Scientific Session, and American Association of Nurse Practitioners Annual Meeting, including data from Wake Forest, Mount Sinai, UPenn, and CANVAS cohorts

 

Financial Results

During the six months ended December 31, 2022, the Company recognized $2.2 million of revenue (HY22: $1.3 million). Cost of revenue for the six months ended December 31, 2022, was $1.4 million (HY22: $0.8 million).

 

Administrative expense for the six months ended December 31, 2022, was $22.4 million compared to $27.5 million during the prior year period. The decrease in administrative expenses was driven by previously mentioned cost reduction initiatives resulting in a $1.9 million decrease in contract labour, $1.8 million decrease in professional fees and $1.4 million reduction in other expenses including, insurance, marketing, IT and other miscellaneous expenses.

 

Net loss before tax was $22.7 million for the six months ended December 31, 2022, compared to $26.8 million for the prior year period.

 

Cash and cash equivalents totaled $23.8 million as of December 31, 2022, compared to $41.3 million as of June 30, 2022.

 

Investors are advised to read the results for the three months ended 31 December 2022 under U.S. GAAP which have been released alongside these results.

 

The Company will host a corresponding conference call and live webcast today to discuss the financial results and key topics including business strategy, partnerships and regulatory and reimbursement process, at 08.30 a.m. (EDT) / 1.30 p.m. (BST).

 

Conference Call Details:
To participate in the live conference call via telephone, please register here. Upon registering, a dial-in number and unique PIN will be provided in order for interested parties to join the conference call.

 

Webcast Registration link:  

https://edge.media-server.com/mmc/p/oub5knjk

 

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) 596/2014 (MAR).

 

For further information, please contact:

 

Renalytix plc		www.renalytix.com
James McCullough, CEO		Via Walbrook PR
Stifel (Nominated Adviser, Joint Broker)		Tel: 020 7710 7600
Alex Price / Nicholas Moore / Nick Harland / Samira Essebiyea
Investec Bank plc (Joint Broker)		Tel: 020 7597 4000
Gary Clarence / Shalin Bhamra
Walbrook PR Limited	Tel: 020 7933 8780 or renalytix@walbrookpr.com
Paul McManus / Lianne Applegarth		Mob: 07980 541 893 / 07584 391 303
CapComm Partners
Peter DeNardo		Tel: 415-389-6400 or investors@renalytix.com

 

About Kidney Disease

Kidney disease is a public health epidemic affecting over 850 million people globally.¹ The Centers for Disease Control and Prevention estimates that 15% of U.S. adults, or approximately 37 million people², have chronic kidney disease (CKD). Nearly 95% of people with CKD are in early stages 1-3³. Despite its magnitude, early-stage (1-3) CKD is underdiagnosed and undertreated, largely because it's asymptomatic at this time in the disease. As many as 9 in 10 adults with CKD, and about 2 in 5 adults with severe CKD do not know they have the condition.³

 

About Renalytix

Renalytix (NASDAQ: RNLX) (LSE: RENX) is an in-vitro diagnostics and laboratory services company that is the global founder and leader in the new field of bioprognosis™ for kidney health. The leadership team, with a combined 200+ years of healthcare and in-vitro diagnostic experience, has designed its KidneyIntelX laboratory developed test to enable risk assessment for rapid progressive decline in kidney function in adult patients with T2D and early CKD (stages 1-3). We believe that by understanding how disease will progress, patients and providers can take action early to improve outcomes and reduce overall health system costs. For more information, visit www.renalytix.com.

 

About KidneyIntelX™

KidneyIntelX™ is a laboratory developed test demonstrated to be a reliable, bioprognostic™ methodology that yields a simple-to-understand, custom risk score, enabling prediction of which adult patients with T2D and early CKD (stages 1-3) are at low, intermediate or high risk for rapid progressive decline in kidney function. By combining information from KidneyIntelX with newer cardio- and reno-protective therapies, doctors will have more information in determining which patients are at higher versus lower risk for rapid disease progression and may be able to more appropriately target resources and guideline-recommended treatments to advance kidney health. KidneyIntelX is supported by a growing body of clinical, utility and health economic studies (including a validation study of two large cohorts) and has demonstrated a 72% improvement in predicting those patients who are at high risk for rapid progressive decline in kidney function versus the current standard of care (eGFR and UACR). KidneyIntelX has received Breakthrough Device Designation from the U.S. Food and Drug Administration, and Renalytix has submitted for De Novo marketing authorization. To learn more about KidneyIntelX and review the evidence, visit www.kidneyintelx.com.

