RNLXY 10-K & 10-Q changes, risk factors and insider trading
Renalytix plc (also RENXF) · OTC · Services-Medical Laboratories · CIK 1811115 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Medical advances may impact the diagnostics industry and prevent us from achieving increased market penetration and improved operating results.”
New heading “We have material weakness in our controls and procedures.”
New heading “Our international operations may be adversely affected by actions taken by foreign governments or other forces or events over which we may have no control.”
New heading “We may experience inflationary pressures, which could increase our manufacturing costs and operating expenses and have a material adverse impact on our results of operations.”
New heading “We have announced the delisting of our ADSs from trading on the Nasdaq Capital Market, which could limit investors' ability to make transactions in our ADSs and subject us to additional trading restrictions.”
New heading “Our ADSs may be traded infrequently and in low volumes, so you may be unable to sell your ADSs at or near the quoted bid prices if you need to sell.”
New heading “If we qualify as a foreign private issuer, we will be exempt from a number of rules under the U.S. securities laws and will be permitted to file less information with the SEC than a U.S. domestic public company, which may limit the information available to our shareholders.”
Largest changes
“Our global operations are dependent upon products manufactured, purchased and sold around the world, including in countries with political and economic instability or uncertainty. This includes, for example, the current conflict between Russia and Ukraine, ongoing tensions across the Middle East, the adoption and expansion of trade restrictions, including the occurrence or escalation of a “trade war,” or other governmental action related to tariffs or trade agreements or policies among the governments of the United States, China and other countries and other global events. …”see in full comparison
“We have announced the delisting of our ADSs from trading on the Nasdaq Capital Market, which could limit investors' ability to make transactions in our ADSs and subject us to additional trading restrictions.”see in full comparison
“We have material weakness in our controls and procedures.”see in full comparison
“We may experience inflationary pressures, which could increase our manufacturing costs and operating expenses and have a material adverse impact on our results of operations.”see in full comparison
“On December 22, 2023, we received two written notices from the Listing Qualifications Department of Nasdaq notifying us that (i) because the closing bid price for the ADSs was below $1.00 per ADS for at least 30 consecutive business days, we did not meet the $1.00 per ADS minimum bid price requirement (the “Minimum Bid Price Requirement”) and (ii) we were not in compliance with the requirement to maintain a minimum market value of listed securities (the “MVLS”) of $50,000,000 for continued listing on The Nasdaq Global Market (the “MVLS Requirement”). …”see in full comparison
“Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations. …”see in full comparison
Full comparison: every changed paragraph (119)
Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.
Covenants under our Second Amended and Restated Bond Agreement and any future debt arrangements may result in the acceleration of outstanding indebtedness and limit the manner in which we operate.
We may underestimate the timing and complexity of successfully integrating KidneyIntelX into the clinical guidelines of new healthcare systems with which we partner.
Modifications to our products may require new 510(k) clearances or PMAs or may require us to recall or cease marketing our products until clearances or approvals are obtained, which could harm our business, financial condition and results of operations.
Success in early clinical study work that we have published and data that we have submitted to the FDA under breakthrough device designation does not ensure that later clinical trials will be successful, and we cannot be sure that the later trials will replicate the results of prior clinical trials and studies.
Long payment cycles of Medicare, Medicaid and/or other third-party payors, or other payment delays, could hurt our cash flows and increase our need for working capital.
We rely on a limited number of suppliers or, with respect to our multiplex biomarker assays, a single supplier, for the assay reagents and associated materials and may not be able to find replacements or immediately transition to alternative suppliers.
If one or more of our laboratory facilities become damaged or inoperable, if we are required to vacate any of our laboratory facilities, or if we are delayed in obtaining or unable to obtain additional laboratory space or delayed in commencing operations in our laboratory facilities, our ability to manufacture our products, pursue our research and development efforts and fulfill our contractual obligations may be jeopardized.
Our long-term strategy depends in part on our ability to improve KidneyIntelX, through versioning, to keep pace with rapid advances in artificial intelligence, technology, medicine and science. If we experience delays or challenges in creating and deploying new versions of KidneyIntelX, our operating results and competitive position could be harmed.
If we are unable to obtain and maintain sufficient patent protection for our products, or if the scope of the patent protection is not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours, and our ability to commercialize our products successfully may be adversely affected.
Diagnostic patents and patent applications involve highly complex legal and factual questions, which, if determined adversely to us, could negatively impact our patent position.
Developments in patent law in the United States and in other jurisdictions could have a negative impact on our business.
If our trademarks and trade names are not adequately protected, we may not be able to build name recognition in our markets of interest.
The trading price of our ADSs and our ordinary shares may be volatile, and you could lose all or part of your investment.
The sale of a substantial number of our total outstanding ADSs or ordinary shares could cause the market price of our ADSs and ordinary shares to drop significantly, even if our business is doing well.
We have announced the delisting of our ADSs from trading on the Nasdaq Capital Market, which could limit investors' ability to make transactions in our ADSs and subject us to additional trading restrictions.
Our ADSs may be traded infrequently and in low volumes, so you may be unable to sell your ADSs at or near the quoted bid prices if you need to sell.
We are an “emerging growth company,” and the reduced disclosure requirements applicable to emerging growth companies may make our ADSs and ordinary shares less attractive to investors.
Securities traded on AIM may carry a higher risk than securities traded on other exchanges, which may impact the value of your investment.
Raising additional capital may cause dilution to holders of our ADSs or ordinary shares or may restrict our operations.
If we are unable to compete successfully with respect to our current or future products, we may be unable to increase or sustain our revenues or achieve profitability.
Our business could be adversely affected by the effects of health epidemics, including the current COVID-19 pandemic, in regions where we or third parties on which we rely have significant manufacturing facilities, concentrations of validation study sites or other business operations.
Our business could be adversely affected by the ongoing financial distress within the U.S. hospital system.
Holders of our American Depository Shares ("ADS")ADSs have fewer rights than our shareholders and must act through the depositary to exercise their rights.
Purchasers of ADSs may be subject to limitations on the transfer of ADSs and the withdrawal of the underlying ordinary shares.
Concentration of ownership of our ordinary shares (including ordinary shares represented by ADSs) among our executive officers, directors and principal shareholders may prevent new investors from influencing significant corporate decisions and matters submitted to shareholders for approval.
Because we do not anticipate paying any cash dividends on ordinary shares (including ordinary shares represented by ADSs) in the foreseeable future, capital appreciation, if any, will be your sole source of gains and you may never receive a return on your investment.
Purchasers of ADSs may not receive distributions on our ordinary shares represented by the ADSs or any value for them if it is illegal or impractical to make them available to holders of ADSs.
Protections found in provisions under the U.K. City Code on Takeovers and Mergers may delay or discourage a takeover attempt, including attempts that may be beneficial to holders of our ADSs and ordinary shares.
As an English public company, certain capital structure decisions will require shareholder approval, which may limit our flexibility to manage our capital structure.
Claims of U.S. civil liabilities may not be enforceable against us.
We identified a material weakness in our internal controls over financial reporting. If we are unable to develop and maintain an effective system of internal controls and procedures required by Section 404(a) of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"), we may not be able to accurately report our financial results in a timely manner.
We expect our expenses to increase in connection with our ongoing activities, particularly as we conduct commercial sales at scale. We expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. We will continue to incur additional costs associated with operating as a company that is both publicly listed on Nasdaqtraded in the United States and admitted to trading on AIM in the United Kingdom, and we expect these costs may increase in connection with our loss of foreign private issuer status.Kingdom.
Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. On September 30, 2024, we announced our intention to raise approximately £11 million gross proceeds through a placing, a subscription and a retail offer of new ordinary shares of the Company at an issue price of £0.09 per new ordinary share to new and existing institutional and other investors. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, curtail or discontinue our research and development programs or any future commercialization efforts. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect, or our operating plan may change as a result of many factors unknown to us. These factors, among others, may necessitate that we seek additional capital sooner than currently planned. In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe we have sufficient funds for our current or future operating plans.
Covenants under our Second Amended and Restated Bond Agreement and any future debt arrangements may result in the acceleration of outstanding indebtedness and limit the manner in which we operate.
The Second Amended and Restated Bond Agreement we entered into with CVI Investments, Inc. ("CVI") in AprilMarch 20222024 (the “Bond Agreement”) contains customary terms and covenants, as well as customary events of default, after which the bonds may be due and payable immediately, including defaults related to payment compliance, material inaccuracy of representations and warranties, covenant compliance, material adverse changes, bankruptcy and insolvency proceedings, judgments against the Company, and change of control or delisting events. For more information regarding the foregoing, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates – Convertible Notes” below.
Servicing these bonds requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial debt.
Servicing these bonds requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial debt. Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. If we are unable to make our quarterly instalmentinstallment payments in cash, we may be forced to issue a significant number of ordinary shares which could dilute existing shareholders. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.
Integration of KidneyIntelX with healthcare providers’ clinical workflow is a core part of our adoption and growth strategy. To assist with KidneyIntelX utility and system-wide integration, we deploy a variety of critical supporting resources to providers, including direct customer service, care navigation and specialist educator functions. Integrated partnerships are designed to allow KidneyIntelX to be deployed directly to patient populations and their treating clinicians in a cost-efficient and timely manner.
Although we carefully study each potential partnership and expend significant time and resources to support the deployment of KidneyIntelX, we may underestimate the time, costs and complexity of integration, and our integration efforts may ultimately be unsuccessful. For example, implementation of KidneyIntelX testing with the VA medical system has been slower than planned due to the complexities in introducing a novel test and integrating its use into the VA system. If we are unable to successfully integrate KidneyIntelX into health systems, including the VA medical system, our business may be adversely affected.
continuing to expand study data for KidneyIntelX.dkd,data, including data demonstrating the clinical utility over the short, intermediate and long term use of KidneyIntelX in different clinical settings;
expanding our manufacturing of commercial supply for KidneyIntelX;
transitioning from selling KidneyIntelX as an LDT to selling the FDA authorized KidneyIntelX.dkd;
achieving market acceptance by patients and the medical community of KidneyIntelX; and negotiating and securing coverage and adequate reimbursement from third-party payors, including Medicare,payors for KidneyIntelX.
Our commercial success could be compromised if we do not obtain and maintain coverage and adequate reimbursement from third-party payors—Medicare, specifically—for KidneyIntelX.
Whether marketed as a Laboratory Developed Test (“LDT”) or a medical device, theThe commercial success of KidneyIntelX and any future products we may develop will depend on the extent to which our customers obtain and maintain coverage and adequate reimbursement from third-party payors, including government payors such as Medicare and Medicaid, managed care organizations and commercial payors.
