Renalytix PLC (RNLX) 2022 Q1 法說會逐字稿

Good morning and welcome to the Renalytix Conference Call to review First Quarter results for fiscal year 2022.

At this time all participants are in a listen-only mode. We will be facilitating a question and answer session toward the end of today's call. As a reminder, this call is being recorded for replay purposes.

I would now like to turn the call over to Peter DeNardo of CapComm Partners for a few introductory remarks.

Thank you [Katherine] and thank you all for participating in today's call. Joining me today from Renalytix are James McCullough, Chief Executive Officer; Tom McLain, President; and James Sterling, Chief Financial Officer.

Before we begin I'd like to remind you that management will make statements during this call that include forward-looking statements with the meaning of the Private Securities Litigation Reform Act of 1995. Any statements made during this call that relates to expectations or predictions of future events, results or performance are forward-looking statements.

Examples of these statements include without limitation statements related to KidneyIntelX's ability to lower healthcare costs, improve patient quality of life and set a long-term standard of care, trends in our market potential benefits of government policy change, the impact of COVID-19 on our business, or expectations for hiring, product development, strategic partnerships and collaborations, reimbursement decisions, clinical studies and regulatory submissions and our business strategies and future growth. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements.

Accordingly, you should not place undue reliance on these statements. For a description of the risks and uncertainties associated with our business please refer to the risk factor section of our annual report on Form 20F that was filed on October 21, 2021, with the Securities and Exchange Commission.

All forward-looking statements made on this call are based on management's current estimates and various assumptions. Renalytix [withstands] any intention or obligation except as required by law to update or revise any financial projections or forward-looking statements whether because of new information, future events or otherwise.

This conference call contains time sensitive information and is accurate only as of the live broadcast today, December 7, 2021.

And with that I'll turn the call over to James McCullough. James.

Thank you Peter. Good morning and good afternoon. As the end of this calendar year approaches we are confident that our healthcare system partnership model is delivering a unique value proposition for changing the course of chronic disease management.

As the real-world numbers start to build lessons learned from the KidneyIntelX implementations at Mount Sinai, Wake Forest, Atrium Health, CDPHP and now the Veterans Health Administration System are setting the foundation for a national model with the potential to enable a broad section of healthcare providers to drive better outcomes for the greater than 12 million people with diabetic kidney disease in the United States.

At Mount Sinai the KidneyIntelX program experienced growth during the quarterly period and most importantly continues to generate key utility data around physician behavior, risk assessment ordering and follow-on clinical actions.

In mid November KidneyIntelX testing was extended to the Mount Sinai network sites across Long Island and Queens in New York incorporating several new physician practices to integrated electronic health record ordering.

We are now able to measure a critical measure -- critical metric (inaudible) and volume growth for the KidneyIntelX program with conversion from pre-pended to executed orders.

Said another way, conversion is the percentage of doctors who actually order KidneyIntelX testing for their patient in response to a centralized population health suggested or pre-pended order. Mount Sinai is now seeing conversion rates as high as 80% in the quarter ended this September. An outstanding metric of performance and a direct measure of active engagement in risk assessment by clinicians.

Further, Mount Sinai is now leveraging its population health pharmacy management program to support primary care practices on diabetic kidney disease and optimizing therapy decisions early in the disease cycle for those patients that KidneyIntelX has prognoses at intermediate and high risk.

Doctors are now demonstrating that assessing risk in their kidney disease patients is important and are willing to take direct action on a prognostic result. Assuming this high rate of conversion to executed orders with coordinated pharmacy management continues we will have demonstrated important clinical activation beginning at the primary care level.

This should provide publishable evidence that health systems implementing the KidneyIntelX model have the potential to drive significant improvements to diabetic kidney disease management across large groups of practicing primary care physicians connected through the electronic health record system.

We believe conversion and pharmacy management will support real-world evidence results published in the coming quarters and will accelerate additional healthcare system adoption and payer coverage in 2022.

Implementing its scale in a complex healthcare environment such as Mount Sinai has required many learnings and continuing innovation. Importantly, we are now demonstrating that KidneyIntelX care model can not only applied across multiple healthcare systems with different operating environments, but that we can accomplish a full implementation to clinical testing in shorter timeframes.

With our Wake Forest implementation for example we were able to achieve the start of clinical testing in just six months from execution of contract. A go-live timeframe we are now targeting to reduce to three to four months with coming system partnerships.

