RenalytixAI Reports Financial Results for First Quarter of Fiscal Year 2021

NEW YORK, Nov. 25, 2020 (GLOBE NEWSWIRE) — Renalytix AI plc (LSE: RENX) (NASDAQ: RNLX), an artificial intelligence-enabled in vitro diagnostics company, focused on optimizing clinical management of kidney disease to drive improved patient outcomes and advance value-based care, today reported financial results for the quarter ended September 30, 2020.
Recent HighlightsLaunched KidneyIntelX within the Mount Sinai Health SystemSubmitted final package to FDA seeking clearance of KidneyIntelXAnnounced collaboration with AstraZeneca to develop and launch precision medicine strategies for cardiovascular, renal and metabolic diseasesCompleted spin-out of Verici Dx (previously FractalDx)Achieved dual listing on Nasdaq Global Market
First Quarter 2021 Financial Results
Operating expense for the three months ended September 30, 2020 was $5.4 million compared to $2.0 million during the prior year period.Research and development expenses were 1.7 million for the three months ended September 30, 2020, increasing $0.5 million from $1.2 million for the three months ended September 30, 2019. The increase R&D expense was due to increased headcount and the associated compensation and related benefits, including share-based payments.General and administrative expenses were $4.1 million for the three months ended September 30, 2020, increasing $3.3 million from $0.8 million for the three months ended September 30, 2019. The increase was due to an increase in insurance costs, compensation and related benefits, including share-based payments, due to increased headcount, and in fees associated with the listing on Nasdaq.Net loss attributable to ordinary shareholders was $7.2 million for the three months ended September 30, 2020 compared to $1.5 million in the prior year period.Cash, cash equivalents and short-term investments of $82.3 million as of September 30, 2020. This includes $76.1 million from the Company’s initial public offering on the Nasdaq Global Market after commissions, fees and offering expenses.For further information, please contact:About Kidney Disease
Kidney disease is now recognized as a public health epidemic affecting over 850 million people globally. The Centers for Disease Control and Prevention (CDC) estimates that 15% of US adults, or 37 million people, currently have chronic kidney disease (CKD).  Further, the CDC reports that 9 out of 10 adults with CKD do not know they have it and 1 out of 2 people with very low kidney function who are not on dialysis do not know they have CKD*. Kidney disease is referred to as a “silent killer” because it often has no symptoms and can go undetected until a very advanced stage.  Each year kidney disease kills more people than breast and prostate cancer. Every day, 13 patients in the United States die while waiting for a kidney transplant.
* https://www.cdc.gov/kidneydisease/publications-resources/2019-national-facts.htmlAbout RenalytixAI
RenalytixAI is a developer of artificial intelligence-enabled clinical in vitro diagnostic solutions for kidney disease, one of the most common and costly chronic medical conditions globally. RenalytixAI’s products are being designed to make significant improvements in kidney disease diagnosis, transplant management, clinical care, patient stratification for drug clinical trials, and drug target discovery. For more information, visit www.renalytixai.com.Forward Looking Statements
Statements contained in this release regarding matters that are not historical facts are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Examples of these forward-looking statements include statements concerning: the ability of KidneyIntelX to lower healthcare costs, improve patient quality of life and set a long-term standard of care, trends in our market and potential benefits of government policy change, the impact of COVID-19 on our business, our expectations for product development, strategic partnerships and collaborations, reimbursement decisions, clinical studies and regulatory submissions, and our business strategies and future growth. Words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “seeks,” and similar expressions are intended to identify forward-looking statements. We may not actually achieve the plans and objectives disclosed in the forward-looking statements, and you should not place undue reliance on our forward-looking statements. Any forward-looking statements are based on management’s current views and assumptions and involve risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. These risks and uncertainties include, among others: that KidneyIntelX is based on novel artificial intelligence technologies that are rapidly evolving and potential acceptance, utility and clinical practice remains uncertain; we have only recently commercially launched KidneyIntelX; and risks relating to the impact on our business of the COVID-19 pandemic or similar public health crises. These and other risks are described more fully in our filings with the SEC, including the “Risk Factors” section of our Annual Report. All information in this release is as of the date of the release, and we undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law.Investor Contact
