Renalytix PLC

LSE:RENX

Earnings Call Transcript 2022-Q4

[Operator]

Good morning, and welcome to the Renalytix Conference Call to Review Fourth Quarter and Full Year Fiscal 2022 financial results. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Peter DeNardo of Capcom Partners for a few introductory comments.

[Peter DeNardo]

Thank you, Michelle, and thank you all for participating in today's call. Joining me today from Renalytix are James McCullough, Chief Executive Officer; Tom McLean, President; Michael Donovan, Chief Medical Officer; 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 within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements made during this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements. 

Examples of these statements include, without limitation, the potential benefits, including economic savings of KidneyIntelX, the potential for KidneyIntelX to receive regulatory approval from the FDA, the commercial prospects of KidneyIntelX, if approved, including whether KidneyIntelX will be successfully adopted by physicians and distributed into market, our expectations regarding reimbursement decisions, and the ability of Kidney Intellectual curtail cost of chronic and end-stage kidney disease, optimize care delivery and improve patient outcomes, trends in our market and potential benefits of government policy change, the impact of COVID-19 and other world events on our business, our expectations for hiring, product development, strategic partnerships and collaborations, reimbursement decisions, clinical studies and regulatory submissions, our business strategies, and future growth, including plans, expectations, and opportunities for financing our operations and revenue projections and guidance. 

These statements involve material risks and uncertainties that could cause actual results or events to material differently from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a description of the risks and uncertainties associated with our business, please refer to the Risk Factors section of our annual report on Form 20-F 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 disclaims 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, October 31, 2022. And with that, I'll turn the call over to James McCullough. James?

[James McCullough, executive]

Thank you, Peter. Good morning and good afternoon. From our first funding in November of 2018, Renalytix was built to generate extensive data evidence and comprehensive reimbursement for early risk assessment in kidney disease with our advanced prognostic tool, KidneyIntelX. In both of these categories, we have had significant wins, which are widening the opportunity to grow market share and drive real change in patient care. We have now expanded Blue Cross Blue Shield coverage to our third state, and as was in our SEC filing last week, KidneyIntelX billings are now being paid by the Medicare system. Medicare in the United States covers approximately 64 million beneficiaries. Tom McLain will speak in detail about payment and insurance shortly. 

We are reaching a tipping point where in certain population centers with a large prevalence of diabetes and kidney disease, a supermajority or greater than 70% of individuals will have some form of insurance payment for KidneyIntelX testing. Supermajority coverage is a critical feature for KidneyIntelX implementation at the front-end primary care level of medicine. To put the sheer size of this health problem and opportunity in perspective, some 40 million Americans are estimated to have existing kidney disease today. Over half of adults with diabetes will develop kidney disease. Costs here pile up quickly. An October report in the Journal of American Medical Association citing Medicare dialysis costs at over 80,000 in their first year alone on dialysis, while privately insured patients are costing close to $200,000 in their first year alone. 

This is simply unsustainable. And unfortunately, a large portion of individuals suffering from this preventable course of kidney failure are from economically disadvantaged groups. Kidney disease has become a raging center of health and equity in the United States, with disastrous consequences for communities. Our Chief Medical Officer, Michael Donovan, will summarize data now being published, which shows doctors using KidneyIntelX are much more likely to prescribe new medicines early, conduct timely referrals to specialists, and initiate important blood pressure controls to prevent their patients from suffering the consequences of progressive kidney disease and dialysis. In this quarter alone, 4 new presentations are being given next week at the American Society of Nephrology Kidney Event week and one of our real-world evidence programs on 1,658 patients has just been accepted for a publication showing positive changes in patient management and outcomes. In the period ended September 30, we posted our first million quarter. 

For the month of September alone, we recorded a record 527 KidneyIntelX patient reports issued. And while month-to-month results will continue to vary, we are encouraged to see testing volume beginning to emerge from disparate sources, including individual physician groups located in different states where insurance payment has now been established. We continue to have productive discussions with FDA under our breakthrough device review -- we have been fortunate to use this past year to recently submit additional data on over 1,000 patients that further confirms the performance of KidneyIntelX and risk discrimination for patients with diabetic kidney disease. We now believe we are approaching the completion of the de novo regulatory process.

And while there is no guarantee of success until FDA has made its final determination, we are optimistic based on both the quality of the analytical and clinical evidence provided and the high level of engagement we have had with FDA. Our current expectations are for a decision to be made in the first quarter of calendar 2023 ending March, but there can be no guarantee on this time frame. 