 

Sources

1 https://www.theisn.org/blog/2020/11/27/more-than-850-million-worldwide-have-some-form-of-kidney-disease-help-raise-awareness/
2 https://www.cdc.gov/kidneydisease/publications-resources/ckd-national-facts.html
3 https://www.cdc.gov/kidneydisease/basics.html

 

 

Forward Looking Statements

Statements contained in this report regarding matters that are not historical facts are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Examples of these forward-looking statements include statements concerning: the potential benefits, including economic savings, of KidneyIntelX, the future impact of KidneyIntelX on clinical decision-making and outcomes, the potential for KidneyIntelX to receive regulatory approval from the FDA, the commercial prospects of KidneyIntelX, if approved, including whether and to what extent KidneyIntelX will be successfully adopted by physicians and distributed and marketed, expectations regarding insurance and covered lives, our expectations regarding reimbursement decisions and the ability of KidneyIntelX to curtail costs of chronic and end-stage kidney disease, optimize care delivery, address systemic inequalities and improve patient outcomes. The results presented in this press release are interim results; subsequent interim results and full results may vary and may not be consistent with these interim results. Words such as "anticipates," "believes," "estimates," "expects," "intends," "plans," "seeks," and similar expressions are intended to identify forward-looking statements. We may not actually achieve the plans and objectives disclosed in the forward-looking statements, and you should not place undue reliance on our forward-looking statements. Any forward-looking statements are based on management's current views and assumptions and involve risks and uncertainties that could cause actual results, performance, or events to differ materially from those expressed or implied in such statements. These risks and uncertainties include, among others: that KidneyIntelX is based on novel artificial intelligence technologies that are rapidly evolving and potential acceptance, utility and clinical practice remains uncertain; we have only recently commercially launched KidneyIntelX; and risks relating to the impact on our business of the COVID-19 pandemic or similar public health crises. These and other risks are described more fully in our filings with the Securities and Exchange Commission (SEC), including the "Risk Factors" section of our annual report on Form 20-F filed with the SEC on October 31, 2022, and other filings we make with the SEC from time to time. All information in this press release is as of the date of the release, and we undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law.

 

Chairman & CEO's Joint Statement

 

TO THE SHAREHOLDERS OF RENALYTIX PLC

We are pleased to present the half year report for the six months ended December 31, 2022 for Renalytix plc ("Renalytix" or the "Company").

 

ABOUT RENALYTIX

At Renalytix, we are introducing more accurate prognosis and effective care management for the estimated 850 million people worldwide with chronic kidney disease. In the United States alone, chronic kidney disease affects about 37 million people and is responsible for one of the largest cost drivers in the national medical system. Early identification, prognosis and treatment beginning with primary care is essential if we are to stem the growing social cost and suffering associated with kidney disease.

 

With our lead product, KidneyIntelX, the goal is to drive the focus from kidney disease treatment to kidney health management through a more accurate understanding of a patient's risk for kidney failure before it happens. KidneyIntelX leads development in the new field of bioprognosis, a biology driven approach to risk assessment that integrates information from a simple blood draw and a patient's health record to produce an accurate picture of kidney health. A doctor can use KidneyIntelX results to act on patients at high risk of kidney disease progression or failure at an early stage where active management and therapeutics have the best opportunity to impact outcomes and cost before it is too late.

 

KIDNEYINTELX™

Our novel platform, KidneyIntelX, uses a machine-learning enabled algorithm to process predictive blood biomarkers with key features from a patient's health record to generate an early and accurate kidney health risk score. The score identifies those patients at the most risk for kidney disease progression and/or failure and further guides ongoing clinical decisions.