We expect implementation in our most recent hospital system partners, St. Joseph's will be the most efficient to date. Implementation such as Mount Sinai, Wake Forest, University of Utah, physician led payer network CDPHP and the VA Medical System are complicated by requirements to coordinate electronic health record system integration, broad physician education, defining a care pathway with general and specialty physicians and setting up a pharmacy management program.

This complication, however, is offset by long-term care management relationships that can reach large physician bases and their patient populations from the outset, a significant competitive barrier to entry.

The Mount Sinai, St. Joseph and CDPHP implementations are demonstrating the value and focusing on a healthcare region with concurrent regional implementations we expect to achieve efficiencies in sales and medical science liaison personnel deployment and overlapping insurance coverage across different patient populations.

We also see a potential saturation effect beginning to occur which is generating awareness and near-term demand from other players operating in the New York State region. St. Joseph's also offers an opportunity to accelerate adoption into a larger patient population as they are part of the Trinity Health System, the fifth largest healthcare network in the United States with 1,600 member healthcare facilities.

We expect to announce additional partnerships in the New York region throughout 2022.

The KidneyIntelX real-world evidence utility should continue to expand rapidly with tested patients to date now numbering into the thousands. Real-world evidence Testing and Care Management in the KidneyIntelX diabetic kidney disease population could well exceed 20,000 patients in calendar 2022.

This is no small population data set and provides Renalytix with considerable use case experience and the statistical power to begin addressing insurance payment for repeat testing in high and intermediate risk patients, potentially expanding the indicated uses to include diagnosis and therapeutic response monitoring and to other potential related disease indications such as cardiovascular event risk.

In short, the real-world evidence program we have established provides a direct potential pathway to significant increases in the KidneyIntelX total addressable market and beginning to erect a one-stop shop for practicing primary care physicians to assess chronic disease risk.

Our real-world evidence program also has the potential to provide KidneyIntelX with a significant competitive advantage through continuous product innovation and performance improvements.

With the General Services Administration contract that establishes full reimbursement at $950 per reportable result for any KidneyIntelX test ordered by a government physician we are on our way to a sustainable revenue pathway.

In the VA Health System alone there are approximately 400,000 diagnosed diabetic kidney disease patients eligible for a KidneyIntelX baseline risk assessment today. Again, because we have full reimbursement in this population we have hired, trained and are deploying sales personnel in addition to medical science liaison personnel in to the VA System to begin supporting KidneyIntelX usage nationally.

Given our overall experience and implementation success we are now targeting 20 large hospital systems KidneyIntelX contracts in 2022. These systems could provide us with the potential to achieve seven figures of diabetic kidney disease patients integrated into a KidneyIntelX risk assessment model.

I would now like to turn the conversation over to our President Tom McLain for an update on our commercial progress.

Thank you James. While the implementation timelines were not what Mount Sinai planned initially in part due to COVID-19 it is now clear that our shared achievements have defined the value of KidneyIntelX testing in our health system focused commercial model.

The invaluable lessons learned with the first scaled KidneyIntelX implementation have created a playbook that is being applied not only in New York but as part of the core offering across multiple other systems.

KidneyIntelX is now driving increased value for clinicians, patients and payers at Mount Sinai, Wake Forest Atrium, CDPHP and soon across St. Josephs and the VA Medical System.

From the start we were aware that others have tried to apply broad care solutions in chronic disease based on their technology solution. We studied their successes and their failures in developing our unique approach to care enabled by KidneyIntelX risk assessment. The differentiated features of our tests and our core care model are allowing us to demonstrate unique utility (technical difficulty).

Please stand by we're having technical difficulties. Just one moment.

You may now begin.

Sorry for the interruption and the drop in the call. This is Tom McLain, I'm going to begin my session of the presentation again. While the implementation timeline through not what Mount Sinai planned initially in part due to COVID-19 it is now clear that our shared achievements have defined the value of KidneyIntelX testing in our health system focused commercial model.

The invaluable lessons learned with the first scaled KidneyIntelX implementation has created a playbook that is being applied not only in New York but it's part of the core offering across multiple other health systems.

KidneyIntelX is now driving increased value for clinicians, patients and payers at Mount Sinai, Wake Forest Atrium, [CDPH V] and soon across St. Joseph's and the VA Medical system. From the start we were aware that others have tried to apply broad care solutions in chronic disease based on their technology solution. We studied their successes and importantly their failures in developing our unique approach to care enabled by KidneyIntelX risk assessment.