Also, as clarity builds for KidneyIntelX insurance, we have been able to reduce our cash burn by focusing on regional markets with developing supermajority payment. We have also reduced third-party vendor contracts, made selective headcount reductions, and slowed our rate of hospital integrations. If our business progress continues as expected, we could very well be in a position in the coming quarter or 2 where we have mitigated risks for insurance payment, regulatory approvals, and utility validation of KidneyIntelX. And while it's been nothing short of a roller coaster getting here with market conditions, we cannot forget that Renalytix is achieving its major milestones and objectives in a very short period of time, 4 years from our founding financing round in November of 2018 and just over a year from our commercial product launch. I will now turn the call over to our President, Tom McLain, who will detail progress with insurance and commercial rollout. Tom?

[Thomas McLain, executive]

Thank you, James. From a commercial view, we are making significant progress with expanding payment and coverage for KidneyIntelX testing, with increasing testing volumes and maintaining high-quality laboratory operations that are necessary to operate in the highly regulated laboratory services environment. The recent filing of the Medicare payment for KidneyIntelX testing is significant for healthcare providers, patients and also for other payers. Our analysis of data available through the Kaiser Family Foundation indicates that Medicare beneficiaries account for 50% to 60% of the intended use population for KidneyIntelX. This has been validated in our real-world patient experience within the Mount Sinai Health System in New York City. It is important to understand that Medicare payment determination is made based on where the testing is performed, not where the patient lives or where the blood is drawn. So this includes patients across the world that are covered by Medicare. 

All KidneyIntelX testing for Medicare beneficiaries is being performed in our New York City laboratory. As a result, National Government Services, the regional Medicare Administrative Contractor or MAC, covering New York reviews all Medicare claims and issues payment to Renalytix. In an SEC filing last week, we provided material information that we have been paid for Medicare claims for KidneyIntelX testing services with testing dates starting July 1, 2022. Under individual claim review or ICR, a medical director from the MAC reviews each claim submitted for payment and makes a determination as to whether the claim is reasonable and necessary. This determination is based on the extensive clinical evidence we have submitted to the MAC and documentation related to the specific service performed. 

This is significant for the 50% to 60% of patients eligible for KidneyIntelX testing who have Medicare coverage. We also believe this Medicare payment precedent for KidneyIntelX will support additional coverage determinations from other insurance payers who rely on evidence of Medicare payment. Based on the significantly increasing volume of Medicare claims for KidneyIntelX testing, we also submitted a request for a local coverage determination, or LCD, from the MAC. We have been notified that our LCD application is complete, and it has been accepted for review. Similar to the current individual claim review process, the medical directors at the MAC will consider the previously submitted evidence to determine whether KidneyIntelX is reasonable and necessary. This determination is then published in a draft coverage policy and reviewed in an open public meeting. We are now awaiting notification of the public meeting date when their recommendation will be reviewed. This meeting could take place as early as the March quarter of 2023. 

The MAC has indicated that they will continue to pay under the current ICR process until the LCD review is completed. Beyond Medicare, insurance coverage and payment reviews are accelerating, and we would expect to secure additional coverage contracts, including contracts with large regional and Blue Cross Blue Shield payers on a rolling basis through the remainder of fiscal 2023. As James indicated, our focus is on enabling KidneyIntelX testing with super majority coverage or greater than 70% of the insurance payment in large commercialization markets.

Turning now to commercialization. As part of the cost reduction actions announced in 2022, we reduced our field sales force to 12 account executives for the fiscal year 2023. Our sales team is focused on territories where the near-term opportunities for the health system, individual practice, and VA sales are significant and broad payer coverage is likely. As James indicated earlier, testing at the Mount Sinai Health System increased during the September quarter. It is important to understand that Mount Sinai has developed a care pathway for early-stage diabetic kidney disease patients that leverages the value of KidneyIntelX testing. 

This care pathway is being rolled out across the health system. In the quarter, through better coordination with Mount Sinai, testing increases are being driven by adding new practice locations to the care program by optimizing the use of the care program in established practices and by bringing care to the patient through a combination of home phlebotomy services and telemedicine. Our Chief Medical Officer, Michael Donovan, will discuss the positive results from the first 1,700 patients receiving care under the KidneyIntelX informed care pathway. This compelling clinical utility data will drive increasing testing volume at Mount Sinai and will be influential in launching or expanding similar programs in other KidneyIntelX integrated health systems. Those include Atrium Health, Singing River Health System, and St. Joseph's Health. Our efforts inside the Veterans Administration health system have continued to advance also. We are focused on clinicians in VA center facilities as well as clinicians in the community who also provide care for veterans. 

Specifically, the Veterans Administration Community Care Network or VACCN provides a direct link between the VA and community providers to ensure veterans receive timely, high-quality care. CCM uses industry-standard approaches and guidelines to administer services, pay for services promptly and manage the network to its full potential. During September and October, we introduced KidneyIntelX testing into 2 of the 5 VACCN regions in the United States. This is a highly scalable program. Based on that initial success, we expect to see volumes increase in November and December of this year. In addition, we have executed the first past quarter and the first blanket purchase agreements with VA centers in the West and in the Southeast. In addition, we secured a prepayment for testing at a third VA center.