 

KidneyIntelX is initially indicated for use with adults who have diagnosed kidney disease and diabetes - diabetic kidney disease or DKD.  Future KidneyIntelX products in development intend to expand the indicated uses to include broader chronic kidney disease, health equity strategies and kidney health monitoring through treatment. Diabetes is the leading cause of chronic kidney disease, representing nearly 40% of its cases, and DKD patients are the highest contributors to emergency room dialysis starts. Unfortunately, many DKD patients are unaware that their kidney disease has been progressing, often uncontrolled, for many years and now find themselves making difficult decisions about late-stage treatments.

 

KidneyIntelX was designed as an expandable platform able to add indicated uses and a monitoring capability, all within an FDA regulated, insurance reimbursable framework.

 

OPERATIONAL PROGRESS

Over the last several months, we have made continued progress in establishing the commercial foundation for KidneyIntelX. 

 

Commercial Development

Progressing towards majority insurance coverage in multiple regional markets with large prevalence of diabetes and kidney disease

 

We are demonstrating payment success across a diverse cohort of insurance entities including individual state Blue Cross Blue Shield and Medicaid plans, Medicare Advantage, and other large for-profit and not-for profit insurance plans.  Together with the recently awarded individual claim review payment from Medicare contractor National Government Services, this growing diversity in payment is providing us with the basis to expect that KidneyIntelX will continue to achieve majority coverage in markets with large populations of diabetes and kidney disease patients during calendar 2023.  As a result, we are now able to concentrate resources and focus on building sales, marketing, and customer service functions to support test adoption in regions with comprehensive insurance coverage. 

 

Establishing comprehensive insurance in metropolitan New York has allowed us to proceed with the important milestone of converting to a long term, commercial reimbursement model with Mount Sinai Health System in our fiscal third quarter of this year (quarter ending March 31, 2023). As discussed below, this conversion from Mount Sinai as the sole payor of tests performed under the real-world evidence program begun in 2021 is timely in the March quarter. 

 

The Centers for Medicare & Medicaid Services set the price for KidneyIntelX at $950 in 2019.  To date, we have matched or exceeded the Medicare price when negotiating commercial insurance coverage contracts.  To broaden access, we maintain a robust patient assistance program for those patients who have limited insurance coverage and for whom KidneyIntelX is indicated as a test.  We are particularly conscious of the health inequity which is pervasive among diabetes and kidney disease populations and endeavor to expand access to the advanced prognosis benefits of KidneyIntelX wherever possible and permitted under the law.  

 

We believe the diversity and depth of established insurance payment remains critical to establishing long-term testing adoption and revenue growth and is a unique feature of our business strategy in a relatively short time period since commercial testing launch.

 

Continuing to publish on our growing real-world evidence of KidneyIntelX effectiveness

 

We continue to accumulate longitudinal data from our real-world evidence program leading to further peer-reviewed support of the positive impact of KidneyIntelX.  Published utility study results in the Journal of Primary Care Community Health on November 28, 2022 on 1,686 patients showed that primary care physicians using KidneyIntelX were 4.5 times more likely to prescribe advanced medication to their high-risk patients in early-stage kidney disease, where the opportunity to prevent significant kidney damage or kidney failure is greatest, as compared to their low-risk patients.  Additionally, providers were nearly 2.5 times more likely to make a timely referral to a specialist in high-risk patients compared to low-risk patients, and 20% more likely to initiate more adaptive and aggressive anti-hypertensive (blood pressure control) strategies in these high risk patients.  Notable clinical observations from this study showed improvements in HbA1C levels for diabetes glucose control in the high-risk group in the first six months, most likely the result of both increased patient engagement combined with appropriate medication changes. There was also a 15% improvement in UACR (urine albumin to creatinine ratio), an important indicator of kidney health, at the six-month mark in the low- and intermediate-risk groups.