We received a positive local or national Medicare coverage determination in June 2024. If we do not maintain a positive Medicare coverage determination, we could experience negative consequences including:
We received a CPT code for KidneyIntelX, effective as of October 1, 2019 from the American Medical Association. We also received Medicare national pricing for KidneyIntelX set at $950 per reportable test result, effective from January 2020 through at least 2024. We are currently undergoing a Medicare coverage determination process and have begun receiving payments under an individual claims review, ("ICR"), process. Our success is highly dependent on ultimately receiving a positive local or national Medicare coverage determination. If we do not receive a positive Medicare coverage determination, we could experience negative consequences including:
Accordingly, even though we received Medicare national pricing for KidneyIntelX set at $950 per reportable test result, we may not continue to be reimbursed at that rate. As we enter into partnerships and contracts with healthcare systems and third-party payors, we will establish a reimbursement rate through contractual negotiations.
If we cannot obtain and maintain coverage and adequate reimbursement from private and governmental payors such as Medicare and Medicaid for our current products or new products that we may develop in the future, demand for such products may decline or may not grow as we expect, which could limit our ability to generate revenue and have a material adverse effect on our financial condition, results of operations and cash flow. In order to secure coverage and reimbursement for our products that might be approved for sale, we may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of the product, in addition to the costs required to obtain FDA or other comparable regulatory approvals. Additionally, companies may also need to provide discounts to purchasers, private health plans or government healthcare programs. Nonetheless, products may not be considered medically necessary or cost effective. Further, we may experience delays and interruptions in the receipt of payments from payors due to missing documentation and/or other issues, which could cause delay in collecting our revenue.
In some foreign countries, the proposed pricing for a product must be approved before it may be lawfully marketed. The requirements governing pricing vary widely from country to country. For example, the European Union (the "EU"), provides options for its member states to restrict the range of products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. To obtain reimbursement or pricing approval, some of these countries may require the completion of clinical trials that compare the cost effectiveness of a particular product to the current standard of care. A Member State may approve a specific price for the product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the product on the market. There can be no assurance that any country that has price controls or reimbursement limitations for diagnostic products will allow favorable reimbursement and pricing arrangements for any of our products. Historically, products launched in the EU do not follow price structures of the United States and generally prices tend to be significantly lower.
The coverage and reimbursement market may be additionally impacted by future legislative changes. There are increasing efforts by governmental and third-party payors in the United States and abroad to cap or reduce healthcare costs which may cause such organizations to limit both coverage and the level of reimbursement for newly approved products and, as a result, they may not cover or provide adequate payment for our products. Specifically, there have been several recent U.S. presidential executive orders. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug and medical device pricing, reduce the cost under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies. For example, based on a recent executive order, the Biden administration expressed its intent to pursue certain policy initiatives to reduce drug prices. We expect to experience pricing pressures in connection with the sale of any of our products due to the trend toward managed healthcare, the increasing influence of health maintenance organizations, cost containment initiatives and additional legislative changes.
Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug and medical device pricing, reduce the cost under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies. For example, based on a recent executive order, the Biden administration expressed its intent to pursue certain policy initiatives to reduce drug prices. We expect to experience pricing pressures in connection with the sale of any of our products due to the trend toward managed healthcare, the increasing influence of health maintenance organizations, cost containment initiatives and additional legislative changes.
We must maintain CLIA compliance and certification to be eligible to bill for clinical laboratory services provided to federal health care program beneficiaries. We have received CLIA Certificates of Compliance for our Utah, Florida and New York laboratorieslaboratory and CLIA Certificate of Registration for our Florida laboratory Toto renew our CLIA certificates, we are subject to survey and inspection every two years to assess compliance with program standards. We also may be subject to additional unannounced inspections. Laboratories performing high complexity testing are required to meet more stringent requirements than laboratories performing less complex tests. In addition, a laboratory that is certified as “high complexity” under CLIA may develop, manufacture, validate and use LDTs. CLIA requires analytical validation including accuracy, precision, specificity, sensitivity and establishment of a reference range for any LDT used in clinical testing. The regulatory and compliance standards applicable to the testing we perform may change over time, and any such changes could have a material effect on our business.
We cannot predict whether future health care initiatives will be implemented at the federal or state level, or how any future legislation or regulation may affect us. The expansion of government’s role in the U.S. health care industry, and changes to the reimbursement amounts paid by Medicare and other payors for our current assays, whether marketed as an LDT or a medical device, and our planned future assays, may reduce our profits, if any, and have a materially adverse effect on our business, financial condition, results of operations and cash flows. Moreover, Congress has proposed on several occasions to impose a 20% coinsurance payment requirement on patients for clinical laboratory tests reimbursed under the Medicare Clinical Laboratory Fee Schedule, which would require us to bill patients for these amounts. In the event that Congress werewas to ever enact such legislation, the cost of billing and collecting for our products, once commercialized, could often exceed the amount actually received from the patient.
In the United States, federal, state, and local governments have enacted numerous data privacy and security laws and regulations, including data breach notification laws, state and federal health information privacy laws, personal data privacy laws, and federal and state consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), and other similar laws (e.g., wiretapping laws).
In the United States, federal, state, and local governments have enacted numerous data privacy and security laws and regulations, including data breach notification laws, state and federal health information privacy laws, personal data privacy laws, and federal and state consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), and other similar laws (e.g., wiretapping laws). In addition, we may obtain health data from third parties (including research institutions from which we obtain clinical trial data) that is subject to privacy and security requirements under HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 ("HITECH"), and their respective implementing regulations. Depending on the facts and circumstances, we could be subject to civil, criminal, and administrative penalties if we knowingly obtain, use, or disclose individually identifiable protected health information in a manner that is not authorized or permitted by HIPAA. In addition, the California Consumer Privacy Act of 2018, as amended by the California Privacy Rights Act of 2020 ("CPRA"), (collectively, the CCPA), applies to personal data of consumers, business representatives, and employees, and requires businesses to provide specific disclosures in privacy notices and honor requests of California residents to exercise certain privacy rights. The CCPA provides for civil penalties of up to $7,500 per violation and allows private litigants affected by certain data breaches to recover significant statutory damages. Further, the CPRA expands the CCPA’s requirements, including by adding a new right for individuals to correct their personal data and establishing a new regulatory agency to implement and enforce the law. Although the CCPA exempts some data processed in the context of clinical trials, the CCPA increases compliance costs and potential liability with respect to other personal data we maintain about California residents. Other states, such as Virginia, Colorado, Utah, and Connecticut have also passed comprehensive privacy laws, and similar laws are being considered in several other states, as well as at the federal and local levels. While these states, like the CCPA, also exempt some data processed in the context of clinical trials, these developments may further complicate compliance efforts, and increase legal risk and compliance costs for us and the third parties upon whom we rely.
We may at times fail (or be perceived to have failed) in our efforts to comply with our data privacy and security obligations. Moreover, despite our efforts, our personnel or third parties on whom we rely upon may fail to comply with such obligations, which could negatively impact our business operations. If we or the third parties on which we rely fail, or are perceived to have failed, to address or comply with applicable data privacy and security obligations, we could face significant consequences, including but not limited to: government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar); litigation (including class-action claims) and mass arbitration demands; additional reporting requirements and/or oversight; bans on processing personal data; and orders to destroy or not use personal data. In particular, plaintiffs have become increasingly more active in bringing privacy-related claims against companies, including class claims and mass arbitration demands. Some of these claims allow for the recovery of statutory damages on a per violation basis, and, if viable, carry the potential for monumental statutory damages, depending on the volume of data and the number of violations. Any of these events could have a material adverse effect on our reputation, business, or financial condition, including but not limited to: loss of customers; inability to process personal data or to operate in certain jurisdictions; limited ability to develop or commercialize our products; expenditure of time and resources to defend any claim or inquiry; adverse publicity; or substantial changes to our business model or operations.
In October 2018, we, Mount Sinai and NPLUS1 Singer Advisory LLP ("Singer"), entered into a Relationship Agreement ("the Relationship Agreement"), to regulate the terms of the relationship between the Company and Mount Sinai and to ensure that we can operate independently of Mount Sinai, pursuant to which, among other things, Mount Sinai has the right to appoint one member to our boardBoard of directorsDirectors and Mount Sinai has agreed to not take any action intended to prevent our boardBoard of directorsDirectors from operating independently of Mount Sinai. The Relationship Agreement is filed withas an exhibit to this Annual Report on Form 10-K as Exhibit 10.18 and is incorporated herein by reference, and the foregoing description of the Relationship Agreement is qualified in its entirety by reference thereto.
We have also entered into partnerships with health systems such as Atrium Health, Wake Forest Baptist Health and Wake Forest School of Medicine to implement KidneyIntelX testing as part of their clinical care models. If we do not continue to enter into partnerships with health systems at the rate and on the scale that we anticipate, or if these existing partnerships are terminated or do not result in the rate and quantity of KidneyIntelX testing that we anticipate, our business could be harmed.
Management's Discussion & Analysis (MD&A)
New heading “Impairment Loss on Property, Equipment and Other Long-lived Assets”
New heading “Impairment Loss on Property, Equipment and Other Long-Lived Assets”
New heading “October 2024 Proposed Debt Restructurings”
Largest changes
“Based upon the debt restructurings, Nasdaq delisting, OTCQX quotation and re-achieving foreign private issuer status discussed above, we are projecting that our over-all cash burn rate can be reduced to $0.75 million or less per month by the end of our fiscal year ending June 30, 2025.”see in full comparison
“The Bond Agreement contains a negative pledge covenant that provides that for so long as the principal amount outstanding under the Bonds is equal to or exceeds U.S.$3,000,000, the Company shall not, and will procure that none of its subsidiaries, will, create or permit to subsist any Security Interest (as defined in the Bond Agreement), other than a Permitted Security Interest (as defined in the Bond Agreement), upon the whole or any part of its present or future undertaking, assets or revenues (including any uncalled capital) to secure any Financial Indebtedness (as defined in the Bond …”see in full comparison
“Impairment Loss on Property, Equipment and Other Long-lived Assets”see in full comparison
“Impairment Loss on Property, Equipment and Other Long-Lived Assets”see in full comparison
Unfavorable conditions in the economy in the United States and abroad may negatively affect the growth of our business and our results of operations. For example, macroeconomic events, includingsee in full comparisontheconflictsCOVID-19inpandemic,Ukraine-Russiarisingand Middle East, increased inflation rates and U.S. and U.K. interestrates and the Russia-Ukraine war,rates, have led to economic uncertainty globally. The effect of macroeconomic conditions may not be fully reflected in our results of operations until future periods. If, however, economic uncertainty increases or the global economy worsens, our business, financial condition and results of operations may be harmed. For further discussion of the potential impacts of macroeconomic events on our business, financial condition, and operating results, see the section titled “Risk Factors.”
Full comparison: every changed paragraph (75)
The following management’s discussion and analysis of financial condition and results of operations describes the principal factors affecting our results of operations, liquidity, capital resources and contractual cash obligations. This discussion should be read in conjunction with “Item 1A. Risk Factors”, the accompanying audited consolidated financial statements and related notes thereto, as well as other cautionary statements and risks described elsewhere in this Annual Report on Form 10-K. For the discussion of the financial condition and results of operations for the year ended June 30, 20222023 compared to the year ended June 30, 2021,2022, please refer to “Itemthe 5.information Operatingcontained under Management’s Discussion and Analysis of Financial ReviewCondition and Prospectus—Financial operations overview”, “—Consolidated resultsResults of operations”Operations and “—Liquidity"Risk andFactors" capital resources” includedcontained in the Company’s Annual Report on Form 20-F10-K for the year ended June 30, 2022,2023, which was filed with the SEC, on OctoberSeptember 31,30, 2022.2023.