Building on these initial successes, we are in the development stage for task orders and laboratory services agreements in other locations. We expect agreements with up to 8 more VA centers through June of next year. While the initial testing commitments under the task order and purchase agreements are modest, the programs are designed to generate evidence of clinical adoption and patient care value before increasing volume commitments. 

Building on our experience at Mount Sinai, we've also developed an at-home testing program that can be offered to veterans by contract on a center-by-center basis to increase access to KidneyIntelX for those who have mobility or other issues preventing them from accessing a VA Center. While these initial wins have taken 10 months to accomplish, the opportunity with the VA Health system remains strong based on the higher incidence of diabetes and chronic kidney disease in this population. Demographic and health economic data for the VA from a study being conducted by the University of Utah and the University of Illinois, Chicago, will be published in 2023. This quarter, we also opened up a focus on the local primary care physician, and endocrinology market to our sales account executives starting in late August. Under this program, our field reps are introducing testing to accounts meeting 2 criteria. First, a significant percentage of their patients are Medicare beneficiaries.

Second, there's demonstrated adoption of innovative new therapeutic approaches to treat diabetic kidney disease. Our account targeting cert is already demonstrating value, and we expect to see test volumes increase in every territory during the current quarter and to the end of our 2023 fiscal year. 

Between health systems, VA, and direct-to-primary care physician sales, we expect every account exec will contribute a positive ROI in the current year. Finally, the company continues to demonstrate its compliance with the rigorous standards for laboratory testing performance that are required under CLIA, ISO, CAP, and FDA. That has been evidenced by a series of positive external and internal audits and regulatory certifications during the fiscal year 2022. Our laboratory and client services teams continue to prioritize quality in processing samples and delivering test reports to clinicians and patients. I'd now like to turn the discussion over to Michael Donovan, who will review the important new clinical utility data supporting test volume increases and payment. Michael?

[Michael Donovan, executive]

Thank you so much, Tom. So we continue to document the real-world impact of KidneyIntelX on decision-making by primary care physicians managing their patients with diabetes and kidney disease. As part of our ongoing real-world evidence investigation, we recently evaluated over 1,600 patients with KidneyIntelX risk assessments at a 6-month repeated time point and observed the following changes in patterns of care. 53% of patients identified as high risk by KidneyIntelX had a clinical encounter in the first month compared with the current standard of care, which is every 12 months. Most importantly, 71% of this high-risk group had at least one management action taken within 6 months of their KidneyIntelX test, such as doctor ordering a consult for one of the specialty services or a modification change in their medications. We believe the observed behavioral adjustment at the primary care level based on the patient's risk for a progression decline in their kidney function may form the basis for what future management would look like in managing patients with early-stage kidney disease. 

Ongoing evidence development programs should continue to reinforce the role of Kidney and telex use over the coming months. 3 of the more important observations are a 2.5-fold increase in new referrals to specialty services for high-risk patients, predominantly by primary care physicians and a 4.5-fold increase in the use of novel effective therapies such as the SGLT2 inhibitors for high-risk patients. Importantly, we also observed that more than 1/3 of the 496 Black patients representing 29% of the total cohort were classified as high risk by the KidneyIntelX. By comparison, the white patient population representing 24% of the total cohort of 406 patients, only 17% were identified as high risk.

Finally, although still early in the course of the study, we did observe trends in reductions of HbA1c and UACR levels across the KidneyIntelX risk strata and patients who have received some change in management at 6 months post-testing. Data collection is ongoing, including anticipated longer-term outcomes associated with improvement in kidney function based on eGFR slope and reductions in UACR, along with approaching recommended webcaster values and weight loss targets at 12 and 24 months. I'll now turn the call over to James Sterling, our Chief Financial Officer, for a review of our financial results. James?

[Oliver Sterling, executive]

Thanks, Michael. Good morning. Today, we issued our financial results for the fiscal year ended June 30, 2022, which will be detailed in our GAAP financials on Form 20-F filed later today and subsequently in our annual report under IFRS accounting. Figures I will discuss here are based on our GAAP financials and quoted in U.S. dollars, which is our reporting currency. For fiscal year 2022, we recorded total revenue of almost $3 million, $2.7 million of which was from KidneyIntelX testing, with the remainder being services revenue. This was an increase from approximately $1.5 million reported for 2021, of which just $400,000 was from testing revenue. Operating expenses for the year were $54.1 million on a GAAP basis, up from $32.5 million in fiscal '21, due primarily to higher headcount and higher R&D expenses to fund studies as well as increased consulting and professional fees to support our growth. Net loss for fiscal '22 was $45.3 million or $0.62 per share. As previously reported in April 2022, we issued amortizing senior convertible bonds with a principal amount of $21.2 million due in April 2027. 

