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Makes sense andypa - Medicare provides the reimbursement coverage and FDA more focused on regulatory approval/compliance/clinical recognition.
2021 actual testing revenue at $950 a pop was $0.4m (400 tests). 2022 anticipated to be $2.7m (2850 tests). If they can drive sales in the VA systems using the GSA contract; secure some private payer insurance business; get Medicare approval, continue Sinai testing (we have completed 3K out of initial 6K target), and get Utah, wake forest etc moving - surely we can increase our sales in Q1 2023 to 100+ a week; Q2 150; Q3 200; Q4 250? Realistically we need 1000+ a week to breakeven. SB
SB- I think Medicare is likely this year and FDA H1 next year. Medicare is more important. I listened to the Q3 results presentation again. The automation that was talked about is for an automated prompt to PCP's that a patient would be suitable / benefit from the KiX test. A patient won't want the £950 test unless their insurance covers it though. So I think medicare / insurance coverage / automation / real world evidence etc etc should all help drive much higher sales. We need to start gaining sales traction soon.
Oct/Nov/ Dec quarter sales need to be at least $2m and should be achievable with the ins coverage we now have.
Looks like you might be right andypa - my reference point was the Company Overview presentation dated January 2022 which mentions under its 3 year investment highlights that we have both Medicare National Price Award at $950 and GSA Coverage Award at $950 - which are key to reimbursement. However - from what I can gather and as you noted - whilst we have the GSA approval, the position on Medicare is not concluded. There were two options to secure Medicare coverage/reimbursement. The first was as part of the Medicare Coverage of Innovative Technologies programme (MCIT) under its breakthrough device programme administered by the Centers for Medicare & Medicaid Services (CMS). This pathway was cancelled by the CMS in late 2021. The second route is to secure a local Medicare coverage determination - which I think links to the events schedule you listed and which aligns with the companies position that it has both a reimbursement code (0105U) and fee ($950) agreed with CMS - but is still awaiting confirmation from CMS that coverage has been approved and that local Medicare Administrative Contractors (MAC) can start to process tests based on the agreed Medicare reimbursement of $950. So as it stands we are not only waiting on the FDA De Novo marketing authorization; but equally or possibly more importantly - confirmation from CMS that we have secured the Medicare reimbursement - which was targeted for summer 2022 - which is a key issue holding back sales where the costs cannot presently be recouped. SB
SB- It is all very confusing, but per last quarter's results presentation we are hoping to get "medicare coverage, medicare payment this calendar year," Medicare covers the over 65's which is where the bulk of the potential tests are targeted.
I think there are 4 stages to go through to get Medicare - below is an extract from March 2020 presentation
Expected Events
Q1 20 • CPT code 0105U
• $950 price
Q2 20e • CMS contract & provider number
• MolDx coverage submission
Q4 20e • Draft coverage policy & public
meeting presentation
Q2 21e • Coverage policy final
You wouldn't happen to be in the market for a CFO job andypa.....100% agree with your conclusion - although I think we already have medicare at $950 a test - and presume that's the target figure for the private insurance market as well. SB
SB - We ramped up sales staff numbers too quickly when there were still many administrative hurdles left to clear. I would guess we have culled the dead wood from the sales team. I'm sure I read somewhere that there were 98 employees in Renx which shocked me. At least a half of these need to go. The current cost savings don't seem high enough......
The recent RNS confirms the narrowing of focus to the areas of potential high demand and insurance coverage.
At this stage, I would cut costs to the bone and concentrate on areas where we have ins converage, get FDA, get Medicare and then raise money once we have a proven model.
General overheads doubled from Q2 2022 ($5.5m) to Q3 2022 ($10.8m) - with the increase down to 'compensation, expenses and share based payments'. Presumably due to the large ramp up in staff, and pretty bold all things considered - and as you note perhaps savings are now being realised in the recently recruited team. We have a team of four in the New York markets - and sixteen - yes sixteen - on the VA account. The sales team is supported by seven medical liaison team members. 27 front end professionals with a unique market leading product capable of saving $b's from future clinical treatments........surely there needs to be some accountability on how those sales team are performing.
Without a credible increase in testing volumes and more detail on a financially robust business plan it is likely to prove very difficult to raise equity - bearing in mind that Mills and Sinai were the only institutions investing last time around. Or perhaps the business is hoping to conclude a deal with a strategic investment partner who can take a medium term view on returns. I also like to think the current market price reflects a reasonable level of expected dilution.....and hopefully not our ever decreasing cash balance. SB
Staff cost is the main driver - detail in Half Year Report under Note 9 is more informative than comment on Q3. Just briefly, staff cost, professional fees & contractors double in H1 22 vs H1 21 with those increased run rates continued through Q3. The danger is that "savings" announced recently are the offloading of under performers recruited at a handsome introduction fee & now + termination package(?). i.e. a resolution of mistake & not saving at all & sadly not including the CFO himself.
Professional fees & consulting H1 22 $6.4m were double H1 21 but come back in line over Q3. Contractors $3.3m in H1 22 also doubling on H1 21 - my guess on Mt Sinai IT & then there is an insurance cost $2.3m not incurred in H1 21.
To continue my theme of scatty management, their presence in Utah, Mt Sinai, Wake Forest? for VA? & now Chicago? all add to cost & difficulty in staffing up.