Renalytix is focused on providing doctors around the world with a safe, reliable and effective tool to identify which patients are or are not in danger of losing significant kidney function and falling into kidney failure and may require long-term dialysis or a kidney transplant. Chronic kidney disease is one of the largest urgent medical needs, globally affecting an estimated 850 million people, and is responsible for an unsustainable and growing societal cost burden.
We believe an important part of the answer is preventative medicine and the ability to identify individuals with advancing chronic kidney disease early, where new drug therapies and clinical strategies have the optimal chance to stop uncontrolled disease progression.
At Renalytix, we developed kidneyintelX.dkd, the first U.S. Food and Drug Administration ("FDA") authorized in vitro prognostic test that uses an artificial intelligence-enabled algorithm to aid in assessment of the risk of progressive decline in kidney function. The test is designed to predict early in the progression of kidney disease who is at risk for significant sustained decline in kidney function. Prognostic tests, such as kidneyintelX.dkd, are not intended for diagnosing any disease or for monitoring disease progression or the effect of any therapeutic product. Rather, prognostic tests are intended to be used in conjunction with other clinical and diagnostic findings and consistent with professional standards of practice, including information obtained by alternative methods, and clinical evaluation, as appropriate. When used as intended, potential interventions can be considered early, ideally before major damage is done and when treatments can be most effective. KidneyintelX.dkd is part of a family of clinical tests being developed from the KidneyIntelX technology platform developed using technology licensed from the Icahn School of Medicine at Mount Sinai in New York, the Joslin Diabetes Center in Boston and under development through U.S. and international collaborations.
We are deploying KidneyIntelX to patient populations with DKD on a regional basis through partnerships with healthcare systems and insurance payors that provide coverage to those healthcare systems’ patients. In June 2024 , Medicare issued a final Local Coverage Determination (“LCD”) for the Company’s kidneyintelX.dkd testing and is effective for dates of service on or after August 1, 2024. The established Medicare price for kidneyintelX.dkd is $950 per test. Distinct CPT Codes (Common Procedural Terminology Codes) have been established for kidneyintelX.dkd and is published in CMS’ 2024 Clinical Lab Fee Schedule. The LCD specifies coverage for use of kidneyintelX.dkd for patients with diagnosed Type 2 diabetes and Stage 1-3b Chronic Kidney Disease is reasonable and necessary. The LCD was issued by National Government Services (“NGS”). NGS is a subsidiary of Elevance Health, Inc. (previously Anthem, Inc.), a Medicare Administrative Contractor responsible for claims processing for testing performed in the Company’s New York City laboratory.
We 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 EHR systems to generate a unique patient risk score. This patient risk score enables prediction of progressive kidney function decline in 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, an LDT initially indicated for adult patients with DKD. KidneyIntelX has already been granted a 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 FDA. Building on these 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.
We plan to deploy KidneyIntelX to patient populations with DKD on a regional basis through partnerships with healthcare systems and insurance payors that provide coverage to those healthcare systems’ patients. Following the receipt of national Medicare pricing at $950 per reportable test for KidneyIntelX in January 2020, we are actively pursuing Medicare coverage and a determination under the MolDX Program. In March 2020, we announced that our application for a Medicare PTAN was approved by Noridian Healthcare Solutions, the regional Medicare Administrative Contractor with responsibility for overseeing facilities and providers located in the western United States, and, as a result, we are now qualified as a provider and can bill for services provided to patients with Medicare and Medicaid health insurance coverage in the United States. In addition, in October 2019, Capital District Physicians’ Health Plan, Inc., a physician-led health insurance payor in New York, adopted coverage determination policies that provide insurance for certain patients with DKD who are tested with KidneyIntelX. We are working with additional private insurance payors and healthcare providers to expand insurance coverage for KidneyIntelX nationwide, which we believe will be accelerated by our recent achievement of a CPT code and national Medicare pricing.
Since our inception in March 2018, we have focused primarily on organizing and staffing our company, raising capital, developing the KidneyIntelX platform, conducting clinical validation studies for KidneyIntelX, establishing and protecting our intellectual property portfolio and commercial laboratory operations, pursuing regulatory approval and developing our reimbursement strategy. To date, we have not generated any revenue from the sales of KidneyIntelX tests. We have funded our operations primarily through equity financings. In November 2018, we sold 18.4 million of our ordinary shares in our initial public offering the"IPO"), and our ordinary shares were admitted to trading on AIM, a market operated by the London Stock Exchange, resulting in gross proceeds of approximately $29.1 million. Prior to our IPO on the London Stock Exchange, EKF provided debt financing, referred to as our related-party note payable. All borrowings with EKF were repaid in their entirety upon completion of the equity offering in November 2018.financings.
In July 2019, we sold an additional 5.6 million of our ordinary shares in a secondary offering for approximately $17.3 million. In July 2020, we closed our global offering and listed our ADSs on the Nasdaq Global Market, in which we issued and sold 12.6 million ordinary shares which converted into 6.3 million ADSs at a public offering price of $13.50 per share. In addition, we completed a concurrent private placement in Europe and other countries outside of the United States of 30,000 ordinary shares at a price of £5.37 per ordinary share (at an exchange rate of GBP:USD 1:1.2563). We received gross proceeds of approximately $85.1 million as a result of the offering.
During fiscal year 2023,2024, we returned to conducting business as usual after the COVID-19 pandemic, with necessary or advisable modifications to employee travel and employee work locations. We continuecontinued to monitor the situation related to COVID-19 and may take actions that alter our business operations to the extent 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.
Unfavorable conditions in the economy in the United States and abroad may negatively affect the growth of our business and our results of operations. For example, macroeconomic events, including theconflicts COVID-19in pandemic,Ukraine-Russia risingand Middle East, increased inflation rates and U.S. and U.K. interest rates and the Russia-Ukraine war,rates, have led to economic uncertainty globally. The effect of macroeconomic conditions may not be fully reflected in our results of operations until future periods. If, however, economic uncertainty increases or the global economy worsens, our business, financial condition and results of operations may be harmed. For further discussion of the potential impacts of macroeconomic events on our business, financial condition, and operating results, see the section titled “Risk Factors.”
In July 2017, EKF,EKF entered into the Joslin Agreement,Agreement with Joslin. In October 2018, we purchased all of EKF’s rights, title, interest and benefit in the Joslin Agreement in exchange for the issuance of 15.4 million of our ordinary shares.
Pursuant to the Joslin Agreement and the related assignment from EKF, we obtained a worldwide, royalty- bearing,royalty-bearing, exclusive license under any patents and any related know-how of Joslin related to the patent application filed with respect to the Joslin IP to make, have made, use, offer for sale and sell licensed products covered by claims in the Joslin IP, and to perform, practice offer for sale and sell certain licensed processes related to the Joslin IP. We are obligated to use commercially reasonable efforts in connection with the development and commercialization of the licensed products and licensed processes, including in accordance with a development plan.
During the fiscal yearyears ended June 30, 2024 and 2023, we continued to deploy KidneyIntelX to patient populations with DKD, on a regional basis through partnerships with healthcare systems and insurance payors that provide coverage to those healthcare systems’ patients. If these strategic partners fail to meet their key contractual obligations or to purchase KidneyIntelX tests, thatit will likely have an adverse effect on us and our ability to achieve our commercial objectives, potentially including the attainment of sales volumes leading to profitability.
Additionally, during the fiscal year ended June 30, 2023, we recognized services revenue upon completion of two services contracts, including our project with AstraZeneca. We plan to continue to pursue further collaborations with pharmaceutical companies with the goal of improving guideline-based standard-of-care for optimal utilization of existing and novel therapeutics using the KidneyIntelX testing platform and care management software.
continuing to expand study data for KidneyIntelX, including data demonstrating the clinical utility over the short, intermediate and long termlong-term use of KidneyIntelX in different clinical settings;
Impairment Loss on Property, Equipment and Other Long-lived Assets
On a quarterly basis, the respective carrying value of non-financial assets are assessed for impairment indicators and, if ultimately considered impaired, are adjusted and written down to their fair value, as estimated based on consideration of external market participant assumptions.
In October 20202020, the Company completed a spin off VericiDX,of VericiDx, a developer of advanced clinical diagnostics for organ transplanttransplant, and retained 9,831,681 ordinary shares of VericiDX.VericiDx. The Company accounts for the investment in VericiDx equity securities at fair value, with changes in fair value recognized in the incomeconsolidated statement.statements of operations and comprehensive loss. In March 2024, the Company sold 750,000 ordinary shares of VericiDx for net proceeds of $0.1 million and a realized loss of $0.1 million. In May 2024, the Company sold 250,000 ordinary shares of VericiDx for net proceeds of $0.02 million and a realized loss of $0.04 million. As of June 30, 2024, the Company owns 8,831,682 shares of VericiDx.
We elected to account for the bonds at fair value with qualifying changes in fair value recognized through the consolidated statements of operations and comprehensive loss until the notes are settled.
Other Income (Expense)
Other income relates to interest income earned on our cash deposits, grant income earned for work performed under the Horizon Europe grant and other services provided to academic institutions or pharmaceutical companies.
Other income primarily relates to income realized on the dissolution of Kantaro, and interest income earned on our cash deposits.
During the year ended June 30, 2024, we recognized $2.1 million of revenue related to sales of KidneyIntelX and $0.14 million of revenue related to services performed for Eli Lilly and University Medical Center Gronigen. During the year ended June 30, 2023, we recognized $3.1 million of revenue related to sales of KidneyIntelX and $0.3 million of revenue of pharmaceutical services revenue related to services performed for AstraZeneca and University Medical Center Gronigen. DuringThe the year ended June 30, 2022, we recognized $2.7$1.1 million revenue related to sales of KidneyIntelX and $0.2 million of revenue of pharmaceutical services revenue related to services performed for AstraZeneca. The $0.4 million increasedecrease in revenue was primarily driven by an increasedecrease in KidneyIntelX billable testing volumes.volumes due to the transition to a commercial billing structure under our arrangement with Mount Sinai.
During the year ended June 30, 2023,2024, we recognized cost of revenue of $2.7$2.1 million primarily attributable to KidneyIntelX testing, including labor, lab consumables and sample collection costs related to revenue generating activities. We recognized $2.1$2.7 million of cost of revenue for the year ended June 30, 2022.2023. The $0.6$0.5 million increasedecrease in cost of revenue was primarily driven by ana increasedecrease in KidneyIntelX testing volumes.
Research and development expenses decreased by $0.4$5.0 million from $14.6$14.3 million for the year ended June 30, 20222023 to $14.3$9.3 million for year ended June 30, 2023.2024. The decrease was attributable to a $2.1 million decrease related to consulting and professional fees, $0.3$2.7 million decrease in labcompensation suppliesand purchases,related offsetbenefits, by a $1.6$2.5 million increasedecrease related to external R&D projects and studies with Mount Sinai,Sinai and Wake ForestForest, $0.2 million decrease in lab supplies purchases, offset by $0.4 million increase related to consulting and Joslinprofessional Diabetesfees and $0.4$0.1 million increase in other miscellaneous expenses.