Net loss on a fully diluted basis was $0.66 per share, taking into account the possible conversion of shares of the convertible bonds and reversal of the bond's fair value adjustment. This is compared to a net loss of $35.3 million or $0.49 per share in the fiscal year 2021. We ended the year with cash and cash equivalents of $41.3 million as of June 30, 2022. As a reminder, in mid-August, we disclosed that we had executed changes designed to yield over $12 million in annual savings in fiscal 2023, with more in process. The full effects of cash burn rate reduction are expected to be realized in our fiscal second and third quarters ending December and March, respectively. And we've taken since further steps to reduce expenditures and extend our cash runway. We anticipate that this should, depending on achieving certain assumed revenue, provide us with an adequate cash runway into the first half of fiscal 2024. Operator, could we now open the call up for questions?

[Operator]

[Operator Instructions] Our first question comes from Dan Arias with Stifel.

[Daniel Arias, analyst]

Just wanted to start on test volumes, 1,200 during the quarter, which is right around 100 a week. I think that's up slightly from last quarter. James or Tom, it would be helpful within Mount Sinai, Wake Forest in Utah, where you're most established there. Can you just sort of talk to the volume ramp that you expect? And just how much of it is going to be dependent on clinical data generation and reimbursement versus those things that are more tied to logistics and commercial practice, things like EMR and portal infrastructure, dock awareness, et cetera? Just trying to understand what the trigger points are from here and then what you actually need to get testing going at a higher level.

[James McCullough, executive]

Yes. Thanks, Dan. I'll give a quick answer to that and turn it over to Tom. We obviously are seeing a pickup in volume as we get better and better at what we do. And I think it's certainly becoming less of a technical issue at this point and much more of an education issue. And then, of course, the single most important thing is establishing comprehensive reimbursement. So when we start to see Blue Cross Blue Shield plans tip over for support, and obviously, now that we're on a Medicare pathway, that's going to start to widen the market, especially going into next year, and going to help support volume increase. But I think at this point, we know pretty much how to implement and have got enough experience under our belt that it really comes down to now education and reimbursement. Those are the 2 major things. And obviously, if we end up with an FDA de novo marketing authorization, that's going to be an additional help as well. Tom, do you want to take up on that too?

[Thomas McLain, executive]

I would only echo what you said, James. Coverage and utility data are very important to broadening adoption and increasing testing volumes, and both of those have been a strong focus for us over the last year and what we have been able to accomplish on coverage, importantly, Medicare because of the significance for the intended use population here. And the utility data, the publication that's forthcoming and Michael described, is going to be very important for building primary care physician understanding of how KidneyIntelX can benefit them and benefit their patients.

[Daniel Arias, analyst]

Okay. A follow-up question, I guess, would just be on Mount Sinai. James, when do you think you might be in a position to hit that 300 test-per-week target? And then, within the VA, I think the comment last quarter was that testing was being set up in 59 of 171 health centers. What's the update there? And are you still thinking that testing will begin in 8-plus of those by the end of the calendar year?

[James McCullough, executive]

Yes. On the Sinai piece, 2023 calendar. So starting January to January should be quite productive, especially as we now shift to a full commercial model with comprehensive payment, right? And without pointing to specifics, we are making some very real progress on securing additional private payer groups and public payer groups that have influence in New York state, especially New York City, which, again, is a bit of a Lazona plate of payer mix, but we're moving into a position now where we can actually start to get a super majority coverage, we believe, going into next year in Sinai. And that's where now, all of a sudden, you start to expand a much larger patient population, and that's going to help.

And you also start to get insurance payer push into that patient population for diagnosis, prognosis, and treatment in their best interest to do that rather than take the cost for late-stage disease and part of the dialysis bill. So we do expect a push there. And that should all accrue towards an increase in testing volume across the board, specialty practices, primary care practices, different patient demographics. We're even looking at pulling in specialties outside of kidney disease, including cardiology. Everybody's got a best in interest in understanding what the state of the kidney is, which is the gateway to a lot of chronic disease management. So 2023 should actually be quite a very interesting year.

[Daniel Arias, analyst]

Okay. The last one for me, and then I'll just hop off. OJ, maybe the obvious one on the cash side, just given where the burn is today and where you think the cost structure is headed, how far out should we go before thinking that you need access to capital at this point?

[Fergus Fleming, executive]

So we've been comfortable saying we are in shape to get through or into at least the first half of fiscal '24. So cash spend, we've indicated already, and we reiterated today that we've reduced expenses already to the tune of $12 million a year annualized. And indeed, we've already done most of that with more available to us, pretty good flexibility to flex spend. And so I feel pretty good about the cash position to get us through operational milestones. And at some point, I would expect in fiscal '24 or thereabouts next funding event.