investors@renalytixai.comRENALYTIX AI PLCOperational Update and Financial Results for the Three Months Ended September 30, 2020Unless otherwise indicated, all references in this report, to the terms “Renalytix,” “Renalytix AI,” “Renalytix AI plc,” “the company,” “we,” “us” and “our” refer to Renalytix AI plc together with its subsidiaries. We recommend that you read the discussion below together with our audited financial statements and the notes thereto, which appear in our Annual Report on Form 20-F for the year ended June 30, 2020, filed with the Securities and Exchange Commission on October 28, 2020 (our “Annual Report”).The statements in this discussion regarding our expectations regarding our market opportunity and future performance, as well as all other non-historical statements are forward-looking statements. Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These risks and uncertainties include, but are not limited to, the risks and uncertainties set forth in the “Risk Factors” section of our Annual Report and any subsequent reports that we file with the SEC. See the section titled “Forward-Looking Statements” above.OPERATIONAL REVIEWCompany OverviewWe are an artificial intelligence-enabled in vitro diagnostics company, focused on optimizing clinical management of kidney disease to drive improved patient outcomes and lower healthcare costs. KidneyIntelX, our first-in-class diagnostic platform, employs a proprietary artificial intelligence-enabled algorithm that combines diverse data inputs, including validated blood-based biomarkers, inherited genetics and personalized patient data from electronic health record (“EHR”) systems, to generate a unique patient risk score. This patient risk score enables prediction of progressive kidney function decline in chronic kidney disease (“CKD”) allowing physicians and healthcare systems to optimize the allocation of treatments and clinical resources to patients at highest risk. CKD affects approximately 37 million individuals in the United States, significantly impacting their quality of life and, according to the United States Renal Data System’s 2019 Annual Data Report, resulting in Medicare spending of over $120 billion per year. In response to this substantial kidney disease burden, a U.S. Presidential Executive Order on Advancing American Kidney Health was issued in July 2019 to support change in kidney disease care. We believe we are well-positioned to help meet this urgent medical need with KidneyIntelX, a laboratory developed test (“LDT”), initially indicated for adult patients with type 2 diabetes and existing CKD, which is referred to as diabetic kidney disease (“DKD”). KidneyIntelX has already been granted a common procedural terminology (“CPT code”), national Medicare pricing and a positive coverage determination from a regional, private physician-led health insurance payor. Further, it has been granted breakthrough device designation from the U.S. Food and Drug Administration (the “FDA”). Building on these significant reimbursement and regulatory milestones, we believe our population health-based business model, which includes partnerships with healthcare systems, such as Mount Sinai Health System, will help facilitate commercial adoption of KidneyIntelX in the United States.Kidney disease is a worldwide public health crisis, resulting in more deaths per year than breast or prostate cancer. The National Kidney Foundation estimates that one-third of adults in the United States are at risk of developing kidney disease. Advanced kidney disease is generally not reversible and, once the disease progresses to kidney failure, the only available treatments are long-term dialysis and kidney transplant. In 2016, more than 726,000 patients had end-stage kidney disease (“ESKD”), with more than 500,000 requiring dialysis at least three times a week. More than 100,000 patients begin dialysis each year to treat ESKD. Once on dialysis, patients typically experience a five-year mortality rate of up to 65%, about the equivalent rate for brain cancer. As of July 2019, nearly 100,000 Americans were on the waiting list to receive a kidney transplant and 13 patients die in the United States while waiting for a kidney transplant every day. Moreover, the kidney disease crisis is continuing to grow along with the increased prevalence of contributing risk factors, such as obesity and diabetes.Managing a CKD population of this scale and associated healthcare costs presents a unique social challenge. The ability to predict which patients will experience progressive kidney function decline, kidney failure, initiation of long-term dialysis or kidney transplant, is critical to changing patient outcomes and health economics. In our clinical validation studies in patients with DKD, we observed that the Kidney Disease: Improving Global Outcomes (KDIGO) classification system, which is the standard clinical assessment to predict risk for progression of CKD, including DKD, only identified approximately 20% of patients that experienced an adverse kidney outcome as very high-risk patients with the recommendation of referral to a nephrologist, while KidneyIntelX identified nearly half of such patients.We believe that the utilization of KidneyIntelX across large patient populations will have a significant impact on overall healthcare costs. Health economic benefits are projected to be derived from three key areas: (1) slowing progression to the next stage of CKD, (2) delaying or preventing progression to ESKD and the need for dialysis or kidney transplant and (3) avoiding dialysis crashes. We have partnered with Boston Healthcare Associates, or BHA, to develop a health economic