The differentiated features of our tests and our core care model are allowing us to demonstrate unique utility from the earliest stages of diabetic kidney disease.

In 2021 we accomplished something we believe no one else has been able to do. We implemented advanced IDD risk assessment in a large chronic disease population across a complex integrated network comprised of hospitals, primary care offices and specialist physician practices.

In this complex environment we have had to learn how to drive efficiency in the clinical pathway with sensitivity to the demands on primary care physicians that effect training and adoption timelines. All of this was within a first EHR integrated ordering and result reporting technology application.

We have come to truly understand what it takes to be successful in a complex heavily regulated environment with precision.

I'd like to quickly provide more context around what this accomplishment really means for our capabilities going forward. Mount Sinai is representative of the complexity in the healthcare delivery model in the United States today.

The health system was built from the acquisition of independent hospital systems, PCP offices and networks, specialist practices and health centers. It serves disparate patient populations from the heart of New York City to suburbs in Long Island and Upstate to New Jersey and Florida. That health system operates across different data platforms, care pathways, and delivery models.

Mount Sinai has many different provider contracts with local, regional and national insurers, Medicare and Medicaid, all under unique payer and payer risk models. The reality is that this complexity has been a barrier for many health systems in fully deploying a single care practice model across their diverse patient populations.

At Mount Sinai we learn the importance of the right sponsorship for implementation programs especially the roles and collaboration needed between clinical medicine, population health and the CIO/CMIO teams. We have also learned the essential roles of our health systems partnerships, medical affairs, client services, and sales account executives to support the rollout.

We have defined the key metrics and information that are helpful to quickly align on and assess the benefits of KidneyIntelX informed care. We have developed a model for integrating payers and economic data to demonstrate value.

And importantly we have developed a core parameters to effectively apply risk informed patient management across different care and payer models that exist within the same health system. This program is also demonstrating the benefits of a value based care model that drives savings for payers and providers through better care for patients.

Our team is confident that what we accomplished together with Mount Sinai, what we have learned and experienced it equips us to streamline and accelerate implementation timelines and positions KidneyIntelX to succeed in subsequent health systems rollouts.

As James noted earlier, we have already demonstrated that at Wake Forest Atrium where the time from contract to first clinical tests was six months. That timeline will be further accelerated in future system rollouts.

James Sterling, our Chief Financial Officer, will now provide more detail on our financial results. James.

Good morning. The earnings release we issued today presents our US GAAP financial results for the first quarter of fiscal year 2022 ended September 30 of '21. And I'll review a summary of these results now. All figures are in US dollars which is our reporting currency.

For the quarter we recognized about $450,000 of services revenue related to testing under the Mount Sinai clinical utility study and $30,000 of services revenue from AstraZeneca. We did not post revenue in the prior year period. We recorded $230,000 of cost attributable to those revenues.

Our operating expenses were $12.1 million for the quarter as compared to $5.4 million for the prior year period. The increase was primarily driven by higher headcount, higher R&D expense related to studies at Mount Sinai, Wake Forest and University of Utah. As well as increased consulting and professional services fees in support of our growth.

Net loss for the first quarter of fiscal '22 was $10.1 million or 14 cents per share compared to a net loss of $7.2 million or 10 cents per share for the same period a year ago.

We ended the quarter with cash in equivalence of $54.3 million as of September 30, 2021 compared to $65.1 million at the end of June 30, 2021.

I'll now turn the call back James McCullough for final remarks before we open the call to questions.

Thanks you, James. Finally, as we have all experienced, November and December have presented a challenging capital markets environment where the tools of diagnostic sector in particular has become, in our opinion, oversold. Renalytix stock has fallen substantially with the rest of the sector in recent weeks to pricing levels we believe do not reflect the series of value milestones achieved since our Nasdaq listing in 2020.

In the coming year we intend to focus on increasing the liquidity, analyst coverage and visibility of Renalytix stock. And while we will continue to refrain from providing specific revenue guidance at this early stage of our business scale-up we will provide core elements to support financial modeling such as select specific testing run rates, addressable markets, and routes to expanding addressable markets such as repeat testing.