[Operator]

Our next question comes from Yi Chen with H.C. Wainright.

[Yi Chen, analyst]

Could you comment on what would be your target volume per quarter by the end of fiscal 2023?

[Thomas McLain, executive]

Thanks. Appreciate the question. So we don't want to dip into the area of forecast too hard, but it will be significantly higher than where we are today. And importantly, I think the real tipping point for us is, again, in my head, the comment of super majority coverage. Once you start to have Medicare, Medicaid, Blue Cross Blue Shield, Medicare Advantage, and other private plans, especially in the diabetes population. Now you're talking about the ability to test the vast majority of patients who are eligible for KidneyIntelX, now it becomes an ROI equation, which is how many feet do we want to put on the street -- and how aggressively do we want to go at specific areas in terms of education partnership, et cetera, to get to larger patient basis.

So -- and I said this in my statement, but we could very well find ourselves in the March quarter, having substantially mitigated reimbursement risk to the business model, regulatory risk, with the publications coming up, showing that KidneyIntelX really does work and not just in a 2-rat study but in thousands of patients across a pretty broad group of patients that we now have substantially completed the business case for KidneyIntelX to now move into broader scale use. 

And that -- I believe that's a short-term equation, and that will allow us to expand much more assertively into certain high-density populations with an assurance that we're going to get paid. I think today, we're getting paid on a majority of the testing that we conduct, that's going to continue to increase even through the balance of this year. So for me, the canary in the coal mine investors should be looking for additional filings on significant insurance payer coverage or payment later this year and going into next year. Obviously, we have the FDA, which is going to render its decision, and you should be looking at that utility data, which is really where the rubber hits the road.

What does KidneyIntelX actually do? How do physicians use it, and how does it affect the care pathway? And Michael detailed some of that, but we're very pleased with how KidneyIntelX is performing today is doing what we thought it would do. So we're actually in a very strong position when we take a look at the whole package around bending the curve on chronic disease management, especially in diabetes and kidney disease, and that's going to start to reflect in the market space, we believe, to your point, as we get into the end of next year.

[Yi Chen, analyst]

At which point would you feel comfortable to provide the revenue guidance?

[Thomas McLain, executive]

The old question. I think we're reaching that point. This has been a very difficult market, and we've had an internal debate about this. I don't think it's going to be long from now. We're certainly starting to get confident in the ability to get paid for KidneyIntelX and the ability to get paid for KidneyIntelX in different areas, which is important. So we're moving into a more confident position there. Market volatility doesn't help. What we say at the end of the day or project, I'm not exactly sure how much effect that would have as opposed to just putting up the numbers and clicking off the fundamentals. So we've taken that position for now, which is let's just click off the fundamentals to inform the market as they come along. But I'm hoping as we start to see interest rate moderation, hopefully early next year, capital markets get a little bit more friendly that we could start to provide guidance into fiscal '23 and fiscal '24, which we're very encouraged about.

[Yi Chen, analyst]

Do you feel confident that you can get FDA clearance within calendar 2022?

[Thomas McLain, executive]

I do. And again, I always put the caveat that you can't call the timing. [Audio Gap] We are certainly reaching the end game, and this process cannot go on too much longer. And certainly, the burden on FDA has changed and moderated with COVID. So we're starting to see processes picking up. And until you have FDA, you don't have FDA full stop, but we have now submitted a substantial amount of validation data, performance data, analytical validation data, and we're now seeing the clinical use of KidneyIntelX across thousands of patients. So I also think that we have one of the best FDA teams, certainly the best FDA team that I've worked with in terms of outside consultants and internally.

We've gotten very smart about the process. So at the end of the day, the risk of using KidneyIntelX is not particularly high, right? You get referred, you get put on a drug early on, and this is all in a patient population that has existing disease. So we're only focused on patients with diabetes and existing kidney disease. We're not screening. So the risk of using KidneyIntelX is very low, but the benefit is very high. So with all of the validation data we have, I believe we're well-positioned to get a de novo marketing authorization in the March quarter. But again, let's see how the process goes.

[Operator]

Our next question comes from Randy Baron with Pinnacle.

[Randy Baron, analyst]

My first question is for Tom. Tom, congrats on last week's Medicare announcement. I mean, it's certainly a significant milestone. And today, obviously, talking about LCD being accepted for review. One thing that certainly seems like what was glaringly missing to me on this call was a mention of national coverage termination. For those Lemon on the call like me, can you explain if Renalytix is going to be going for an NCD? And if not, kind of why not without rehashing the script, like how else can you get paid at scale?