General and administrative expenses decreased $10.9$8.9 million from $39.5 million for the year ended June 30, 2022 to $28.7 million for the year ended June 30, 2023.2023 to $19.8 million for the year ended June 30, 2024. The decrease was driven by our previously announced cost cutting measures and was due to a $4.8 million decrease in consulting and professional fees, $2.8$6.7 million decrease in compensation and related benefits, including share-based payments, due to decreased headcount, $2.0$1.3 million decrease in insurance costs, $0.7$0.6 million decrease in marketing and public relations, $0.5 million decrease in other operating expenses, and $0.4 million decrease in IT costs, andoffset $0.2by a $0.6 million decreaseincrease in otherconsulting operatingand expenses.professional fees.
In connection with the delisting of our ADSs from Nasdaq effective on or about October 7, 2024, and our ADSs becoming quoted on the OTC Markets’ OTCQX tier effective on or about October 8, 2024, we anticipate that we will re-qualify as a foreign private issuer (“FPI”) at our next testing date for FPI status. As a foreign private issuer, we expect annual cost savings of up to $1.5 million from a reduction in regulatory filing costs, professional fees (audit, legal, and consulting), listing fees, insurance and other administrative costs.
Impairment Loss on Property, Equipment and Other Long-Lived Assets
As part of our cost saving plan, we consolidated lab operations which resulted in a $0.6 million impairment of property and equipment at our Utah and Florida labs and a $0.1 million impairment of the Utah right-of-use asset for the year ended June 30, 2024. There was no impairment loss on property, equipment and other long-lived assets in the year ended June 30, 2023.
Foreign Currency Gain (Loss)
During the year ended June 30, 2024, we recognized a foreign currency gain of $0.2 million due to exchange rate fluctuations on transactions denominated in a currency other than our functional currency. During the year ended June 30, 2023, we recognized a foreign currency gain of $0.4 million due to exchange rate fluctuations on transactions denominated in a currency other than our functional currency and remeasurement of intercompany payables/receivables.
During the year ended June 30, 2023, we recognized a foreign currency gain of $0.4 million due to exchange rate fluctuations on transactions denominated in a currency other than our functional currency. During the year ended June 30, 2022, we recognized a foreign currency gain of $9.7 million due to exchange rate fluctuations on transactions denominated in a currency other than our functional currency and remeasurement of intercompany payables/receivables. The decrease in foreign currency gain from the prior year was primarily driven by settlement of foreign currency denominated intercompany payables/receivables during the year ended June 30 2023 which reduced the foreign currency gain driven by remeasurement of the intercompany balances.
We account for the investment in VericiDx equity securities at fair value, with changes in fair value recognized in the incomeconsolidated statement.statement of operations and comprehensive loss. During the year ended June 30, 2024, we recorded a loss of $0.5 million to adjust the VericiDx investment to fair value. During the year ended June 30, 2023, we recorded a loss of $1.3 million to adjust the VericiDx investment to fair value. During the year ended June 30, 2022, we recorded a loss of $5.9 million to adjust the VericiDx investment to fair value.
We elected to account for the bonds at fair value with qualifying changes in fair value recognized through the consolidated statements of operations and comprehensive loss until the notes are settled. This excludes fair value adjustments related to instrument-specific credit risk, which areis recognized in OCI.Other Comprehensive Income (OCI). For the year ended June 30, 2023,2024, we recorded a loss of $3.1$3.8 million to adjust the bonds to fair value. For the year ended June 30, 2022,2023, we recorded a gainloss of $4.0$3.1 million to adjust the bonds to fair value. The change in fair value of the bond was driven by a decrease in term to maturity, increase in risk free rate and change in stock price.
Other Income (Expense)
During the year ended June 30, 2024, we realized $0.2 million of income which included $0.2 million of interest income earned on our cash deposits and $0.2 million of grant income, offset by $0.1 million of realized loss on the sale of VericiDx shares. During the year ended June 30, 2023, we realized $0.7 million of income related $0.2 million of income related to the dissolution of Kantaro, $0.3 million of income for refunds from Citibank, and $0.1 million interest income earned on our cash deposits.
During the year ended June 30, 2023, we realized $0.2 million of income related to the dissolution of Kantaro, $0.3 million of income for refunds from Citibank, and $0.1 million interest income earned on our cash deposits. During the year ended June 30, 2022, we realized $0.1 million of income on the reduction of the Kantaro liability for future services to be performed for the joint venture as well as $0.01 million interest income earned on our cash deposits.
On March 12, 2024, we entered into a Placing Agreement (the “Placing Agreement”) with Stifel Nicolaus Europe Limited (the “Bookrunner” or “Stifel”), pursuant to which we agreed to allot and issue new ordinary shares, nominal value £0.0025 per ordinary share (the “Placing Shares”) to certain investors (the “Placees”) in an unregistered offering (the “Private Placement”), up to an aggregate of 46,801,872 ordinary shares, in two tranches. We allotted and issued 19,986,031 Placing Shares at a placing price of £0.20 per Placing Share (the “First Tranche”), which closed on March 14, 2024. Subsequent to obtaining the required shareholder approval, we allotted and issued 26,815,841 Placing Shares at a placing price of £0.20 per Placing Share (the “Second Tranche”), which closed on April 24, 2024. We received aggregate gross proceeds of approximately $12 million from the closing of the First Tranche and Second Tranche, before deducting fees and commissions to the Bookrunner and other offering expenses payable by us.
On April 5, 2024, we entered into a securities purchase agreement (the “DB Capital Purchase Agreement”) with an institutional investor pursuant to which we agreed to issue and sell in a registered direct offering (the “Registered Direct Offering”) 2,666,667 ordinary shares, nominal value £0.0025 per share. Pursuant to the DB Capital Purchase Agreement, we also granted the investor an option to purchase up to 7,811,696 additional ordinary shares at the offering price of $0.375 per share. The purchase price of each ordinary share is $0.375. On April 18, 2024, the investor partially exercised the option to purchase 1,333,334 ordinary shares. The gross proceeds to the Company from the Registered Direct Offering were approximately $1.5 million, before deducting offering expenses payable by the Company. The shares were offered by the Company pursuant to an effective shelf registration statement on Form S-3 (File No. 333-274733) that was filed with the SEC on September 28, 2023 and became effective on October 6, 2023, including the base prospectus contained therein, and a related prospectus supplement dated as of April 5, 2024 filed with the SEC.
On September 30, 2024, we announced our intention to raise approximately £11 million gross proceeds through a placing, a subscription and a retail offer of new ordinary shares of the Company at an issue price of £0.09 per new ordinary share to new and existing institutional and other investors. There can be no assurance that we will complete this fundraising or on the terms and in the timing expected.
October 2024 Proposed Debt Restructurings
The Company announced a proposed fundraising (the “Fundraise”) on September 30, 2024. In that announcement, the Company announced a proposed revision to the terms of its £8.7 million amortizing senior convertible bond (the “Convertible Bond”) held by a fund advised by Heights Capital Ireland LLC (the "Convertible Bond Investor"), subject to the closing of the fundraising which we expect to be on or around October 9, 2024. Under the proposed terms, the Convertible Bond would be repaid and restructured as follows (depending on the specific amount of capital committed in the financing): (i) £2.9 million of the Convertible Bond would be capitalized via issue to the Convertible Bond Investor of approximately 32.2 million ordinary shares (the “Heights Conversion Shares”), at the per share price (the “Issue Price”) being offered in the Fundraise; (ii) in the event that the Company were to raise more than £12.5 million (net of costs) through the Fundraise, the next £2.5 million raised in the Fundraise (above the £12.5 million (net of costs)) would be payable to the Convertible Bond Investor (such amount, the “Tranche 2 Payment”); and (iii) the balance of the Convertible Bond will be restructured as a new unsecured convertible bond (the “New Convertible Bond”). It is currently expected that the Heights Conversion Shares to be issued to the Convertible Bond Investor will represent 9.9% of the Company’s enlarged issued share capital. The Convertible Bond Investor will be subject to a 6-month lock-in and, in the event that the Tranche 2 Payment exceeds £2 million, the Convertible Bond Investor will agree to extend its lock-in period for a further 3 month period.
The New Convertible Bond will accrue interest at a rate of 5.5% per annum if paid in cash or 7.5% per annum if rolled into the principal amount, at the discretion of the Company. The New Convertible Bond will have a maturity date of July 31, 2029 and may not be converted before April 1, 2026 ,except in the event that the Company undertakes a further qualifying equity issuance in the future (which would exclude securities properly issued to employees and other staff of the Company for bona fide remuneration and incentivisation purposes). The New Convertible Bond can be redeemed as follows:
at any time from 1 April 2026, a holder of the New Convertible Bond can redeem any or all of the New Convertible Bond at a conversion price (subject to customary adjustment provisions) equal to 250% of the Issue Price;
in the event of a change of control of the Company or if the ordinary shares cease to be admitted to trading on AIM or the Main Market of the London Stock Exchange (or if dealing in the ordinary shares is suspended, other than in connection with a corporate reorganisation, for a period of 60 dealing days or more) or in the event that less than 20% of the Company’s issued share capital (including ADSs) comprises free float, a holder of the New Convertible Bond can require the Company to redeem all but not some of their New Convertible Bond at a conversion price equal to 120% of the principal amount of the New Convertible Bond (together with accrued but unpaid interest); and at any time, the Company can elect to redeem all, but not some, of the principal amount of the New Convertible Bond at a price equal to the greater of (i) the principal amount and all accrued but unpaid interest and (ii) the “parity value” of the New Convertible Bond. For this purpose, the “parity value” is the product of: (a) such number of ordinary shares as would have been issued on conversion and the mean volume weighted average price of an ordinary share on the ten consecutive dealing days preceding the date on which such redemption is to occur.
Additionally, an accounts payable balance with a professional adviser of approximately $850,000 (the “Advisor Accounts Payable Balance”) has been restructured such that 50% of the outstanding balance ($425,000) will convert to equity at the Issue Price. The remaining 50% will be repaid as follows: (i) $325,000 will be converted to a long term unsecured note (the “Advisor Loan Note”), bearing interest at 5% per annum, which will be rolled into the principal amount of the Advisor Loan Note. The principal and interest of the Advisor Loan Note will be repaid on the earlier of: (i) 5 years from the issuance of the Advisor Loan Note; or (ii) such earlier time as the Company is acquired by another company. Additionally, the Company has the right to redeem the Advisor Loan Note at any time without prepayment penalties.
The remaining balance will be settled in cash from operations following the closing of the Fundraise.
Additionally, other creditors with accounts payable having an aggregate value of approximately £650,000 have agreed to write-off their balances (the “Creditor Write-offs”).