For 2022 we are targeting a series of catalyst including; one, achieving insurance payment for greater than 12 million individuals with diabetic kidney disease including with Medicare and Medicare Advantage payment profiles; two, announcing a series of new healthcare partnerships; three, publishing real world utility evidence from our Mount Sinai and other study programs; four, announcing new strategic partnerships in the services and pharmaceutical categories; five, achieving FDA De Novo marketing authorization; and six, demonstrating revenue growth across multiple market segments.

We appreciate your patience and support in 2021. Please have a safe and happy New Year. And with that, operator, we'd now like to open the call for questions.

Thank you. (Operator Instructions). Our first question comes from Tycho Peterson with JP Morgan. Your line is open.

Good morning. First question, just on the sales ramp, so I know you hired Jed Fulk and I think his plan to hire 43 people to support him. Is that all dedicated to the VA? Can you talk a little bit about scaling up there and then just broader plans for the sales force?

Yes. Hi, Tycho. It is primarily dedicated to the VA. One of the rules of the road we are adhering to is that we will not hire a significant fixed overhead until we have direct visibility on secured reimbursement. And with the VA medical system, we are going to expand into that rapidly.

There are 121 -- 171 medical hospital systems in the VA medical group. And we're now going to start with that salesforce, customer service, and medical science liaison on a national rollout scale.

We have hired other salespeople, which will be supporting our efforts at Wake Forest, and, again at Atrium and also now into Mount Sinai. And as we get additional insurance coverage that come into those systems we'll continue to scale that up as well.

And then LCD timing, I know you've previously said summer 2022. Any chance that the approval could accelerate that or any risks of push out? (Inaudible).

Yes, great question. It's a three-dimensional chessboard. So, we're playing all dimensions. The LCD is certainly one route that we're focused on, we've been focused on it from the very beginning. We -- the guidance we've given to the market is that we do expect an LCD by the summer but there are other pathways to Medicare payment.

And it's interesting to follow the track of what's going on post [MSIT] now back down in Washington so I think that other pathways will also open up in 2022. FDA is not a requirement, it is certainly something we want to have but if we do get FDA will that help in terms of timing? Perhaps. I don't know, Tom if you want to add any color to that.

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

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

Yes, we haven't put a specific timeline but I am very encouraged by the developments of -- development of real-world evidence. So, I think one of the core valued propositions for what we've done is we've now recruited in multiple centers across geographically diverse implementations across a diverse patient population.

We are looking at the real-world evidence equation in different ways. We can now start to measure a physician response. Obviously, we talk about conversion, which is a key metric of performance for us. We can take a look at therapeutic prescription, we can take a look at different clinical workflow strategies, we can look at physician referral behavior.

So, with the real-world evidence machine that we've set up, 2022 is going to generate a huge amount of data. And I think moving into the March quarter and certainly the June quarter we're going to start to be able to put some real guidance down in terms of the data development. We're going to be publishing on that and it's a matter of time.

But certainly, we're already getting requests from physicians about repeat testing, particularly in the high-end intermediate-risk group. It's a natural thing to do. Once you baseline risk assessment a patient with KidneyIntelX and then you prescribe a drug. You want to see if it's making a difference if you're starting to follow the patient.

If you're educating the patient, if the patient is changing their own behavior you want to start to see how that affects kidney health and kidney risk. So, it's a very natural extension for us now to roll into monitoring and another thing which is important, the landscape for therapeutic development is starting to mature.

So, we are seeing strong pipelines in multiple pharmaceutical companies. Obviously, we have the SGLT2 inhibitors, Bayer has Finerenone, there are a number of those therapeutics which are coming online and this is the cancer equation all over again. You want to have the ability to risk assess early, you want to have the ability to characterize the disease.

If you want to start to now identify patients that are appropriate ultimately for therapies and you want to be tracking therapeutic response. All of this needs to be validated, all of this needs to be done in a regulated pathway but I think what we're going to see is an acceleration of precision, diagnostics, and therapeutics coming to play.

And there will be a lot of options for patients and physicians and that's going to require upfront risk stratification, understanding, and [following]. So, it's a very rich area of development right now. We see it happening very quickly, much quicker than it did in the cancer field. And it's going to be interesting in 2022 how the data comes down.

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

Yes, the pharmaceutical equation I think is going to be very interesting in 2022. I do believe it's going to expand. And we have learned a lot from our AstraZeneca collaboration. We've been in with real-world tracking now in the Mount Sinai Health System.