model analyzing the cost and care pathway for patients with DKD at all stages of the disease and the potential cost savings of implementing and utilizing KidneyIntelX. According to the BHA study, based on the Medicare price of $950 per reportable test, KidneyIntelX would generate a positive return for health insurers in under 24 months and deliver a cost savings of up to $1.3 billion over five years per 100,000 patients with DKD.Several federal policy and economic events, including the U.S. Presidential Executive Order on Advancing American Kidney Health issued in July 2019 and recent changes in U.S. reimbursement law, are helping disrupt the kidney disease clinical and commercial environment, highlighting the pressing need for solutions such as KidneyIntelX. We believe these favorable policy trends, which began during the Obama administration, will continue to build under a Biden administration and will support broader commercial adoption of KidneyIntelX and other derivative products contemplated in our diagnostics development planning. In addition, in August 2020, the U.S. Centers for Medicare & Medicaid Services (“CMS”), an agency within the U.S. Department of Health and Human Services, submitted for public comment a rule (“Medicare Coverage of Innovative Technology”) which, if finalized, would provide an automatic National Medicare Coverage Determination for diagnostic devices that have received breakthrough device designation upon the effective date of the promotional approval by the FDA. The automatic coverage period shall continue for a period of four years, during which manufacturers of breakthrough devices may develop additional evidence regarding the applicability of their products to the Medicare population, so they might continue Medicare coverage beyond the initial four years. We believe that this new proposed CMS rule making, if adopted in its current form, could have a material positive impact on addressable market population with insurance coverage for KidneyIntelX if we obtain FDA clearance for KidneyIntelX.Launch of KidneyIntelX at Mount SinaiIn September 2020, we announced the initiation of KidneyIntelX clinical test reporting within the Mount Sinai Health System (“Mount Sinai”) in New York City. In addition to patient testing and risk assessment, a central component of this operational milestone was the physician education and support program developed in close collaboration with leadership of the Mount Sinai Departments of Medicine and Population Health Science and Policy, with input from patient advocacy groups and the broader clinical community. This expert experience is reflected in the design of the KidneyIntelX test report and the newly launched product website, www.kidneyintelx.com. We believe this education and support program will be an important resource to help improve care for early stage DKD patients at Mount Sinai and support future deployments of KidneyIntelX.Submission to FDA seeking clearance of KidneyIntelXIn August 2020, we filed a submission seeking clearance of KidneyIntelX with the FDA. This FDA filing builds on our regulatory and commercialization program, which includes our June 2020 announcement that the New York State Department of Health has issued a clinical laboratory permit for commercial clinical testing of KidneyIntelX. In May 2019, we announced that KidneyIntelX was granted breakthrough device designation by FDA, the first such designation for an artificial intelligence-enabled in vitro diagnostic for kidney disease publicly announced by any company. We are now seeking FDA clearance for the intended use of KidneyIntelX, in conjunction with clinical evaluation, as an aid to further assess the risk of progressive decline in kidney function within a period of up to five years in patients over the age of 21 with type 2 diabetes and existing CKD. Patients with CKD and type 2 diabetes account for approximately 25-30% of the estimated 37 million U.S. patients with CKD. Performance data we provided in our FDA 510(k) submission was based on a multi-center validation study of more than 1,100 patients that demonstrated that KidneyIntelX accurately identifies patients with type 2 diabetes in CKD stages 1, 2 and 3 who are at highest risk of progressive decline in kidney function and/or kidney failure.COVID-19 studiesThe current COVID-19 pandemic has had a devastating impact around the world. Many reports indicate that acute kidney injury occurs in approximately 20% to 40% of patients hospitalized with COVID-19, is often severe (including need for acute dialysis), and data from Mount Sinai during the initial U.S. surge indicated that 70% of patients that develop acute kidney injury in the setting of COVID-19 either die in the hospital or do not recover kidney function by discharge. We plan to investigate the use of KidneyIntelX for patients with COVID-19 in two clinical studies. The first study, entitled “Pred-MAKER” (Prediction of Major Adverse Kidney Events and Recovery) involves acutely ill patients with COVID-19 admitted to Mount Sinai. The second study, “MASKeD-COVID” (Multi-center Assessment of Survivors for Kidney Disease after COVID-19) is designed to understand the long-term kidney epidemiology of CKD in survivors of COVID-19 and validate KidneyIntelX for prediction of long-term kidney outcomes post-COVID hospitalization that will inform further prevention, treatment and clinical care.AstraZeneca collaborationIn August 2020, we announced a collaboration