[Thomas McLain, executive]

Thanks, Randy. There's a lot of confusion around Medicare. I was at a conference last week where CMS provided some important context around payment. They were clear. They have 3 very distinct and separate payment methodologies. And the first is what you referenced, national coverage determinations, separate or local coverage determinations, and then there's this claim-by-claim adjudication. But what the Director of the coverage program for Medicare was clear about our numbers. There are currently 300 national coverage determinations. The local coverage determinations, which come from the MAX, number in the single thousands, but individual claim review, and claim-by-claim adjudication still accounts for the majority of Medicare payment in the United States. 

So basically, it's not a sequential process. Once you have coverage that's efficient for the scale you're at, you are done with Medicare. In our case, coverage under a local coverage determination. It relates to the location of the laboratory that runs the Medicare patient sample. So a local coverage determination by the MAC for the New York City lab, if we continue to run all of our Medicare samples through that New York lab, that's national coverage for us. There isn't a next move on to a national coverage determination that's required here. So that -- and the reason that we're doing the LCD, as I indicated, is the volume of KidneyIntelX claims is going to be significant that makes the payment process much more efficient. -- for that Medicare administrative contractor in New York. So the short answer is on national with a local coverage determination. We would be done. There isn't a need to move on to a national coverage determination.

[Randy Baron, analyst]

Well, that's a good answer, but let me ask just a dumb question. Is there a collar or limit of the amount of tests that you could push through the New York MAC?

[Thomas McLain, executive]

No. It's national. So all the New York MAX does is administer Medicare for laboratories or providers that are located in their region. The budget is the Medicare budget. There isn't a limit as to each MAX what they can pay. And they're paying for claims for people in California, people in territories like Puerto Rico, and people in New York. So they are -- the regional contractor is a national payer for any service that's provided in their region.

[Randy Baron, analyst]

Let me shift to OJ. Jay, I'm just trying to reconcile kind of the company's aspirations for minimizing cash burn versus what happened in the quarter that just ended. Seeing as the September quarter is done, what were the cash levels at September 30?

[Oliver Sterling, executive]

So we're not previewing that. As far as we're going to go in previewing September is the revenue line. Not ready to give more guidance on what September looks like.

[Randy Baron, analyst]

Okay. Well, let me ask the question this way. Was the September burn down to that $9 million, $9.5 million aspiration?

[Oliver Sterling, executive]

September burn was definitely down. I don't want to put a number on it, but it was lower than what you've seen in recent historicals.

[Randy Baron, analyst]

Both Tom and James talked about return on investment for the test reps. How many tests on average for your 12 reps are needed to get to that threshold?

[Thomas McLain, executive]

I got to be careful. And it's a good question. I get why you're asking it. I'm just worried that it trips into forward-looking guidance, which we're not giving to give specifics there. So let me hold off on.

[Randy Baron, analyst]

Okay. Let me ask the question this way. What's your average compensation per sales rep?

[Thomas McLain, executive]

Not ready to provide that either. It's market rate comp. They get a base and a bonus-based performance. But as far as giving you specific numbers.

[Randy Baron, analyst]

But let me -- so then you can just comment directionally if I'm right. But if an average salesperson gets $200,000 at $950 a test, that's 200 tests at times 12 is $150, that gets me to like $2.5 million. Is that directionally how I should look at it?

[Thomas McLain, executive]

Yes. I don't see why that's not a fair way of looking at the picture. Randy, before you go on there, these are actually good questions. The reps get paid different depending on level of experience, location, et cetera. But I actually like that direction that you're going in.

[Randy Baron, analyst]

Well, on the specialist, since you guys open the door, it seems like a pretty obvious change. James, let me just do my last couple to you. Are there -- and I just want to make sure I didn't miss this. Are there any remaining open items requested by the FDA for anything else?

[James McCullough, executive]

At the moment, no. Just to put the caveat on that, okay? Because I want to be very, very careful and respectful of the FDA process and very humble, right? It is a complicated process. We are doing a de novo authorization, and it's a proper de novo authorization. There are a reason there are no substantial examples of risk assessment tests at the front end of a disease is big. So when FDA does opine, and we would like it to be successful, that's going to be obviously a significant statement of achievement because we will now be putting a new class, a prognostic test, on the table. So it is a proper de novo authorization. And the way the FDA process works, while we do -- we believe we have satisfied what FDA is looking for. It doesn't mean that as we continue to conclude the review process that additional questions will not appear or there will not be additional discussions. But the -- we're certainly confident that we put together a very strong package.

[Randy Baron, analyst]

Okay. And then just last, really quick 2 ones for me, James. I don't -- I'm just curious on partnership you've talked about it in the past. Do you expect any updates or completion of any partnership in this calendar year?