The Company believes that the restructuring of the Convertible Bond and the Advisor Accounts Payable Balance, the creation of the New Convertible Bond and the Advisor Loan Note and the Creditor Write-offs, along with some ancillary debt restructuring, will substantially reduce the Company’s monthly cash burn and the Company estimates that this will remove more than 80% of the total forecasted cash obligations of the Company over the next 3 years (or approximately £485,000 per month).
The ordinary shares issued pursuant to the debt restructuring described in this section are expected to equate to approximately 36 million ordinary shares and are expected to be issued on or about October 30, 2024, subject to the passing of resolutions at the general meeting of the Company’s shareholders (the “General Meeting”), completion of the allotment and issue of the Non-EIS/VCT placing shares will take place after the General Meeting, and application to the London Stock Exchange for admission of such ordinary shares.
To date, we have primarily financed our operations through equity and debt financings. As of June 30, 2023,2024, we had cash of $24.7$4.7 million. TheWe Company hashave incurred recurring losses and negative cash flows from operations since inception and had an accumulated deficit of $178.3$211.8 million as of June 30, 2023.2024. TheWe Company anticipatesanticipate incurring additional losses until such time, if ever, that itwe can generate significant sales of KidneyIntelX or any future products currently in development. As a result of our losses and our projected cash needs, substantial doubt exists about the Company’sour ability to continue as a going concern within 12 months after the date that the financial statements are issued.
Substantial additional capital will be necessary to fund the Company'sour operations, expand itsour commercial activities and develop other potential diagnostic relateddiagnostic-related products. TheWe Company plansplan to finance our cash needs through a combination of revenue from sales, securities offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements with third parties. For example, in February 2023, we entered into securities purchase agreements with certain investors to issue and sell an aggregate of 18,722,960 ordinary shares (including in the form of ADSs) for a purchase price of £0.90 per ordinary share ($2.17 per ADS) and an aggregate purchase price of $20.3 million. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our shareholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our shareholders.
Going Concern
We have limited sources of revenue to provide incoming cash flows to sustain our future operations. As outlined above, our ability to pursue our planned business activities is dependent upon our successful efforts to raise additional capital and the effectiveness of our cost-cutting and other capital preservation measures. Without additional financing, we expect our cash and cash equivalents as of June 30, 2024, combined with additional cost reduction options available, will be sufficient to fund our operating expenses and capital expenditure requirements into November 2024. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect or may fail in our efforts to enact additional cost reduction options. Furthermore, our operating plan may change, and we may need additional funds sooner than planned in order to meet operational needs and capital requirements for product development and commercialization.
On September 30, 2024, we announced a commitment from a number of existing and new investors to purchase equity securities from the Company in the aggregate gross amount of approximately £11 million. This equity financing is expected to close in two or more tranches beginning on October 9, 2024. This incremental equity capital is expected to fund the Company for at least the next 12 months. The funding has been committed but not yet received at the time of this filing.
These factors raise substantial doubt regarding our ability to continue as a going concern. Our consolidated financial statements have been prepared on a going concern basis, which implies that we will continue to realize our assets and discharge our liabilities in the normal course of business. Our financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.
During the year ended June 30, 2023,2024, net cash used in operating activities was $34.1$30.1 million and was primarily attributable to our $45.6$33.5 million net loss as well as $5.8$6.9 million of noncash charges and $5.7$3.5 million net change in our operating assets and liabilities. Noncash charges were primarily related to $2.9 million in share-based compensation expense, $2.0$3.5 million fair value adjustment related to the bonds, $1.3$1.7 million in share-based compensation expense, $0.7 million of loss on write off of assets, $0.5 million fair value adjustment on our VericiDx investment, $0.5and $0.4 million of depreciation and amortization expense and $0.1 million of non cash lease expense, offset by $1.0 million in foreign exchange gains.expense. The change in our operating assets and liabilities was primarily attributable to $4.2$4.4 million increasedecrease in accrued expenses and other current liabilities, $1.5offset by $0.9 million increase in accounts receivables, prepaids and other current assets.
During the year ended June 30, 2023, net cash used in operating activities was $34.1 million and was primarily attributable to our $45.6 million net loss adjusted for $5.8 million of noncash charges and $5.7 million net change in our operating assets and liabilities. Noncash charges were primarily related to $2.9 million in share-based compensation expense, $2.0 million fair value adjustment related to the bonds, $1.3 million fair value adjustment on our VericiDx investment, $0.5 million of depreciation and amortization expense and $0.1 million of noncash lease expense, offset by $1.0 million in foreign exchange gains. The change in our operating assets and liabilities was primarily attributable to a $4.2 million increase in accrued expenses and other current liabilities and a $1.5 million increase in accounts receivables, prepaids and other current assets.
During the year ended June 30, 2022, net cash used in operating activities was $45.9 million and was primarily attributable to our $45.3 million net loss as well as $0.2 million net change in our operating assets and liabilities and $0.5 million of noncash charges. The change in our operating assets and liabilities was primarily attributable to $1.8 million increase in accounts receivables, prepaids and other current assets, offset by a $1.6 million increase in accrued expenses and other current liabilities. Noncash charges were primarily related to $7.3 million in foreign exchange gains, $3.9 million fair value adjustment related to the bonds, which were offset by $4.6 million in share-based compensation expense, $5.6 million unrealized loss on the company’s shares of VericiDx and a $0.5 million increase in depreciation and amortization.
What changed in the latest 10-Q
Risk Factors
Removed heading “Our review of potential strategic alternatives may not result in the approval or completion of any specific transaction or outcome, and the process of reviewing strategic alternatives or the outcome could adversely affect our business, financial condition, operations and stock price.”
Removed heading “Protections found in provisions under the United Kingdom City Code on Takeovers and Mergers may delay or discourage a takeover attempt, including attempts that may be beneficial to holders of our Ordinary Shares and ADSs.”
Removed heading “If we fail to meet all applicable requirements of Nasdaq and Nasdaq determines to delist our ADSs, the delisting could adversely affect the market liquidity of our ADSs and the market price of our ADSs could decrease.”
Removed heading “We may be required to register with the SEC as an “investment company” in accordance with the Investment Company Act of 1940.”
Largest changes
“If we fail to meet all applicable requirements of Nasdaq and Nasdaq determines to delist our ADSs, the delisting could adversely affect the market liquidity of our ADSs and the market price of our ADSs could decrease.”see in full comparison
“If we are unable to satisfy the Nasdaq criteria for continued listing, our ADS would be subject to delisting. A delisting of our ADS could negatively impact us by, among other things, reducing the liquidity and market price of our ADS; reducing the number of investors willing to hold or acquire our ADS, which could negatively impact our ability to raise equity financing; decreasing the amount of news and analyst coverage of us; and limiting our ability to issue additional securities or obtain additional financing in the future. …”see in full comparison
“If we do not regain compliance with the Minimum Bid Price Requirement by the end of the Compliance Period, we may be eligible for an additional 180 calendar day period to regain compliance during which we may transfer to The Nasdaq Capital Market, provided that we meet the applicable market value of publicly held shares requirement for continued listing and all other applicable requirements for initial listing thereon (except for the bid price requirement) based on our most recent public filings and market information and notify Nasdaq of our intent to cure the minimum bid price deficiency. …”see in full comparison
“Our review of potential strategic alternatives may not result in the approval or completion of any specific transaction or outcome, and the process of reviewing strategic alternatives or the outcome could adversely affect our business, financial condition, operations and stock price.”see in full comparison
“Protections found in provisions under the United Kingdom City Code on Takeovers and Mergers may delay or discourage a takeover attempt, including attempts that may be beneficial to holders of our Ordinary Shares and ADSs.”see in full comparison
“We may be required to register with the SEC as an “investment company” in accordance with the Investment Company Act of 1940.”see in full comparison
Full comparison: every changed paragraph (28)
Our review of potential strategic alternatives may not result in the approval or completion of any specific transaction or outcome, and the process of reviewing strategic alternatives or the outcome could adversely affect our business, financial condition, operations and stock price.
On March 4, 2024, we announced that we had received an unsolicited approach from a large and well-capitalized publicly listed strategic diagnostics company, which is in the process of evaluating an acquisition of the entire issued, and to be issued, share capital of the Company. Therefore, we have commenced a review of all available options, including a possible sale of the Company and/or our assets, and have commenced the Formal Sale Process. We have not yet established a timeline for completion of the strategic review process, and there is no assurance that the process will result in the approval or completion of any specific transaction or outcome. We are actively working with financial and legal advisors in connection with our review of potential strategic alternatives.
Any potential transaction or other strategic alternative would be dependent on a number of factors that may be beyond our control, including, among other things, market conditions, industry trends, regulatory approvals, and the availability of financing for a potential transaction on reasonable terms. The process of reviewing potential strategic alternatives, including optimization of our cost structure, is time consuming, may divert the attention of our board of directors and management from core business operations, and may be distracting and disruptive to our business operations and long-term planning, which may cause concern to our current or potential employees, investors, strategic partners and other stakeholders, and may have a material impact on our business and operating results or our internal controls and procedures, or result in increased volatility in our share price. We may incur substantial expenses associated with identifying, evaluating and negotiating potential strategic alternatives. There can be no assurance that any potential transaction or other strategic alternative, if consummated, will provide greater value to our shareholders than that reflected in the current price of our ADSs or ordinary shares. Additionally, the outcome of the strategic review may adversely impact our business, cash flows, operations, financial condition and stock price. Until the review process is concluded or developments on the progress of the strategic review are disclosed, perceived uncertainties related to our future may result in the loss of potential business opportunities, volatility in the market price of our ADSs or ordinary shares, and difficulty attracting and retaining qualified employees and business partners.
Protections found in provisions under the United Kingdom City Code on Takeovers and Mergers may delay or discourage a takeover attempt, including attempts that may be beneficial to holders of our Ordinary Shares and ADSs.
The United Kingdom City Code on Takeovers and Mergers, or the City Code, applies, among other things, to an offer for a public limited company whose shares are admitted to trading on AIM. The Company is therefore subject to the City Code.
The City Code provides a framework within which takeovers of certain companies organized in the United Kingdom are regulated and conducted. The following is a brief summary of some of the most important rules of the City Code:
In connection with a potential offer, if following an approach by or on behalf of a potential bidder, the company is “the subject of rumor or speculation” or there is an “untoward movement” in the company’s share price, there is a requirement for the potential bidder to make a public announcement about a potential offer for the company, or for the company to make a public announcement about its review of a potential offer.
When interests in shares carrying 10% or more of the voting rights of a class have been acquired by an offeror (i.e., a bidder) in the offer period (i.e., before the shares subject to the offer have been acquired) or within the previous 12 months, the offer must be in cash or be accompanied by a cash alternative for all shareholders of that class at the highest price paid by the offeror or any person acting in concert with them in that period. Further, if an offeror or any person acting in concert with them acquires any interest in shares during the offer period, the offer for the shares must be in cash or accompanied by a cash alternative at a price at least equal to the price paid for such shares during the offer period.
If after an announcement is made, the offeror or any person acting in concert with them acquires an interest in shares in an offeree company (i.e., a target) at a price higher than the value of the offer, the offer must be increased accordingly.