with AstraZeneca (LSE/STO/NASDAQ: AZN) to develop and launch precision medicine strategies for cardiovascular, renal, and metabolic diseases. The first stage in the collaboration is examining the uptake of, and patient adherence to, treatments for diabetes as well as common complications of CKD, including hyperkalemia and anemia. The study will provide key insights into the impact of the KidneyIntelX platform to optimize utilization of therapeutics in CKD under current standard of care protocols. Based on the insights gained from the first stage, a multi-center, randomized controlled trial will be initiated to evaluate the impact of KidneyIntelX testing and care navigation software on uptake and adherence to new potassium-binding agents in patients with CKD and hyperkalemia. We believe that this approach will accomplish the following: (1) help improve physician uptake and patient adherence to existing potassium-binding therapeutics and other approved products in CKD through early identification of previously hidden high-risk patient groups; (2) accelerate patient identification and recruitment for clinical trials; and (3) complement commercialization efforts with outcomes from KidneyIntelX results. Importantly, this collaboration extends the potential impact of KidneyIntelX to populations beyond the first indicated use, DKD, that is approved with New York State and under breakthrough review with the FDA. Hyperkalemia affects approximately 10-20% of patients with CKD or chronic heart failure. Anemia affects 15% of patients with CKD, and nearly 50% of individuals with advanced CKD.FractalDx (Verici Dx) spin-offIn April 2020, the Company created a wholly-owned subsidiary, Verici Dx Limited (“Verici Dx”), to hold technology in-licensed from the Icahn School of Medicine at Mount Sinai in late 2018. In May 2020, the Company transferred the in-licensed FractalDx technology and associated assets to Verici Dx in exchange for $2.0 million, which was satisfied by the issuance of convertible loan notes of Verici Dx to the Company.We announced on July 8, 2020 that the share capital of Verici Dx had been re-designated into 59,416,134 A Shares of £0.001 each and one golden share of £0.001 (the “Golden Share”) and that Renalytix would retain the Golden Share and its associated controlling voting rights. Subsequent to that announcement, the Company entered into a declaration of trust whereby Renalytix AI plc has declared that it holds the Golden Share as nominee and on trust for certain Directors of RenalytixAI and accordingly, the Company itself has no ongoing beneficial interest in Verici Dx shares. This triggered a reconsideration event for ongoing consolidation of Verici Dx and since the Company was still the primary funding source for Verici Dx, the Company continued to hold a controlling financial interest in Verici Dx and continued to consolidate Verici Dx. Consequently, the Company recognized noncontrolling interest of $1.6 million to reflect Verici Dx’s distribution of A shares and the Golden Share.On November 3, 2020, Verici Dx completed its initial public offering (the “Verici IPO”) on AIM thus triggering another reconsideration event for ongoing consolidation of Verici Dx. The Verici IPO resulted in the Company no longer having a controlling financial interest and no longer having a majority equity interest in Verici Dx.Nasdaq dual listingIn July 2020, we completed a dual listing on the Nasdaq Global Market through the issuance of American Depository Shares under ticker symbol “RNLX,” expanding our institutional investor base and raising net capital of approximately $76.1 million after commissions, fees and offering expenses. We maintain our listing on the AIM market of London Stock Exchange plc under the symbol “RENX.”Impact of COVID-19The extent of the impact of the COVID-19 pandemic on our business, operations and regulatory and commercialization timelines will depend on certain developments, including the duration and spread of the outbreak and its impact on our partners, laboratory sites, and other third parties with whom we do business, as well as its impact on regulatory authorities and our key scientific and management personnel. For example, to the extent possible, we are conducting business as usual, with necessary or advisable modifications to employee travel and employee work locations. We will continue to actively monitor the rapidly evolving situation related to COVID-19 and may take further actions that alter our business operations, including those that may be required by federal, state or local authorities, or that we determine are in the best interests of our employees, partners and shareholders. At this point, the extent to which the COVID-19 pandemic may impact our business, operations and regulatory and commercialization timelines remains uncertain.FINANCIAL REVIEWFinancial review of the three-month period ended September 30, 2020The operating loss for the three months ended September 30, 2020, was $5.4 million (September 30, 2019: $2.0 million) and the net loss attributable to ordinary shareholders for the three months ended September 30, 2020, was $7.2 million (September 30, 2019: loss of $1.5 million).Research and Development CostsResearch and development expenses increased by $0.5 million, from $1.2 million for the three months ended September 30, 2019 to $1.7 million for the three months ended September 30, 2020. The increase R&D expense was due to increased headcount and the