So, I do expect 2022 -- I'd like to expect the first half of 2022 will very -- be very fruitful when it comes to our pharmaceutical partnerships. And the same is true with DaVita, we are moving along, we are having a number of different discussions. It's been a learning process as we get deeper into this.

The understanding of kidney disease risk and how that should be applied into the clinical pathway is sporadic across the country. It's sporadic with different physician practices. The education level around kidney risk, especially in the diabetes population where we're focusing is uneven.

That's no surprise, we've done a -- an enormous amount of physician survey network -- survey and we also now see from the real-world deployments what's actually going on in the clinic. And it's been a little bit of an eye-opener. But this is the novel understanding that we're developing through these real-world deployments.

And that's going to feed back up now into the strategic partnerships and applying them in 2022 to start generating revenue and to take a look at new clinical strategies. Do you have anything you want to add to that, Tom?

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

Okay, thank you.

Thank you, Tycho.

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

Hi, good morning. Thanks for taking my questions. James, could you please share some of the trends that you're seeing in the (inaudible) KidneyIntelX from the (inaudible) up until now?

Yes, so -- thank you, Anita. The -- one of the things I in particular have a focus on is conversion. So, we've set up an integrated population health model. This is important. We have engaged population health in the cause to support primary care physicians and specialists to understand that we need to do risk assessment early in diabetic kidney disease patients.

And so, in a system like Mount Sinai, population health provides visibility to that primary care physicians and so this is a patient that should have risk assessment. Now you move into the behavioral economics component, which is does that primary care physician then take the ball and start running.

Which ends up in a converted executed KidneyIntelX test order. Now, we're not involved in that, this is Mount Sinai's system, this is all done independently at Mount Sinai. But what we're seeing is a very high conversion rate now. Especially in new practices that are coming online, and we mentioned this in the scripted discussion.

We're seeing conversion rate from [pre-pended] or suggested orders by population health around 80% for actual orders. That is very high and we are very pleased with that and if that trend continues and you couple that now with population health pharmacy management where you can actually prescribe a new drug to high-risk patients you completely changed the equation.

And you completely change the equation of primary care. So the holy grail here and the way that you stop disease progression you keep a healthy kidney, you create a better lifestyle and you start to cut down on cost of progression and dialysis as you get the primary care physician to act.

And what we're demonstrating with that conversion is we are getting action. I would expect the conversion rate without population health engagement and we've experienced this before with other diagnostic test launches in the past, is substantially lower. So this integrated population health model that we are now demonstrating is really working. Now we have to scale it but we're also demonstrating scale.

We're now adding Wake Forest, we're adding Atrium, we're adding University of Utah, we're adding CDPHP and now we're moving into the entire VA health system, St. Joseph's others. So we are demonstrating change in behavior starting early in the disease cycle at the primary care physician level. We are demonstrating that we've engaged population health. And the model is working.

So I expect 2022 will continue to demonstrate that and we'll now have thousands and thousands of patients from which we can derive real-work evidence, peer review published results. And when you get to that point that's a tipping point. Because now everybody says, okay, this thing is working we have to adopt this. That's certainly my hope.

That was very helpful. And as a follow-up to that, I know you mentioned that you might have some publications coming maybe end of Q1 [or through] the calendar year next year. So would one of the topics be around what the outcome is with the support for population health versus from those without?

Yes, that's the benefit of the real-world evidence format, right. We -- our control group is, in effect, what's going on right now, which is quite confusing in the clinical space. We've generated a lot of awareness now in different settings over the lack of standard of care that's being applied.

And so, when you now introduce a controlled population health engaged EHR-integrated advanced risk assessment, you start to see change very quickly. So I do expect we -- well, we're already generating significant results that will be submitted for publication in the short term.

And we have many short-term utility endpoints which could have a significant downstream effect. Just creating awareness of the need to risk assess in the diabetic kidney disease population [of] primary care changes the game.

And talking -- for health system to engage pharmacy management to prescribe new drugs on a system-wide basis to high and intermediate-risk patients early changes the game, for primary care physicians to increase referral patterns of high and intermediate-risk patients changes the game.

So there's a lot of low-hanging fruit here, unfortunately, in this space. And again, we have -- we have the advantage because we've done this in oncology for many, many years. So applying the oncology precision medicine model that we've practiced now for decades into the naive kidney space, we believe, is going to have a significant and immediate impact.