The board of directors of the offeree company must appoint a competent independent adviser whose advice on the financial terms of the offer must be made known to all the shareholders, together with the opinion of the board of directors of the offeree company.
Favorable deals for selected shareholders are not permitted, except in certain circumstances where independent shareholder approval is given and the arrangements are regarded as fair and reasonable in the opinion of the financial adviser to the offeree.
All shareholders must be given the same information.
Those issuing documents in connection with a takeover must include statements taking responsibility for the contents thereof.
Profit forecasts, quantified financial benefits statements and asset valuations must be made to specified standards and must be reported on by professional advisers.
Misleading, inaccurate or unsubstantiated statements made in documents or to the media must be publicly corrected immediately.
Actions during the course of an offer by the offeree company, which might frustrate the offer are generally prohibited unless shareholders approve these plans. Frustrating actions would include, for example, lengthening the notice period for directors under their service contract or agreeing to sell off material parts of the target group.
Stringent requirements are laid down for the disclosure of dealings in relevant securities during an offer, including the prompt disclosure of positions and dealing in relevant securities by the parties to an offer and any person who is interested (directly or indirectly) in 1% or more of any class of relevant securities.
Employees of both the offeror and the offeree company and the trustees of the offeree company’s pension scheme must be informed about an offer. In addition, the offeree company’s employee representatives and pension scheme trustees have the right to have a separate opinion on the effects of the offer on employment appended to the offeree board of directors’ circular or published on a website.
Our future capital needs are uncertain, and our independent registered public accounting firm has expressed in its report on our audited financial statements for the fiscal year ended June 30, 2023,2024 a substantial doubt about our ability to continue as a going concern. OurIf our ability to continue as a going concern is dependent on our ability to raise additional capital andcapital, our operations could be curtailed if we are unable to obtain the required additional funding when needed. We may not be able to do so when necessary, and/or the terms of any financings may not be advantageous to us.
WithoutSubsequent to September 30, 2024, we raised an additional financing,$14.9 wemillion, expect our cash and cash equivalents asnet of Marchexpenses, 31,to 2024,fund combinedthe operations of the company going forward. While the company plans to operate the business well beyond 12 months with additionalthis costcapital, reductionthere optionscan available,be no guarantees that we will be sufficientsuccessful toin fundthose our operating expenses and capital expenditure requirements into early fiscal fourth quarter.plans. We have based thisour estimateestimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect or may fail in our efforts to enact additional cost reduction options. Furthermore, our operating plan may change, and we may need additional funds sooner than planned in order to meet operational needs and capital requirements for product development and commercialization.
If we fail to meet all applicable requirements of Nasdaq and Nasdaq determines to delist our ADSs, the delisting could adversely affect the market liquidity of our ADSs and the market price of our ADSs could decrease.
On December 22, 2023, we received two written notices from Nasdaq Stock Market, notifying us that (i) because the closing bid price for our ADSs was below $1.00 per ADS for at least 30 consecutive business days, we did not meet the $1.00 per ADS Minimum Bid Price Requirement and (ii) we are not in compliance with the requirement to maintain a minimum MVLS of $50,000,000 for continued listing on The Nasdaq Global Market, as set forth in Nasdaq Listing Rule 5450(b)(2)(A).
The Notices have no immediate impact on the continued listing or trading of our ADSs on The Nasdaq Global Market, which will continue to be listed and traded on The Nasdaq Global Market, subject to our compliance with the other continued listing requirements.
Pursuant to Nasdaq Listing Rule 5810(c)(3)(A) and Nasdaq Listing Rule 5810(c)(3)(C), we have a compliance period of 180 calendar days, or until June 19, 2024, to regain compliance with the Minimum Bid Price Requirement and the MVLS Requirement. To regain compliance with the Minimum Bid Price Requirement, the closing bid price of the ADSs must be at least $1.00 per ADS for a minimum of ten consecutive business days prior to the end of the Compliance Period. To regain compliance with the MVLS Requirement, our MVLS must close at $50,000,000 or more for a minimum of ten consecutive business days prior to the end of the Compliance Period.
If we do not regain compliance with the Minimum Bid Price Requirement by the end of the Compliance Period, we may be eligible for an additional 180 calendar day period to regain compliance during which we may transfer to The Nasdaq Capital Market, provided that we meet the applicable market value of publicly held shares requirement for continued listing and all other applicable requirements for initial listing thereon (except for the bid price requirement) based on our most recent public filings and market information and notify Nasdaq of our intent to cure the minimum bid price deficiency. If we meet the applicable requirements, Nasdaq may inform us that we have been granted an additional 180 calendar days to regain compliance with the Minimum Bid Price Requirement. If, however, it appears to Nasdaq that we will not be able to cure the minimum bid price deficiency, or if we are otherwise not eligible for listing on The Nasdaq Capital Market, Nasdaq could provide notice that our ADSs will become subject to delisting. In such event, Nasdaq rules would permit us to appeal the delisting determination to a Nasdaq Hearings Panel.
If we are unable to satisfy the Nasdaq criteria for continued listing, our ADS would be subject to delisting. A delisting of our ADS could negatively impact us by, among other things, reducing the liquidity and market price of our ADS; reducing the number of investors willing to hold or acquire our ADS, which could negatively impact our ability to raise equity financing; decreasing the amount of news and analyst coverage of us; and limiting our ability to issue additional securities or obtain additional financing in the future. In addition, delisting from Nasdaq may negatively impact our reputation and, consequently, our business.
We may be required to register with the SEC as an “investment company” in accordance with the Investment Company Act of 1940.
The rules and interpretations of the SEC and the courts, relating to the definition of "investment company" are very complex. While we currently intend to conduct our operations so that we will not be an investment company under applicable SEC interpretations, we can provide no assurance that the SEC would not take the position that the Company would be required to register under the Investment Company Act of 1940 (the “‘40 Act”) and comply with the ‘40 Act’s registration and reporting requirements, capital structure requirements, affiliate transaction restrictions, conflict of interest rules, requirements for disinterested directors, and other substantive provisions. We monitor our assets and income for compliance under the ‘40 Act and seek to conduct our business activities to ensure that we do not fall within its definitions of “investment company” or that we qualify under one of the exemptions or exclusions provided by the ‘40 Act and corresponding SEC regulations. If we were to become an “investment company” and be subject to the restrictions of the ‘40 Act, those restrictions likely would require significant changes in the way we do business and add significant administrative costs and burdens to our operations. To ensure we do not fall within the ‘40 Act, we may need to take various actions which we might otherwise not pursue. These actions may include modifying our mixture of assets and income or a liquidation of certain of our assets.
Management's Discussion & Analysis (MD&A)
New heading “Research and Development Expenses”
New heading “Research and Development Expenses”
New heading “November 2024 Debt Restructurings”
New heading “Equity Financings”
New heading “Net cash used in financing activities”
New heading “Research and Development Expenses”
Removed heading “Impairment Loss on Property, Equipment and Other Long-Lived Assets”
Removed heading “Consolidated Results of Operations”
Removed heading “Comparison of nine months ended March 31, 2024 and 2023”
Removed heading “Cost of Revenue”
Removed heading “General and Administrative Expenses”
Removed heading “Impairment Loss on Property, Equipment and Other Long-Lived Assets”
Removed heading “Foreign Currency Gain”
Removed heading “Fair Value Adjustments to VericiDx Investment”
Removed heading “Fair Value Adjustment on Convertible Notes”
Removed heading “Net cash used in investing activities”
Largest changes
Unfavorable conditions in the economy in the United States and abroad may negatively affect the growth of our business and our results of operations. For example, macroeconomic events, includingsee in full comparisontheconflictsCOVID-19inpandemic,Ukraine-Russiarisingand Middle East, increased inflation rates and U.S. and U.K. interestrates and the Russia-Ukraine and Hamas-Israel armed conflicts and related developments,rates, have led to economic uncertainty globally. The effect of macroeconomic conditions may not be fully reflected in our results of operations until future periods. If, however, economic uncertainty increases or the global economy worsens, our business, financial condition and results of operations may be harmed. For further discussion of the potential impacts of macroeconomic events on our business, financial condition, and operating results, see the section titled “RiskFactors.Factors” in the Company's Annual Report on Form 10-K.
“As a result of the Company's losses and its projected cash needs, as defined in the accounting literature, substantial doubt exists about the Company’s ability to continue as a going concern. While subsequent to September 30, 2024, the company has successfully raised approximately $14.9 million, net of expenses, in new equity capital and restructured the existing long-term debt recorded on the balance sheet, the Company does have a history of operating losses and it has been expensive to deliver all of the milestones to commercialize the kidneyintelX.dkd test. …”see in full comparison
“The Bond Agreement contains a negative pledge covenant that provides that for so long as the principal amount outstanding under the Bonds is equal to or exceeds U.S. …”see in full comparison
“The Company’s ability to continue as a going concern is contingent upon successful execution of management’s intended plan over the next 24 months to improve the Company’s liquidity and profitability, which includes, without limitation:”see in full comparison
“Impairment Loss on Property, Equipment and Other Long-Lived Assets”see in full comparison
“Impairment Loss on Property, Equipment and Other Long-Lived Assets”see in full comparison
Full comparison: every changed paragraph (134)
Renalytix is focused on providing doctors around the world with a safe, reliable and effective tool to identify which patients are or are not in danger of losing significant kidney function and falling into kidney failure and may require long-term dialysis or a kidney transplant. Chronic kidney disease is one of the largest urgent medical needs, globally affecting an estimated 850 million people, and is responsible for an unsustainable and growing societal cost burden.
At Renalytix, we have developed kidneyintelX.dkd, the first U.S. Food and Drug Administration ("FDA"), authorized in vitro prognostic test that uses an artificial intelligence-enabled algorithm to aid in assessment of the risk of progressive decline in kidney function. The test is designed to predict early in the progression of kidney disease who is at risk for significant sustained decline in kidney function. Prognostic tests, such as kidneyintelX.dkd, are not intended for diagnosing any disease or for monitoring disease progression or the effect of any therapeutic product. Rather, prognostic tests are intended to be used in conjunction with other clinical and diagnostic findings and consistent with professional standards of practice, including information obtained by alternative methods, and clinical evaluation, as appropriate. When used as intended, potential interventions can be considered early, ideally before major damage is done and when treatments can be most effective. KidneyintelX.dkd is part of a family of clinical tests being developed from the KidneyIntelX technology platform developed using technology licensed from the Icahn School of Medicine at Mount Sinai in New York, the Joslin Diabetes Center in Boston and under development through U.S. and international collaborations.
We are deploying kidneyintelX.dkd to patient populations with DKD on a regional basis through partnerships with healthcare systems and insurance payors that provide coverage to those healthcare systems’ patients. In June 2024 , Medicare issued a final Local Coverage Determination (“LCD”) for the Company’s kidneyintelX.dkd testing and is effective for dates of service on or after August 1, 2024. The established Medicare price for kidneyintelX.dkd is $950 per test. Distinct CPT Codes (Common Procedural Terminology Codes) have been established for kidneyintelX.dkd and is published in CMS’ 2024 Clinical Lab Fee Schedule. The LCD specifies coverage for use of kidneyintelX.dkd for patients with diagnosed Type 2 diabetes and Stage 1-3b Chronic Kidney Disease is reasonable and necessary. The LCD was issued by National Government Services (“NGS”). NGS is a subsidiary of Elevance Health, Inc. (previously Anthem, Inc.), a Medicare Administrative Contractor responsible for claims processing for testing performed in the Company’s New York City laboratory.