[Oliver Sterling, executive]

We are making progress, and I do expect completions of partnerships. Can I commit to this calendar year? No. I can't commit to this calendar year. Would I be surprised if we did announce a partnership this calendar year? No. But I can tell you that what's interesting as we continue to make significant milestone progress with insurance, there are a lot of people taking notice, especially in a market that's big. So it's not every day you come across a fully validated prognostic at the front end of the market without any direct competition that is now being paid for. Insurance payment, as we said from the beginning, is one of the ultimate validations because when somebody starts paying for something, you know that they've analyzed it, they've thought about it. Does it really add value? And when the wallets open, you know you've created a product that has value. And there are a lot of people watching that at the moment. And I think as the insurance landscape continues to unfold this year and next year, that's only going to strengthen our hand.

[Randy Baron, analyst]

And this is my last thing. I mean, that last comment you said about you getting paid. I'd love your high-level view on valuation of Renalytix currently. I mean, it certainly seems like you said, this is a company that's getting paid, and you're valued, at least to me, it seems less than a series kind of C venture company, which would be 3 to 5 years away from that milestone. Like, just how do you think about that on the top?

[James McCullough, executive]

I mean, I've been doing this for a long time. And I've never been in a position where we're this close to a regulatory decision where we have validated across multiple insurance carriers, including Blue Cross Blue Shield, where we now have millions of patients with insurance, and I'm still valued at a venture valuation. I mean, we could -- again, as I said, we could literally be in the short term, having derisked regulatory reimbursement utility, which typically takes many, many years to fulfill. So I am -- while I understand where the market volatility is, I am surprised with this level of validation that we're putting on the table where the company is currently valued. But again, I'm biased as CEO. But I would say that we are significantly undervalued for the achievements that we put on the table.

[Operator]

[Operator Instructions] Our next question comes from Mark Massaro with BTIG.

[Mark Massaro, analyst]

So I guess I wanted to just clarify and also congratulate you on the progress on Medicare that you announced last week. But just to kind of verify the -- you will continue to get paid under the ICR process until the LCD process is completed. So I guess just to kind of do the eye here, this would likely go on for a series of months until you know whether -- so I guess my question is really around, if you have a positive draft LCD, that's a good thing. The benefit goes final, you'll continue to get paid. But what happens if you get a negative LCD? Will you propose a noncoverage decision? Will you still get paid until the final is rendered?

[Thomas McLain, executive]

Yes. So if there is a positive local coverage determination, what that does is it more rootnizes the review of every claim, so that it reduces the need for a medical director to review each claim. If there was a negative coverage determination, that would say that medical directors who are reviewing the claims under the ICR process no longer see the test as reasonable and necessary. So I guess it would say that they -- when they went back and looked at the data again that they had changed their mind. If they did that, then they would either reduce or stop payment of claims under ICR. So the data that's in both processes is the same. It's all of our clinical data. And it's -- so Mark, I don't know if that answered the question.

[Mark Massaro, analyst]

Yes, that is certainly helpful. And I know that's a complex question. The fact that you have started getting paid through the ICR pathway. My suspicion is that that builds confidence that you -- well, I guess my question is, does that build your confidence that you think you'll likely get a positive draft LCD?

[Thomas McLain, executive]

I can't speak for where they're going to come out, Mark, but all of the data that will be considered in the local coverage determination process was submitted and reviewed by the MAC in the efforts that led up to payment under the individual claim review process. So as the approach that we took was, we submitted all of our analytical, clinical validation and the utility data that we had. We met with the medical directors on multiple occasions. So we went through that whole process before submitting claims for consideration under ICR. There isn't -- I mean, we've done everything that you would do under an LCD. So -- the only additional information that we will be able to review at the open meeting will be the publication of the utility data that Michael hasn't shared with you today. So I would say they've looked at everything and are continuing on a claim-by-claim basis the safety testing is reasonable and necessary, which is the hurdle for a local coverage determination as well.

[Mark Massaro, analyst]

And just my last question here. I know you were asked about the NCD pathway. I understand you have a lab in Tampa, and you have a lab in Utah as well. Can you just give us some direction as to if you're in conversations with potentially other Medicare contractors, or do you expect to wait this NGS process out first before you move other conversations with other MAX forward?

[Thomas McLain, executive]

Our focus right now is on the fact that we're running 100% of our Medicare testing through the New York lab. We would see the value in having a backup, a second laboratory facility in the future. That could be with a coverage process with another MAC in the future or it could be that we open up another laboratory in an NGS region. But all of our Medicare testing right now is being run through the New York City location.

[Mark Massaro, analyst]

Okay. Great. Congrats on all the progress.

[James McCullough, executive]

Mark, we can finally answer these questions, including -- I love having this discussion on reimbursement now.

[Mark Massaro, analyst]

I appreciate the color.