associated compensation and related benefits, including share-based payments.General and Administrative CostsGeneral and administrative expenses increased by $3.3 million, from $0.8 million for the three months ended September 30, 2019 to $4.1 million for the three months ended September 30, 2020. The increase was due to a $1.0 million increase in insurance costs, $0.8 million increase in legal and accounting fees as a result of listing on Nasdaq, $0.6 million in compensation and related benefits, including share-based payments, due to increased headcount, $0.4 million increase in consulting and professional fees, $0.3 million increase in recruiting expense, and an increase of $0.2 million in marketing, facility and other operating expenses.Performance of contract liability to affiliateIn May 2020, the Company and the Icahn School of Medicine at Mount Sinai entered into an operating agreement (“Kantaro Operating Agreement”) to form a joint venture, Kantaro Biosciences LLC (“Kantaro”), for the purpose of developing and commercializing laboratory tests for the detection of antibodies against SARS-CoV-2 originally developed by Mount Sinai. During the three months ended September 30, 2020, we recognized $0.5 million related to the performance of our contract liability with Kantaro. This represents the allocation of costs related to performing services on behalf of Kantaro.Equity Losses in AffiliateAs the Company can exert significant influence over, but does not control, the investee’s operations through voting rights or representation on Kantaro’s board of directors, the Company accounts for the investment using the equity method of accounting. During the three months ended September 30, 2020, we recognized $0.1 million in losses which represents our proportionate share of losses in Kantaro.Other Income (Expense), netDuring the three months ended September 30, 2020, we recognized a realized foreign exchange gain of $0.06 million which was offset by an unrealized foreign exchange loss of $2.2 million. During the three months ended September 30, 2019, we received $0.08 million of other income in relation to a collaboration with the University Medical Center Groningen, Netherlands as well as $0.01 million of interest income as a result of interest earned on cash deposits. We recognized a realized foreign exchange gain of $0.02 million during the three months ended September 30, 2019 and had an unrealized foreign exchange gain of $0.43 million.Cash FlowsNet cash used in operating activitiesDuring the three months ended September 30, 2020, net cash used in operating activities was $10.4 million and was primarily attributable to our $7.6 million net loss and $3.6 million in the net change in our operating assets and liabilities that was offset by $0.8 million in noncash charges. The change in our operating assets and liabilities was primarily attributable to $3.8 million decrease in our prepaid expenses and other current assets. Noncash charges were primarily related to share-based compensation expense of $0.5 million.During the three months ended September 30, 2019, net cash used in operating activities was $1.7 million and was primarily attributable to our $1.5 million net loss and $0.2 million in noncash charges.Net cash used in investing activitiesDuring the three months ended September 30, 2020, net cash provided by investing activities was $0.4 million and primarily attributable to $1.0 million in proceeds in short term investments offset by $0.5 million for the purchase of lab and office equipment and $0.1 million of software development costs.During the three months ended September 30, 2019, net cash used in investing activities was $13.3 million and primarily attributable to $14.3 million in purchases of short-term investments offset by net proceeds of $1.0 million related to our short-term investments.Net cash used in financing activitiesDuring the three months ended September 30, 2020, net cash provided by financing activities was $76.9 million and was primarily attributable to $79.2 million of proceeds from our initial public offering on the Nasdaq Global Market which was offset by offering costs of $2.3 million associated with the IPO that were paid in the period.During the three months ended September 30, 2019, net cash provided by financing activities was $16.4 million and was primarily attributable to $17.3 million of proceeds from our secondary public offering on the AIM which was offset by offering costs of $0.9 million associated with the public offering.Cash, cash equivalents and short-term investmentsNet cash, cash equivalents and short-term investments of $82.3 million as of September 30, 2020 increased from $13.3 million as of June 30, 2020 primarily due to the net proceeds of our initial public offering on the Nasdaq Global Market.Post-period endOn November 3, 2020, Verici Dx completed its IPO on AIM and raised gross proceeds of £14.5 million. Verici Dx previously issued the Company $2.5 million in convertible loan notes which reflects the consideration for the FractalDx assets and the funding the Company provided Verici Dx through October 28, 2020. Prior to the Verici IPO, on November 3, 2020, the Company gave notice to convert the existing $2.5 million convertible loan notes into 9,831,681 ordinary shares of Verici Dx.

RENALYTIX AI PLCCONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)The accompanying notes are an integral part of these condensed consolidated financial statements.