We are deploying KidneyIntelX to patient populations with DKD on a regional basis through partnerships with healthcare systems and insurance payors that provide coverage to those healthcare systems’ patients. Following the receipt of national Medicare pricing at $950 per reportable test for KidneyIntelX in January 2020, we are actively pursuing Medicare coverage and a determination under the MolDX Program. In March 2020, we announced that our application for a Medicare PTAN was approved by Noridian Healthcare Solutions, the regional Medicare Administrative Contractor with responsibility for overseeing facilities and providers located in the western United States, and, as a result, we are now qualified as a provider and can bill for services provided to patients with Medicare and Medicaid health insurance coverage in the United States. In addition, in October 2019, Capital District Physicians’ Health Plan, Inc., a physician-led health insurance payor in New York, adopted coverage determination policies that provide insurance for certain patients with DKD who are tested with KidneyIntelX. We are working with additional private insurance payors and healthcare providers to expand insurance coverage for KidneyIntelX nationwide, which we believe will be accelerated by our recent achievement of a CPT code and national Medicare pricing.
Since our inception in March 2018, we have focused primarily on organizing and staffing our company, raising capital, developing the KidneyIntelX platform,technology, conducting clinical validation studies for KidneyIntelX,kidneyintelX.dkd, establishing and protecting our intellectual property portfolio and commercial laboratory operations, pursuing regulatory approval andapproval, developing our reimbursement strategy.strategy and commercializing our testing services. We have funded our operations primarily through equity and debt financings.
There is always the possibility that a change in the regulatory or reimbursement landscape can have an impact on our ability to deliver commercial kidneyintelX.dkd testing services in the United States, maintain the current and anticipated costs and services reportable result turnaround times. Any of the aforementioned changes could materially alter our revenue projections.
During fiscal year 2023, we returned to conducting business as usual after the COVID-19 pandemic, with necessary or advisable modifications to employee travel and employee work locations. We continue to monitor the situation related to COVID-19 and may take actions that alter our business operations to the extent 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.
Unfavorable conditions in the economy in the United States and abroad may negatively affect the growth of our business and our results of operations. For example, macroeconomic events, including theconflicts COVID-19in pandemic,Ukraine-Russia risingand Middle East, increased inflation rates and U.S. and U.K. interest rates and the Russia-Ukraine and Hamas-Israel armed conflicts and related developments,rates, have led to economic uncertainty globally. The effect of macroeconomic conditions may not be fully reflected in our results of operations until future periods. If, however, economic uncertainty increases or the global economy worsens, our business, financial condition and results of operations may be harmed. For further discussion of the potential impacts of macroeconomic events on our business, financial condition, and operating results, see the section titled “Risk Factors.Factors” in the Company's Annual Report on Form 10-K.
In May 2018, we entered into the Mount Sinai Agreement, with Mount Sinai, pursuant to which we obtained a worldwide, royalty-bearing, exclusive license under certain patents and a worldwide, royalty-bearing, non-exclusive license under certain know-how of Mount Sinai to develop and commercialize licensed products in connection with the application of artificial intelligence for the diagnosis of kidney disease. Pursuant to the terms of the Mount Sinai Agreement, we are obligated to use commercially reasonable efforts in connection with the development and commercialization of the licensed products,technologies, including in accordance with specified diligence milestones.
We paid Mount Sinai $10.0 million as an up-front payment upon entering into the Mount Sinai Agreement. Under the terms of the Mount Sinai Agreement, we are obligated to pay Mount Sinai $1.5 million and $7.5 million in commercial milestone payments upon achieving worldwide net sales of KidneyIntelXkidneyintelX.dkd testing services of $50.0 million and $300.0 million, respectively. We are also obligated to pay Mount Sinai a 4% to 5% royalty on net sales of KidneyIntelX,kidneyintelX.dkd, subject to customary reductions. Royalties are payable on a product-by-product basis from first commercial sale of such product until the later of (1) expiration of the last valid claim of a licensed patent covering such product or (2) on a country-by-country basis, 12 years from first commercial sale of such product in such country. Moreover, we are obligated to pay Mount Sinai between 15% and 25% of any consideration received by us from a sublicensee. The two provisional patent applications covering the KidneyIntelX diagnostic in-licensed under the Mount Sinai Agreement were filed in February 2020 and April 2020, respectively. If issued, these patents will expire in February 2041 and April 2041, respectively. Furthermore, we agreed to carry out and fund a clinical utility study for KidneyIntelX at a total estimated cost of $10.7 million.
In July 2017, EKF entered into the Joslin Agreement,Agreement with Joslin. In October 2018, we purchased all of EKF’s rights, title, interest and benefit in the Joslin Agreement in exchange for the issuance of 15.4 million of our ordinary shares.
Pursuant to the Joslin Agreement and the related assignment from EKF, we obtained a worldwide, royalty- bearing,royalty-bearing, exclusive license under any patents and any related know-how of Joslin related to the patent application filed with respect to the Joslin IP to make, have made, use, offer for sale and sell licensed products covered by claims in the Joslin IP, and to perform, practice offer for sale and sell certain licensed processes related to the Joslin IP. We are obligated to use commercially reasonable efforts in connection with the development and commercialization of the licensed products and licensed processes, including in accordance with a development plan.
Launched FDA approved kidneyintelX.dkd testing services to replace laboratory developed testing developed services Began receiving Medicare reimbursement under formal Local Coverage Determination New leadership with a track record of commercial success Revamped sales and customer service strategy to focus on health care systems leveraging electronic health records and implementation of a scalable sales-force-led or “direct-to-doctor” strategy Now demonstrating quarter-over-quarter sales growth and repeat doctor testing Major new kidneyintelX.dkd integrated commercial testing implementation with a large New York area physician practice, with test ordering and processing having commenced during September 2024 Significant expansion in patient blood draw options in combination with a simplified test order requisition form to reduce doctor workload Improvements implemented in customer service and test services billing to improve end-to-end user experience.
Nasdaq delisting with American Depository Shares ("ADSs") now quoted on the OTCQB® Venture Market under symbol (OTCQB: RNLXY), and anticipated transition to Foreign Private Issuer (“FPI”) status to provide significant potential savings of up to $2.5 million annually when fully implemented Subsequent to quarter end, completed over-subscribed equity capital Fundraise raising approximately $14.9 million, net of expenses, with strong demand exceeding our initial funding target of $13 million.
Board changes:
▪
Julian Baines, MBE, an experienced executive within the life science industry and former Renalytix Non-Executive Chairman of the Company from March 2018 to June 2020, reappointed as Executive Chairman ▪ Daniel Levangie, Non-Executive Director has stepped down from the Board of Renalytix effective October 31, 2024
KidneyIntelX included as only biomarker test for prognostic risk assessment in landmark update of international clinical practice guidelines (https://kdigo.org/guidelines/) Medicare Local Coverage Determination draft issued for FDA-authorized kidneyintelX.dkd by Medicare contractor National Government Services (NGS) with final issuance expected in the near term Formal launch of the FDA-authorized kidneyintelX.dkd in April 2024 Customer experience improvements implemented including simplified physician order requisition, increased patient access to national blood draw network, revamped marketing and education materials New primary care sales force completed its first quarter of operations with a 33% quarter over quarter increase in independent primary care physician test order volume during the three months ended March 31, 2024 Appointed Howard Doran to president concurrent with organizational changes to focus to accelerating sales and marketing of FDA-authorized kidneyintelX.dkd test Formal strategic sale process initiated with multiple potential acquirers now in discussions Completed common stock equity financings raising aggregate gross proceeds of $13.5 million (including post-period activity) Continued operating expense reduction with 50% year-over-year reduction in head count and approximately 40% total lower operating costs With FDA and clinical guidelines achieved, process initiated for potential ex-U.S. partners to improve non-dilutive company cash position and expand incremental sales opportunities U.S. government added the FDA-authorized kidneyintelX.dkd to 10-year Government-wide Acquisition Contract (GWAC) at a price of $950 per reportable result. The contract covers tests provided by any government healthcare facility Total volume of 806 tests during the quarter, of which 82% were billable
NASDAQ Notices
On December 22, 2023, we received two written notices from The Nasdaq Stock Market, or Nasdaq, notifying us that (i) because the closing bid price for our ADSs was below $1.00 per ADS for at least 30 consecutive business days, we did not meet the $1.00 per ADS minimum bid price requirement of Nasdaq Listing Rule 5450(a)(1) the (“Minimum Bid Price Requirement”) and (ii) we are not in compliance with the requirement to maintain a minimum market value of listed securities (the “MVLS”) of $50,000,000 for continued listing on The Nasdaq Global Market, as set forth in Nasdaq Listing Rule 5450(b)(2)(A) (the “MVLS Requirement”).
The Notices have no immediate impact on the continued listing or trading of our ADSs on The Nasdaq Global Market, which will continue to be listed and traded on The Nasdaq Global Market, subject to our compliance with the other continued listing requirements.
Pursuant to Nasdaq Listing Rule 5810(c)(3)(A) and Nasdaq Listing Rule 5810(c)(3)(C), we have a compliance period of 180 calendar days, or until June 19, 2024 (the “Compliance Period”), to regain compliance with the Minimum Bid Price Requirement and the MVLS Requirement. To regain compliance with the Minimum Bid Price Requirement, the closing bid price of the ADSs must be at least $1.00 per ADS for a minimum of ten consecutive business days prior to the end of the Compliance Period. To regain compliance with the MVLS Requirement, our MVLS must close at $50,000,000 or more for a minimum of ten consecutive business days prior to the end of the Compliance Period.
If we do not regain compliance with the Minimum Bid Price Requirement by the end of the Compliance Period, we may be eligible for an additional 180 calendar day period to regain compliance during which we may transfer to The Nasdaq Capital Market, provided that we meet the applicable market value of publicly held shares requirement for continued listing and all other applicable requirements for initial listing thereon (except for the bid price requirement) based on our most recent public filings and market information and notify Nasdaq of our intent to cure the minimum bid price deficiency. If we meet the applicable requirements, Nasdaq may inform us that we have been granted an additional 180 calendar days to regain compliance with the Minimum Bid Price Requirement. If, however, it appears to Nasdaq that we will not be able to cure the minimum bid price deficiency, or if we are otherwise not eligible for listing on The Nasdaq Capital Market, Nasdaq could provide notice that our ADSs will become subject to delisting. In such event, Nasdaq rules would permit us to appeal the delisting determination to a Nasdaq Hearings Panel.