 

This evidence builds on a previously published study in the American Journal of Managed Care (AJMC) that indicated that 98% of PCPs were somewhat, very or extremely likely to use KidneyIntelX to predict which of their patients with DKD will experience rapid progressive decline in their kidney function.  We believe this investment in real-world evidence is driving positive insurance reimbursement decisions, and will eventually help support inclusion of KidneyIntelX in key clinical guidelines for diabetes and kidney health. 

 

We are also pleased to be a core member of a consortium of industry, academic and clinical research leaders awarded a $10 million Horizon Europe Grant to advance personalized medicine in treating chronic kidney disease.  The consortium, PRIME-CKD, aims to validate and implement in clinical practice, novel biomarker-based tests that predict response to existing drugs used by patients with chronic kidney disease (CKD). PRIME-CKD is funded by Horizon Europe, the European Union's key funding program for research and innovation. The total budget of the project is $10 million over a projected five-year period, with approximately 10% of the budget targeted for commercial translation activities to be undertaken by Renalytix. The project is closely aligned with Renalytix's objective of expanding the clinical utility of the KidneyIntelX platform beyond prognosis to prediction and monitoring of drug response.

 

Pursuing Food and Drug Administration (FDA) De Novo marketing authorization for KidneyIntelX

 

We continue to make progress toward De Novo marketing authorization of KidneyIntelX with the Food and Drug Administration.  While there are no guarantees, we remain optimistic and are working diligently with the FDA towards a successful outcome.  FDA has indicated they are working towards a decision by the end of second calendar quarter of 2023.  As part of the De Novo process, and pending a successful outcome of the review, the FDA will prepare a reclassification order and pursue certain internal processes for this class of test prior to communicating the final decision.  The comprehensive data dossier submitted and detailed review process by the FDA is reflective of the breakthrough nature of this novel test.  

 

Mount Sinai billing transition

 

In our fiscal third quarter (quarter ending March 31, 2023) we completed the milestone of transitioning to a long-term commercial insurance payment model for patients tested at the Mount Sinai Health System.  This transition is taking place with the completion of the applicable portion of the 2018 license agreement under which Mount Sinai covered the cost of the first six million dollars of KidneyIntelX testing as part of a real-world evidence study.

 

Our ability to secure diversity of commercial insurance for KidneyIntelX for a significant portion of the diabetes and kidney disease population in New York City would not be possible without established payment from Medicare, Medicare Advantage and other large New York City concentrated payors.  This includes a recently disclosed coverage contract with the second largest non-profit payer in the United States with 3.2 million members and another coverage contract secured with a large value-based care insurer covering 1.8 million members.  We are now experiencing a high-rate of payment across both public and private insurance carriers in the New York region at or above our established Medicare pricing of $950 per reportable result.

 

The transition to commercial payment for testing at Mount Sinai will have a short-term adverse impact on testing volumes, predominantly in the month of March.  Further, as is customary when diagnostic products move to broad-scale commercial billing, the average selling price for KidneyIntelX will now include a minority percentage of discounted testing for patients qualifying for financial assistance and out-of-network testing. 

 

Further, we have begun to experience the validatory effects of establishing commercial pay after extensive real-world experience with a system as large and influential as Mount Sinai with other key insurers and health systems looking to adopt a KidneyIntelX guided clinical management program for patients with diabetes and kidney disease.   

 

Other commercial market development  

 

Continued diversity of insurance coverage, successful real-world evidence and a positive FDA decision will be important factors in the quarters ahead to drive testing adoption and revenue growth.  We are pleased to begin seeing a more diverse group of physicians in different locations in the United States ordering KidneyIntelX. We are assessing more focused hiring of primary care sales and medical science liaison personnel for deployment in areas with established insurance payment.

 

We entered into an agreement with the Veterans Administration to install the KidneyIntelX solution inside the VA Health System's cloud infrastructure and interface it with the VA electronic health record systems. This marks a significant milestone in ultimately enabling providers at VA Medical Centers and outpatient clinics to order and receive test results in a seamless manner, and eventually make KidneyIntelX accessible to large numbers of veterans with diabetic kidney disease. 