And then, of course as we move into the intermediate and long-term utility categories where, ultimately, we want to slow progression of kidney disease, we want to prevent large population groups from upstaging to late-stage kidney disease. We can do that with applied clinical management.

And then ultimately, we want to reduce the number of people who end up on dialysis [starts]. We certainly want to start to reduce the number people who are crashing into the dialysis.

And just as a reminder, today, somewhere in the order of 50% of people who start hemodialysis in the United States, that's a $100,000 a year event, do it through the emergency room. This is completely unsustainable. And so this is -- this is the model that we're applying on the front end now.

And the [data outs], so real-world evidence generation across multiple systems in a variety of health care environments, demographics, et cetera, into the thousands and thousands of patients. This is the definitive proof that is ultimately required to change standard of care across eventually 40 million Americans with chronic kidney disease.

Okay. Okay, great. Thanks for answering that. And then just one last thing about the number of patients that will be screened by second half next year, it's about 6,000 at Mount Sinai. So the run rate of about 300 patients per week, is that kind of a low end of what can be achieved?

So I just want to point out one thing. We are not screening. This is important. We are prognosing in an already...

[Right].

... diagnosed patient population. Apologies, I just have to point that out. That's very important. And that helps adoption, right, because this is an existing disease population that's already at risk. We're now coming in to say focus on these patients and the rest can go home. We'll see you next year.

So revenue generation and run rates -- again we're not going to forecast because I'll inevitably be wrong, but we do have specific components. Mount Sinai has signed up for 6,000 paid testing patients. We are now rolling that out. We expect to be complete with that program moving into the -- into the June quarter of next year.

The 300 tests per week run rate was a figure that Mount Sinai and Renalytix came up with as a target. We do expect to achieve that moving into the March quarter. Is that a low side? I think that that's a very good target for everybody to focus on when we talk about system rollouts. We'll see how those numbers build.

Certainly, the patient population is available. Mount Sinai Health System alone has 71,000 diabetic kidney disease patients in their registry. That is a significant population. We believe all of them should be baseline risk assessed. And then obviously as the data comes out and we're able to substantiate this, the high and intermediate-risk groups should be monitored. We'll see what the frequency is.

The VA medical system, again 400,000 diagnosed diabetic kidney disease patients, again we believe many of them should be baseline risk assessed. And again, we believe high and intermediate-risk patients should ultimately be monitored with clinical treatment.

Atrium Health and the other health system, Wake Forest, those two systems are operating in the diabetes belt in the Southeast region. Again, they have significant diabetic kidney disease populations. University of Utah, and then now we are moving into other health care systems like St. Joseph's. So there's lots of addressable market, a lot of it is paid for.

What I'm impressed with is we are now making the move, in 2022, to secure broad insurance payment. We are already ahead of our expectations in terms of securing private payer coverage.

We announced that we'd achieved our first Blue Cross Blue Shield coverage determination, which actually gave us Blue Cross Blue Shield coverage in two different states. That was a significant achievement for us and creates an opening to achieve other Blue Cross Blue Shield coverage determinations. And we do believe that we are on track to receive Medicare payment in 2022.

So as the coverage continues to build, we will have more and more systems deployed, which creates a footprint across a significant number of diabetic kidney disease patients that we can now baseline risk assess. It's going to be an interesting equation in '22.

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

Thank you, [Anita].

Thank you. (Operator Instructions). We have a question from Dan Arias with Stifel. Your line is open.

Yes, good morning. Thanks for taking the questions. James, on the 20 institutions that you're targeting for 2022, just a couple of clarifying points there. Number one, is that -- is that a goal for fiscal or calendar '22? And number two, by my tally that's 14 new partners that you think you can sign up in that period, is that right? And then what -- if it is right, what do you envision the makeup of that group being, just in terms of hospital systems, payers, pharmas, et cetera?

Yes, so thank you, Dan. I'll [give] myself calendar '22. The consistency will be a mix of regional hospital system players, intermediate and large size, and we have a number in the pipeline.

And then, of course the upside event here is how far we get with the VA medical system. So as I said, there are 171 hospitals, I believe, in the VA medical system. As we've said from the beginning, we are working with VA on both individual hospital systems on the [VISN] level, which is the regional level, and then we're also working nationally with VA. So that could very much be a swing vote which puts us in a different position in calendar '22.