If we do not regain compliance with the MVLS Requirement by the end of the Compliance Period, Nasdaq will notify us that our securities are subject to delisting, at which point we may appeal the delisting determination to a Nasdaq hearings panel. We may also choose to transfer the listing of our ADSs to The Nasdaq Capital Market. In order to transfer, we must submit an on-line transfer application, pay a $5,000 application fee and meet The Nasdaq Capital Market’s continued listing requirements.
We intend to actively monitor our MVLS and the closing bid price of our ADS and may, if appropriate, implement available options to regain compliance with the MVLS Requirement and the Minimum Bid Price Requirement. There can be no assurance that we will be able to regain compliance with the MVLS Requirement or the Minimum Bid Price Requirement or maintain compliance with any other listing requirements.
During the ninethree months ended MarchSeptember 31,30, 2024,2024 and 2023, we continued to deploy KidneyIntelXkidneyintelX.dkd to patient populations with DKD, on a regional basis through partnerships with healthcare systems and insurance payors that provide coverage to those healthcare systems’ patients. If these strategic partners fail to meet their key contractual obligations or to purchase KidneyIntelXkidneyintelX.dkd tests, thatit will likely have an adverse effect on us and our ability to achieve our commercial objectives, potentially including the attainment of sales volumes leading to profitability.
During the ninethree months ended MarchSeptember 31,30, 2024,2024 and 2023, cost of revenue consists of costs directly attributable to the KidneyIntelXkidneyintelX.dkd testing and services rendered, including labor, lab consumables and sample collection costs directly related to revenue generating activities.
Research and Development Expenses
Research and development costs consist primarily of costs incurred in connection with the development of KidneyIntelX.KidneyIntelX technology. We are currently continuing to conduct limited clinical utility and other studies for KidneyIntelXkidneyintelX.dkd to determineexpand long-term, prospective clinical value and performance in differentchronic CKDkidney populations.disease. We expense research and development costs as incurred. Because we have limited resources and access to capital to fund our operations, we must decide which diagnostic product to pursue and the amount of resources to allocate to each. As such, we have been focused primarily on the development of KidneyIntelX and studies to further demonstrate the clinical utility of KidneyIntelX.
The successful commercialization of KidneyIntelX is uncertain. This is due to the numerous risks and uncertainties associated with product development and commercialization, including:
the uncertainty of the scope, progress, costs and results of clinical validation studies and other research and development activities;
the cost of manufacturing clinical supply of KidneyIntelX;
the efficacy and potential advantages of KidneyIntelX compared to alternative solutions, including any standard of care, and our ability to achieve market acceptance for KidneyIntelX;
continuing to expand study data for KidneyIntelX, including data demonstrating the clinical utility over the short, intermediate and long term use of KidneyIntelX in different clinical settings;
raising necessary additional funds to continue operations; and the costs and timing of preparing, filing and prosecuting patent applications, maintaining, enforcing and protecting our intellectual property rights and defending against any intellectual property-related claims.
A change in the outcome of any of these variables could result in a significant change in the costs and timing associated with our related development.
General and administrative expenses consist principally of salaries and other personnel-related costs including share-based compensation; professional fees for accounting, auditing, tax and administrative consulting services; legal fees relating to patent and corporate matters; administrative travel expenses; insurance costs; marketing expenses and other operating costs. Additionally, general and administrative expenses include the cost of maintaining our admission to AIMAIM, Nasdaq and Nasdaq.OTC trading.
On a quarterly basis, the respective carrying value of non-financial assets are assessed for impairment indicators and, if ultimately considered impaired, are adjusted and written down to their fair value, as estimated based on consideration of external market participant assumptions.
In October 2020, wethe Company completed a spinspinoff offof VericiDx plc. ("VericiDx"),VericiDx, a developer of advanced clinical diagnostics for organ transplant and retained 9,831,681 ordinary shares of VericiDx. WeThe accountCompany accounts for the investment in VericiDx equity securities at fair value, with changes in fair value recognized in the incomeconsolidated statement.statements Inof Marchoperations and comprehensive loss. As of September 30, 2024, wethe soldCompany 750,000owns ordinary8,581,682 shares of VericiDx for net proceeds of $0.1 million and a realized loss of $0.1 million. As of March 31, 2024, we own 9,081,681 shares of VericiDx.
We elected to account for the Bonds (as defined below)bonds at fair value with qualifying changes in fair value recognized through the consolidated statements of operations and comprehensive loss until the notes are settled.
Other income relates to interest income earned on our cash deposits anddeposits, grant income earned for work performed under the Horizon Europe grant.grant and other services provided to academic institutions or pharmaceutical companies. Other expense relates to realized loss on the sale of VericiDx shares.
Comparison of three months ended MarchSeptember 31,30, 2024 and 2023
During the three months ended MarchSeptember 31,30, 2024, we recognized $0.5$0.52 million of revenue related to sales of KidneyIntelX and $0.04 million of pharmaceutical services revenue related to services performed for Eli Lilly and Company.KidneyIntelX. During the three months ended MarchSeptember 31,30, 2023, we recognized $0.7$0.46 million revenue related to sales of KidneyIntelX and zero pharmaceutical services revenue. The $0.2 million decrease in revenue was primarily driven by a decrease in KidneyIntelX billable testing volumes due to the transition to a commercial billing structure under our arrangement with Mount Sinai.KidneyIntelX.
During the three months ended MarchSeptember 31,30, 2024, we recognized cost of revenue of $0.6$0.4 million primarily attributable to KidneyIntelX testing, including labor, lab consumables and sample collection costs related to revenue generating activities. We recognized $0.6$0.5 million of cost of revenue for the three months ended MarchSeptember 31,30, 2023.
Research and Development Expenses
Research and development expenses decreased by $1.7$1.9 million from $3.9$2.8 million for the three months ended MarchSeptember 31,30, 2023 to $2.2$0.9 million for the three months ended MarchSeptember 31,30, 2024. The decrease was attributable to a $1.3$1.7 million decrease related to external R&D projects and studies with Mount Sinai,Sinai and Wake ForestForest, $0.2 million decrease related to consulting and Joslin,professional a decrease of $0.3 million in employee compensation and related benefits, and afees, $0.1 million decrease in other operatingmiscellaneous expensesexpenses, asoffset weby continued$0.2 tomillion implementincrease cost-savingin measures.compensation and related benefits.
General and administrative expenses decreased $3.2$2.8 million from $7.1$6.0 million for the three months ended MarchSeptember 31,30, 2023 to $3.9$3.3 million for the three months ended MarchSeptember 31,30, 2024. The decrease was driven by even further cost cutting measures, which resulted in a $2.6$1.5 million decrease in employee compensation and related benefits, aincluding $0.4share-based payments and bonuses, due to decreased headcount, $0.6 million decrease in consulting and professional fees, $0.2 million decrease in insurance costs, $0.2 million decrease in marketing, and $0.3 million decrease in other operating expenses, and a $0.3 million decrease in insurance costs.expenses. We have implemented a plan to further reduce payroll expense and total general and administrative expenses while preserving our sales capacity.
In connection with the delisting of our ADSs from Nasdaq effective on October 7, 2024, and our ADSs becoming quoted on the OTC Markets’ OTCQB tier effective on October 8, 2024, we anticipate that we will requalify as a foreign private issuer (“FPI”) at our next testing date for FPI status. As a foreign private issuer, we expect annual cost savings of up to $1.5 million from a reduction in regulatory filing costs, professional fees (audit, legal, and consulting), listing fees, insurance and other administrative costs when fully implemented.
Impairment Loss on Property, Equipment and Other Long-Lived Assets
As part of our cost saving plan, we consolidated lab operations which resulted in a $0.3 million impairment of property and equipment at our Florida lab and a $0.1 million impairment of the Utah right-of-use asset for the three months ended March 31, 2024. There was no impairment loss on property, equipment and other long-lived assets in the three months ended March 31, 2023.
Foreign Currency Gain (Loss)
During the three months ended MarchSeptember 31,30, 2024, we recognized a foreign currency gain of $0.02$0.04 million due to exchange rate fluctuations on transactions denominated in a currency other than our functional currency, GB Pounds.currency. During the three months ended MarchSeptember 31,30, 2023, we recognized a foreign currency lossgain of $0.5$0.3 million primarily attributable to cash balances denominated in currencies other than our functional currency.currency, GB Pounds.
We account for the investment in VericiDx equity securities at fair value, with changes in fair value recognized in the income statement. During the three months ended MarchSeptember 31,30, 2024, we recorded a gain of $0.04 million to adjust the VericiDx investment to fair value. During the three months ended March 31, 2023, we recorded a gain of $0.1 million to adjust the VericiDx investment to fair value. During the three months ended September 30, 2023, we recorded a loss of $0.5 million to adjust the VericiDx investment to fair value.
We elected to account for the Bondsbonds at fair value with qualifying changes in fair value recognized through the consolidated statements of operations and comprehensive loss until the notes are settled. This excludes fair value adjustments related to instrument-specific credit risk, which areis recognized in Otherother Comprehensivecomprehensive Incomeincome (LossOCI). For the three months ended MarchSeptember 31,30, 2024, we recorded a loss of $1.2$0.8 million to adjust the Bondsbonds to fair value. For the three months ended MarchSeptember 31,30, 2023, we recorded a loss of $1.2 million to adjust the Bondsbonds to fair value. The change in fair value of the bond was driven by a decrease in term to maturity, increase in risk free rate and change in stock price.
During the three months ended MarchSeptember 31,30, 2024, we recognizedrealized $0.05$0.01 million of other expensesexpense which included $0.03 million of grant income and $0.02$0.014 million of interest income earned on our cash deposits,deposits and $0.024 million of grant income, offset by $0.1$0.042 million of realized loss on the sale of VericiDx shares. During the three months ended MarchSeptember 31,30, 2023, we realized $0.3$0.1 million of other income related expense reimbursement and $0.03 million ofto interest income.income earned on our cash deposits
Consolidated Results of Operations
Comparison of nine months ended March 31, 2024 and 2023
During the nine months ended March 31, 2024, we recognized $1.7 million of revenue related to sales of KidneyIntelX and $0.04 million of pharmaceutical services revenue related to services performed for Eli Lilly and Company. During the nine months ended March 31, 2023, we recognized $2.7 million revenue related to sales of KidneyIntelX and $0.2 million of pharmaceutical services revenue related to services performed for AstraZeneca. The $1.2 million decrease in revenue was primarily driven by a $1.0 million decrease in KidneyIntelX billable testing volumes due to the transition to a commercial billing structure under our arrangement with Mount Sinai and a decrease of $0.2 million of pharmaceutical services revenue.
Cost of Revenue
During the nine months ended March 31, 2024, we recognized cost of revenue of $1.6 million primarily attributable to KidneyIntelX testing, including labor, lab consumables and sample collection costs related to revenue generating activities. We recognized $2.0 million of cost of revenue for the nine months ended March 31, 2023. The $0.4 million decrease in cost of revenue was primarily driven by a decrease in KidneyIntelX billable testing volumes.
RNLXY insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
No Form 4 stock transactions in this period.
Well-known investors holding RNLXY (13F)
None of the 59 investors we track reported a position in their latest 13F.