 

Financing

In March of last year, we announced the completion of a financing package yielding $26.8 million in gross proceeds for the Company.  The financing included an $8.8 million equity subscription plus $21.2 million principal amount of convertible bonds (net cash proceeds of $18 million). 

 

In February 2023, post period end, the Company raised an additional $20.3 million gross proceeds in a private placement of ordinary shares and American Depositary Shares. 

 

We are pleased to have achieved such financings during this challenging capital market environment, which we believe illustrates the strength of our kidney disease testing, monitoring and informed care advantages.  In these rounds, we have welcomed substantial new institutional investors alongside participation by longstanding shareholders.

 

Clinical Evidence

Over the past few years, we have published and presented validation, utility and health economics data supporting KidneyIntelX adoption.  Of particular note is the growing body of real-world utility evidence building on KidneyIntelX clinical reporting in different institutions through several thousand patients.  Examples of published evidence includes:

 

Initial Forum	Cohort	Findings	Publication
ADA 81st Scientific Sessions 2020	Mount Sinai & UPenn (n=1,146)	KidneyIntelX more accurately predicted progressive kidney function decline and kidney failure than clinical metrics alone	Diabetologia 2021;64, 1504-1515
NKF Spring Clinical Meeting 2020	Simulation in patients with DKD stages 1-3b (n=100,000)	Analyses supported payer coverage for early-stage risk assessment and care management in the primary care office; projects significant savings from KidneyIntelX testing at primary care	Journal of Medical Economics 2021;24:972-982
ADA 82nd Scientific Sessions 2021	CANVAS (n=1,325)	KidneyIntelX algorithm published in Diabetologia and currently deployed commercially accurately predicted progression of DKD in this multinational clinical trial cohort	American Journal of Nephrology 2022;53:21-31
ISN World Congress of Nephrology 2021	CANVAS (n=1,026)	KidneyIntelX can be effective at monitoring therapeutic response and improvements in kidney health over time in adults with type 2 diabetes and DKD	American Journal of Nephrology 2022;53:21-31
NKF Spring Clinical Meetings 2021	PCPs (n=401)	KidneyIntelX test had greater relative importance than albuminuria and eGFR to PCPs in making treatment decisions and was second only to eGFR for nephrologist referrals.	American Journal of Managed Care 2022;28:In Press
ASN Kidney Week 2021	Mount Sinai RWE Cohort	KidneyIntelX testing enhanced patient understanding about kidney disease and revealed substantial motivation to take appropriate actions and receive further education for their kidney health.	Journal of the American Society of Nephrology 32: 2021
ISN World Congress of Nephrology 2022	Sinai/Penn (n=1,146)	KidneyIntelX provided robust prognostic information for future eGFR trajectories and adverse kidney outcomes beyond prior ascertainment of baseline kidney function, injury, or historical kidney function trajectories.	Kidney International Reports 2022; 7, S1-S436
ADA 83rd Scientific Sessions 2022	CANVAS (n=1,325)	KidneyIntelX provided risk stratification for a triple composite end point that included not only the kidney-specific outcome of progression, but also clinically relevant outcomes of hospitalizations for heart failure and all-cause mortality, even after adjusting for several other risk factors for these outcomes.	Kidney360 2022, 3;1599-1602
ADA 83rd Scientific Sessions 2022	Mount Sinai RWE Cohort (n=1,112)	KidneyIntelX showed utility in driving guideline appropriate use of therapies, including SGLT-2 inhibitors and RAAS inhibitor use, and timely consultation to specialists in high-risk patients.	Pending
ASN Kidney Week 2022	Systematic Review and Meta-analysis (n=129 studies)	Systematic review and meta-analysis to summarize the prognostic value of preclinical plasma and urine biomarkers for CKD outcomes (incident CKD, CKD progression, or incident ESKD), including 129 studies in the meta-analysis. Pooled risk ratios (RRs) and 95% confidence intervals (Cis) among some of the most studied CKD biomarkers were 2.17 (1.91 to 2.47) for TNFR1 (31 studies); 2.07 (95% CI, 1.82 to 2.34) for TNFR2 (23 studies); 1.51 (95% CI, 1.38 to 1.66) for KIM-1 (18 studies).	Journal of the American Society of Nephrology 2022, 33:1657-1672
ASN Kidney Week 2022	Simulation in patients with DKD stages 1-3b (n=100,000)	Analyses demonstrated that population-based KidneyIntelX testing for the prognosis of progression in a DKD G1-G3b population is a dominant strategy for both Medicare and commercial populations in comparison to prognosis relying on eGFR and UACR alone.	Pending
N/A	Review article and Case Series	Review entitled: "The need for risk stratification in type 2 diabetes and chronic kidney disease: Proposed clinical value of KidneyIntelX"	Diabetic Nephropathy, vol.3, no.1, 2023, pp.1-9
NKF Spring Clinical Sessions 2023	Wake Forest RWE (n=590)	KidneyIntelX was successfully deployed in a diverse health care system, and was associated with a near doubling of SGLT2i use in higher risk-categories, including Blacks, in accordance with guideline recommendations.	Pending
ADA - American Diabetes Association; NKF - National Kidney Foundation; ASN - American Society of Nephrology; ISN - International Society of Nephrology; RWE - Real world evidence; DKD - diabetic kidney disease