I think we have figured out, over the last two years, how to do this and do it well. Certainly, the way we present the value proposition to the hospital systems has evolved and we are much more efficient in our discussions. And the health economics and the clinical programs have only become more attractive. So as we engage in discussions with new hospital systems, the talks are much easier.

And of course, the key for us is we have to reduce implementation time. So we did talk about that in the preamble today with Wake Forest, where implementation time was reduced from contract to go-live testing in six months. We expect to bring that down even further to three or four months as we actually get a more streamlined, simplified program to create a testing environment with care management and pharmacy management in each one of these systems.

So I -- we said 20 is a target for 2022. I very much believe that that is doable. If we end up with success [with] the VA medical system, we may exceed that. Let's see how it goes. But certainly, I think the management team is very pleased now that we've proven the model. It started generating results.

And this engagement with population health is a significant differentiated advantage. We are partnered now to turn on large groups of primary care physicians and support them and enable them to do risk assessment early with specific action. So we know the model works. Now it's time to lean forward and accelerate it.

Okay, just maybe one more clarification on top of that. Is the -- is the VA [counting] as one underneath that 20 institutions or are you considering multiple [VISNs] under the VA as part of the 20?

That's a great question. The VA is an open field for us, so how I'm counting it -- that's a good question. I actually think -- if we're looking at individual hospital systems, I think the VA could contribute a number towards that 20. If we end up with a national component or even a [VISN] component that number could increase rapidly. So no, the VA is its own category.

And again, I have to emphasize this, we have a 10-year general services administration contract which pays for all testing at $950 per reportable result. We have no reimbursement limitation there nor do we need any other regulatory component. This is [a] immediate, addressable market opportunity for us. And obviously that's why we're hiring sales force and we're hiring medical science liaison customer service, but back to your original question, I think the VA will present multiple hospital systems for deployment of kidney and [telex] in 2022.

Okay, so if you were to sign up for [VISNs] in 2022, then that would be four counting towards the [20 institution] goal that you're having -- that you have?

So Tom, jump in on this one.

The VA has 171 health centers, which are health systems. They are -- they operate independently with their own network of [CBox], so there are multiple health systems in each [VISN region].

Okay, I'm sorry guys, I'm not trying to belabor a point, but what should the...

(Inaudible).

...assumption be for the VA within that 20-institution goal that you have for 2022?

So I don't have a number, it should make up a quarter of that, if I have to stand on something, but again, if we're successful at the [VISN] level, it could well exceed that.

If we're successful at the national level, then we're talking about a whole different game. But when I talk about the 20 hospital systems, I'm really looking at large, independent hospital systems like Mount Sinai, Atrium, Wake Forest, et cetera. The VA is a lot of upside, but let's see how it plays in the March quarter.

Okay, thanks very much.

It's a good question.

Thanks, Dan.

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

Hey guys, thanks for the questions. I guess obviously the FDA has been busy reviewing COVID submissions. I do think one value-creating milestone for you would be to secure FDA approval.

I guess can you just give us a sense for how that review process is going, whether or not the dialog is moving, iterative conversations going back and forth or has there been months' worth of not hearing anything? I'm just trying to better understand how that conversation is going and just try to handicap when you think comfortably do you think you can get FDA approval by the end of Fiscal Year '22?

So [I am loathe to be] pinned down to FDA timing. Thank you, Mark, it's good to hear you on the call. This has been -- let me answer the question first, and then I'll give you my -- I'll give you some color.

I won't give FDA timing as I've said from the beginning that's a fool's game and I've been that fool before, I don't want to be that fool again. The process is moving well. We believe we have a good application, we have a very good understanding, we have a significant amount of third-party expertise, which is at the table. Many of these folks don't take prisoners, they're very data-oriented, statistical-oriented.

We've mentioned some of the -- some of the folks that have been involved, so I think we have one of the highest iterations and solid basis for an FDA-regulatory process that I've experienced in my career.

That being said, I'm not going to comment on timing because I will inevitably be wrong. The agency, as you know more than anybody, has been under a considerable amount of stress and there's been consequence across the board for that. I talked to many other CEOs, all of whom are having similar experiences.

But I -- I'm confident that we're on the right track and the communication with FDA has been very good and very comprehensive. So FDA will come when FDA will come. In the meantime, obviously we intend to build a very significant business, and obviously FDA is important. But if you ask me what the number one reimbursed -- number one risk factor associated with growth, it's reimbursement.