Mistakes happens in start ups but I suppose the market expects dilution of $50m by Xmas (50/70 = 70%) at least.
I bet AndyPa might be informative on this : )
What would we give for a reliable version of those revenue projections you mention eh!
Have a good weekend.
Its all a bit painful at the moment Blue. The primary architect of our current predicament is the massive increase in operating costs in last three years with minimal impact of sales growth. From what I can gather we have gone from $11m in 2020; $33m in 2021; to $40m so far in 2022 with Q4 to come (Q3 was $14.5m) - with current revenue of c.$1m per quarter. So we are likely in the region of $53m/54m operating costs full year 2022. Trimming $12m sounds a good start - but you have to ask - what on earth are we spending $4m+ per month on? If you look at where we spend money - in 2022 alone so far we have spent $12m in R+D costs - these are the costs of our 'partnerships' with health systems including Sinai where Renx picks up the costs of clinical studies and licencing costs. In addition we now have convertible loan repayments to make - settled in cash or additional ADS shares. Have to agree with your comments on our financial management - and the market price for the business reflects this lack of confidence in addition to wider marco issues. SB
The ability to make predictions is often indicative of how well, or otherwise, business is planned, controlled & managed.
The 300 test per week in Mt Sinai is so far wrong that it seems to have been a top down estimate on some theorectical basis and not methodically constructed from expectations "bottom up". Someone said, something like Mt Sinia covers 3m lives so perhaps 0.5% will be tested, that’ll be 15,000 pa so let’s say 300pw & THEY ACTUALLY TOLD THE MARKET!!!
If your credibility was on the line, wouldn’t you sanity check such an important expectation by building it up from what you know by physician/team/or centre so undelivery could be managed where it unfolded? I fear this may be indicative of the managerial culture & particularly the CFO’s effectiveness.
Let’s proper management goes into commericalisation & that they have reasons we do not know about to expect SP rise before capital is raised. I also hope that there was some exceptional cost in H1 "crossing rivers" in system roll out at Mt Sinai that release a wave of demand from the wider community of practicioners, although even this seems quite unmanaged if the test is so useful.
I presumed Iowa comes from the Blue Cross relationship in Illinois.
How is Sir Chris Mills not more on top of this?
Sorry to go on, great that savings have been made & there may be more. $12m is not to be sneezed at indeed, but how was cut-able resource taken on in such a short time?! In other situations one might be concerned whether the right $12m has been cut, that seems less of a concern here apart from the CFO still being aboard.
Let's see if the next RNS gives us some hard sales numbers.
$12 million of cost savings in fiscal 2023 "with more to come" is not to be sneezed at.
Anyway, at least it arrested the share price decline which had resumed this morning.
The issue of cash burn has not been helped by inconsistent reporting - quarterly increases when the company had indicated the opposite, 24 month runway, then 12 month......which apart from increasing overheads we have to assume is linked to the sales target failure - not so long ago Sinai alone was at 300 tests a week, then 10,000 pa......factor in that reduced income and no wonder we are left trying to second guess when more funds will be required. Raising cash in equity markets without FDA could be very painful. I like to think we have enough cash until mid 2023 - but that still means we have less than 12 months and that is not a good position to be in. That said - the previous reference to selling $50m ADS chunks on nasdaq can't have been on a whim....surely?
Iowa was news to me but the 8.1m Illinios deal was highlighted in the Q3 results unhooked. What is different is the specific reference to the private healthcare market in those territories in addition to the medicare coverage - so perhaps there is an indication of traction in private physician's looking to book tests based on the ongoing positive clinical proof of concept evidence. SB
I wasn't aware that Illinois was already signed up SB. Was Iowa too? Wondering what was the point of the RNS then. Perhaps the Medicaid component?
Anyway, good to hear they are explicitly (and belatedly) focussing on revenue and reigning in costs, as Blue says. Very necessary in this period of monetary tightening.
If Blue's calculations are correct and they'll need funding towards the end of the year, let's hope it's at a much higher price because the company has made further progress. There's a lot that can happen between now and then.
SB you are right about missing sales targets & they finally recognising the issue of burn.
They do not seem that much more likely to avoid having a huge dilution by December if my calcs are close.
They start with cash 59m in March at a burn rate of $10-15m for Q4 22 ($49-$44m) and Q1 23 ($39-$29m) less associated one costs of annual savings (call it $10m) less another quarter of $15-10m cost reduced by say $2m of annualised savings to be $12pa = $26-11m cash at Sep plus sales revenue from IL/IA push plus Mt Sinai/Wake testing push if any. $26-11m covers them until about 15 May 23 or 15 Dec 22 depending on whether their annulaised normal expenditure is $40 or $60m pa.
Roll on partnership or other game change announcement.
We already knew that Illinois health providers were signed up to KIX with insurance coverage - perhaps the change in narrative here is that the company will focus its efforts on commercialising those markets which in basic terms means selling and processing tests. What is missing here are the sales targets themselves but at least there is an acceptance we should focus on driving sales with current systems rather than trying to expand our footprint at the expense of actually securing revenue. Clearly tied to this is the need to reduce cost in the meantime - and good to see progress being made here also. Will be good to get further clarity on this but might have to wait until FY 2022 results (October?) for an update. SB