 

Numerous additional publications and presentations are upcoming in the months ahead, including presentations at NKF, ADA and the American Association of Nurse Practitioners (AANP)

 

Current Trading and Outlook

Our fundamental goals remain clear:

·      Build testing adoption on a regional basis;

·      Continue to secure diversified, long-term insurance coverage;

·      Continue building evidence of real-world benefit of KidneyIntelX use; and

·      Obtain FDA marketing authorization

 

We believe the early-stage kidney health market remains largely un-tapped and open for innovation. Renalytix is in a position to alter both the fundamental cost of care in the short and long-term, maintain better health for millions of Americans with diabetes and kidney disease, and reduce the threat of unexpected kidney failure and dialysis.  With the World Obesity Federation reporting in March that 51% of the global population, or more than 4 billion people, are expected to be overweight or obese by 2035, kidney disease and diabetes which run in parallel will remain significant threats to the global health care system. Now more than ever, we will need a way to understand who is at risk for advancing kidney disease (and importantly who is not), and to whom new effective medication should be given and how they respond.  Without a KidneyIntelX-like prognosis available at the front end of chronic kidney disease, easily implemented and understood by primary care physicians, it will be very challenging to allocate medical resource efficiently, and alert patients and their doctors to preventive measures to preserve health. 

 

We believe we are in the process of validating a new standard with KidneyIntelX that can be used by any physician in any healthcare environment for preventative medicine, with high-quality standards verified by third-party experts and regulatory agencies, tested extensively in the real-world and, of course, covered by a diverse set of insurance payors. 

 

As discussed earlier in this section, during the current third fiscal quarter of 2023, we have secured important new commercial insurance coverage for KidneyIntelX, held constructive interactions with the FDA regarding our De Novo application, enhanced our balance sheet with new funding, and executed an important transition at Mount Sinai to third-party commercial billing. 

 

We greatly appreciate the support of our shareholders through these unusual times.

 

Christopher Mills Chairman	James R. McCullough Chief Executive Officer

 

                                                                                   

                                                                                                               

 

 

Financial Review

 

The results presented cover the six months ended 31 December 2022 ("HY22"). The presentational currency for Renalytix plc and its subsidiaries (together, the "Group") is the United States Dollar.

 

INCOME STATEMENT

Revenue

The Group recognized revenue of $2.2 million in HY23 related to commercial testing as well as pharmaceutical services performed, compared to revenue of $1.3 million in HY22 related to commercial testing and pharmaceutical services performed.

 

Cost of Sales

The cost of sales associated with the commercial testing and services revenue was $1.4 million for HY23, compared to $0.8 million for HY22.