[Operator]

Our next question comes from Chris Glasper with Singer Capital Markets.

[Christopher Glasper, analyst]

Just a little bit more color, if we may, on the testing volume that you've generated in the first quarter of this year. So if you've done north of 1,200 tests in the quarter, of which a short 1,000 were from Mount Sinai. Can you just give us a little bit more color on where the balance has come from? How many health systems are ordering, whether that's regular repeat orders or one-offs at this stage?

[James McCullough, executive]

Tom, do you want to take that one?

[Thomas McLain, executive]

Yes, I'm sorry, Jim. So on the testing volumes, the increased volumes that we're generating, it's for initial testing with KidneyIntelX. And we are -- I think I understood the question correctly. We are looking at expanded indications for KidneyIntelX repeat testing, and that will be set for the future.

[Christopher Glasper, analyst]

So just a bit more on that. I'm just trying to get a sense of how many different systems are now effectively live in addition to Mount Sinai.

[Thomas McLain, executive]

So we have our clinical study that is ongoing at the Wake Atrium system, and that is for clinical testing with KidneyIntelX. We expect that that will convert into commercial testing before the end of the fiscal year. We also have just gone live with the Simi River Health System in Mississippi, and that testing will go live. And a number of other tests are coming from commercialization within individual primary care practices, which are being focused in areas where we also have insurance coverage in place.

[Christopher Glasper, analyst]

And then just, I think -- I'm not sure the question on the VA was answered from Dan, first up. So just a little bit more color on where you are with the rollout of the VA and whether you're going to a target of having 8 systems live by the end of this year or by the fiscal year.

[Oliver Sterling, executive]

Going back to -- yes. So on the count, we had announced that we had live testing in one VA center. Today, I provided an update that we have a task order with the second center. We have a blanket purchase order with a 1/3, and we have an advanced purchase commitment from a fourth. So those are 4 centers with KidneyIntelX testing. And I went on this confirm that we expect up to that 8% by the end of the fiscal year. Correct.

[Operator]

Our next question comes from Jens Likes with Investec.

[Jens Lindqvist, analyst]

Just a question on the U.S. dialysis market at the moment. There was a profit warning from Fresenius Medical Care this morning and also from disease, I believe, last week, flagging -- well, both downgrading guidance really against the backdrop of cost inflation and stop shortages. Just wondering, is this adverse market backdrop. Is that an opportunity for you? I guess it could be that it could facilitate the adoption of technology focused on intervention, or is the market at the moment, is there simply a lot of late-stage kidney patients that have to take priority? I'm just interested in your thoughts on that.

[James McCullough, executive]

Very good question. The Renalytix business model is insensitive to the economics of the general economy because most of our payment is coming from very large insurers and the government. And what's interesting and what I've noticed anecdotally is there is a large interest from different state organizations, Medicaid, and different large insurers around controlling cost. And the best way to control cost with disease is to get in early and treated -- and the biggest problem and this is not unique to kidney disease, but it's the poster child, is we've let these huge populations with the existing disease just slowly upstage to later disease and then fall into a very expensive medical program.

My breath was taken away with that JAMA publication that I referenced that was talking about close to $200,000 in the first year alone of dialysis for private insurance companies $80,000 from Medicare. And the fact that I believe the statistic was 52% of patients with diabetes will eventually develop kidney disease, the majority. So to me, this is a no-brainer. And it's all about diagnosis, prognosis, and treatment. This is why KidneyIntelX is so critical to controlling state government budgets and getting a handle on what is a completely unsustainable situation, which is who's got kidney disease we need to treat now and who doesn't. 

And we have the technology to do it with KidneyIntelX. We're now getting paid for it. We have the regulatory pathway, and now the utility data is emerging to show that if you are a primary care physician and you are equipped with KidneyIntelX advanced prognosis, we are now demonstrating behavior change. Awareness is going up. We're seeing new drug prescription early. We're seeing timely referrals to physicians. We're seeing more intensive blood control management. This is all coming down to roost. And so I -- my feeling is, regardless of the economic environment, everybody needs to embrace risk assessment early on in this chronic disease condition.

That's how ultimately, we're going to control cost, and everybody's sensitive to cost right now. And so we're getting a lot of inbound questions from insurance payers on this. And I think the health economics are bearing out, and what's going to happen when we start -- when we continue to publish utility data showing that KidneyIntelX is effective, that's really going to give us the boost in terms of adoption. I can't comment on Fresenius and DaVita's profit warnings. I don't know if you have any insights into that, Tom.

[Thomas McLain, executive]

I don't, James.

[James McCullough, executive]

But a good question, Jens. Thank you.

[Operator]

[Operator Instructions] At this time, there are no concludes today's conference call. Thank you for participating. You may now disconnect.