And I've said this from the beginning when we started the company, we talked to the management team and I said, look, we got three things we have to worry about. We know how to -- we ultimately know how to do FDA, we know how to build a sales force, we know how to build a product, we know how to build a business; we've got to focus on reimbursement, reimbursement, and reimbursement, because if you don't get paid for your product, then you don't have a revenue stream, you can't access the capital markets to fund all of the other things that you need.

So reimbursement has very much been a focus and we're succeeding there. FDA will help that. Do I expect and FDA [donoble] marketing authorization in this fiscal year? I do. That is my expectation. We are building for that component. But again, nobody can guarantee this, especially in the COVID era.

How's that? Did I answer that question [well enough]?

(Inaudible). You did, that was perfect. And then just my last question is on the real-world evidence study from Mount Sinai, I guess, should we expect you to publish that in a peer-reviewed journal? And then can you just remind us what you expect the primary and secondary endpoints on that study to be?

Yes, you should expect multiple peer-reviewed publications out of Mount Sinai and other real-world evidence studies that we're running. This is a very powerful cornerstone for Renalytix. It's not easy to set up these large real world evidence programs.

We did it from the very beginning, understanding that real-world evidence ultimately drives a regulatory pathway through multiple product versions. It ultimately drives reimbursement, and of course it proves the case for physicians and healthcare systems that this is the right way to go to manage chronic disease.

So the real world evidence machine that we've set up is extensive, it's comprehensive, it is looking at multiple short, intermediate, and long-term endpoints, short-term readouts, which we expect in 2022, start with things that we've already talked about, like conversion.

If you would gauge population health, which is very important for a capital-efficient diagnostic deployment, right, as opposed to (inaudible) creating a huge fixed overhead hiring a massive salesforce for a strictly push marketing approach by engaging population health, it changes the entire -- [in the] entire return on investment capital [equation].

We're now able to reach up front large [treating] groups of physicians and patients with population health leading the way, and we're already starting to see proof of that with conversion. So when we talk about a conversion of [prepended] or suggested orders by population health to actual executed orders, especially the primary care physician level, approaching or exceeding 80%, I have never before in my career seen that type of utility.

Now that's one metric. Now you have to look at the downstream follow-up. What happened to those patients? Were they high risk patients referred to nephrology? Did they have new drug intervention? Did they have behavioral modification?

So this is a very rich environment in a relatively open field. We would not experience this in oncology, in cancer, but in kidney disease it's just wide open for innovation and it's wide open for novel data around utility, especially around this thing, behavioral economics, which is physician and patient behavior when presented with information, in this case prognostic information early in the disease cycle where we should be able to generate maximum effects with clinical action and prevent people from moving on to late stage kidney disease, that's the whole point, let's maintain kidney health. And can we really drive the utility equation around maintaining kidney health?

And that has short-term implications like conversion, but ultimately we would like to show that we are slowing down progression of patients into late stage disease, ultimately we'd like to show that we are limiting the number of patients that have to experience dialysis.

And this real world evidence machine that we've set up is important. This has not gone -- this has not gone unnoticed by strategic partners, pharmaceutical partners, medical device manufacturers, service providers. How did we get into a position where we are now integrated with large healthcare networks and starting to generate this type of real-world evidence. This has implications across the entire industry for how different devices, drugs, services, clinical management strategies can ultimately be applied.

So this is going to be an ongoing equation for several years but in 2022 we're going to be able to submit for peer review publication a number of significant utility end points across, again, thousands of patients which will then involve into multiple treating facilities in different demographics, across different patient populations. I can tell you from my own experience sitting here in Salt Lake City, my care and the people I speak to is very different then sitting in New York City.

So in New York City your interaction with physicians really come down to primary care and specialty interactions on almost a one for one ratio. Out here in Salt Lake City I have much more interaction with primary care and nurse practitioners than I do with specialties.

So you have to understand the details in all of these settings if you're going to be successful at driving a new standard of care for advanced prognosis. Sorry, I'm going off the deep end here but this is what creates such an exciting equation for 2022.

Okay, thank you. (Operator Instructions).

All right well it sounds like we've answered most of the questions. Again, everybody thank you for dialing in and please have a safe and happy New Year. Operator, back to you.

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