 

Administrative Costs

During HY23, administrative expenses totaled $22.4 million (six months ended 31 December 2021 ("HY22"): $27.5 million). Administrative expenses decreased as a result of the previously mentioned cost reduction initiatives. Major items of expenditure were employee related expenses of $11.5 million (HY22: $11.3 million) due to continued hiring of key corporate and commercial personnel. Professional fees of $4.6 million (HY22: $6.4 million). Contract labour of $1.4 million (HY22: $3.3 million) which include expenses related to R&D efforts such as the utility studies at Mount Sinai and Wake Forest. Depreciation and amortization of $1.0 million (HY22: $1.1 million), laboratory supplies of $0.4 million (HY22: $0.4 million) and other expenses of $3.3 million (HY22: $5.0 million) including $1.3 million of insurance expense, $0.6 million of marketing expense, $0.7 million of IT related expenses and $0.7 million of miscellaneous expenses.

 

Gain on financial assets at fair value through profit or loss

During HY23 the group recorded mark to market adjustments related to the Verici securities which resulted in an unrealized loss of $1.2 million (Six months ended 31 December 2021 ("HY22"): $2.0 million gain).

 

Fair value adjustment of convertible debt

We elected to account for the convertible notes at fair value with qualifying changes in fair value recognized through the income statement until the notes are settled. This excludes fair value adjustments related to instrument-specific credit risk, which are recognized in OCI. For the six months ended 31 December 2022, we recorded a loss of $0.8 million to adjust the convertible notes to fair value. There was no fair value adjustment for the six months ended 31 December 2021 as we had not issued convertible debt at that time.

 

Finance Income (Expense)

Finance income totaled $0.9 million during HY23 (HY22: $2.2 million expense) related to unrealized foreign exchange losses.

 

BALANCE SHEET

Inventory

Inventory consists of consumable materials used by the labs to carry out KidneyIntelX tests. During HY23, inventory levels decreased due to increased KidneyIntelX testing volumes. Inventory on hand as at 31 December 2022 totaled $0.9 million (FY22: $1.2 million).

 

Fixed Assets

Property, plant, and equipment consists of laboratory equipment being used to support testing and product development  activities. As at 31 December 2022, the company held $1.2 million in net property, plant, and equipment (FY22: $1.4 million).

 

Intangible Assets

The Group held $13.0 million net book value of intangible assets as at 31 December 2022 (FY22: $14.0 million) includes payments made primarily to Mount Sinai for license and patent costs for the intellectual property underlying KidneyIntelX, as well as amounts    capitalized as development costs. Intangible assets also include the value of the biomarker business purchased (in exchange for ordinary shares in the Company) from EKF. Intangible assets decreased period over period due to amortization and the impact of foreign exchange translation at period end.

 

Investment in Verici

At the end of HY23 the group held 9.8 million shares in Verici Dx. The fair value of the investment in Verici Dx was $1.5 million as at 31 December 2022 (FY22: $2.7 million).

 

Trade and Other Receivables

As at 31 December 2022, the company held $0.8 million of trade and other receivables (FY22: $0.9 million). During HY23, trade and other receivables decreased slightly due to timing of payments.  

 

Prepaid and Other Current Assets

As at 31 December 2022, the company held $1.0 million of prepaid and other current assets. (FY22: $1.2 million). During HY23, prepaid and other current assets increased due to prepaid insurance as well as upfront payments associated with studies and other administrative expenses.

 

Convertible Note

In April 2022, the Company issued amortizing senior convertible bonds with a principal amount of $21.2 million in amortizing senior convertible bonds due in April 2027 (the "Bonds"). The Bonds were issued at 85% par value with total net proceeds of $18.0 million. The Company elected to account for the Bonds at fair value. At 31 December 2022, the Bonds had a fair value of $11.9 million. At 30 June 2022, the Bonds had a fair value of $12.3 million.

 

Cash

The Group had cash on hand of $23.8 million (FY22: $41.3 million). Cash and cash equivalents are held in several deposit accounts in the US ($11.1 million), UK ($10.8 million) and IRE ($1.9 million). Our expenditure plans remain sufficiently adaptable to align with available resources.