Renalytix plc (NASDAQ: RNLX) (LSE: RENX), an artificial
intelligence-enabled in vitro diagnostics company, focused on
optimizing clinical management of kidney disease to drive improved
patient outcomes and advance value-based care, today reported
financial results for the quarter ended March 31, 2022.
Recent Highlights (including post period
events)
- Successful completion of $30.0
million financing package ($26.8 million gross proceeds)
- Multiple data presentations at the
American Diabetes Association (ADA) 82nd Scientific Sessions®
meeting
- Focused on the value of
KidneyIntelX testing in patients with type 2 diabetes (T2D) and
early-stage chronic kidney disease (CKD):
- KidneyIntelX ability to assess risk
of heart failure hospitalization and death in large international
diabetic kidney disease patient cohort (also published in
Kidney360)
- KidneyIntelX testing in 1,112 adult
diabetic kidney disease (DKD) patients at Mount Sinai Health System
demonstrated utility in driving guideline appropriate use of
therapies, including SGLT-2 inhibitors and RAAS inhibitor use, and
timely consultation to specialists in high-risk patients.
- Continued KidneyIntelX testing
volume growth
- Over 3,000 KidneyIntelX risk scores generated for Mount Sinai
Health System patients and over 300 at Wake Forest Baptist
Health
- 33 state Medicaid programs
contracted to date
- New coverage for KidneyIntelX by
the largest private payer in Illinois with 8.1 million members
- KidneyIntelX coverage from the
largest independent provider network in North Carolina, South
Carolina and Virginia, with over 100,000 health care providers
in-network
Third Quarter 2022 Financial
ResultsDuring the three months ended March 31, 2022, the
Company recognized $0.8 million of revenue (Q3 FY21: $0.6 million).
Cost of revenue for the three months ended March 31, 2022 was $0.7
million (Q3 FY21: $0.2 million).
Operating expense for the three months ended
March 31, 2022 was $14.7 million compared to $8.5 million during
the prior year period.
Within operating expenses, research and
development expenses were $3.9 million for the three months ended
March 31, 2022, an increase of $0.8 million, from $3.1 million for
the three months ended March 31, 2021. The increase was driven by
employee related expenses, lab supplies and professional fees
associated with the utility studies at Mount Sinai, Wake Forest and
University of Utah.
General and administrative expenses were $10.8
million for the three months ended March 31, 2022, increasing by
$5.3 million from $5.5 million for the three months ended March 31,
2021. The increase was primarily due to a $4.3 million increase in
compensation, reimbursable expenses and related benefits, including
share-based payments, due to increased headcount, a $0.7 million
increase in consulting and professional fees including marketing
expense, a $0.2 million increase in computers, software and IT
costs, and a $0.1 million increase in other operating expenses.
Net loss attributable to ordinary shareholders
was $14.7 million for the three months ended March 31, 2022
compared to $8.8 million for the prior year period.
Cash and cash equivalents totaled $32.4 million
as of March 31, 2022. This was prior to the completion of the $26.8
million (gross) financing package, further details of which were
announced on March 31, 2022, which completed post-period end on
April 8, 2022.
The Company also intends to file with the
Securities and Exchange Commission a shelf registration statement
on Form F-3 pursuant to which the Company may offer and sell up to
$300 million of its ordinary shares, ordinary shares in the form of
ADSs, debt securities and warrants, including the intention to
enter into a sales agreement with a sales agent pursuant to which
the Company may sell, from time to time, at its option, up to $50
million of ADSs through the sales agent in “at the market”
transactions on Nasdaq.
The Company will host a corresponding conference
call and live webcast today to discuss the financial results and
key topics including business strategy, partnerships and regulatory
and reimbursement processes, at 8:30 a.m. (ET) / 1:30 p.m.
(GMT).
Conference Call Details:US/Canada Participant
Toll-Free Dial-In Number: (833) 614-1551US/Canada Participant
International Dial-In Number: (914) 987-7290United Kingdom
International Dial-In Number: 0800 0288 438United Kingdom Local
Dial-In Number: 0203 1070 289Conference ID: 1546327
Webcast Registration
link: https://edge.media-server.com/mmc/p/y3zwhkuk
For further information, please contact:
Renalytix plc |
www.renalytix.com |
James McCullough, CEO |
Via Walbrook PR |
|
|
Stifel (Nominated Adviser, Joint Broker) |
Tel: 020 7710 7600 |
Alex Price / Nicholas Moore |
|
|
|
Investec Bank plc (Joint Broker) |
Tel: 020 7597 4000 |
Gary Clarence / Daniel Adams |
|
|
|
Walbrook PR Limited |
Tel: 020 7933 8780 or
renalytix@walbrookpr.com |
Paul McManus / Lianne Applegarth / Alice Woodings |
Mob: 07980 541 893 / 07584 391 303 / 07407 804 654 |
|
|
CapComm Partners |
|
Peter DeNardo |
Tel: 415-389-6400 or investors@renalytix.com |
About RenalytixRenalytix (LSE:
RENX) (NASDAQ: RNLX) is the global founder and leader in the new
field of bioprognosis™ for kidney health. The company has
engineered a new solution that enables early-stage chronic kidney
disease progression risk assessment. The Company’s lead product,
KidneyIntelX™, has been granted Breakthrough Designation by the
U.S. Food and Drug Administration and is designed to help make
significant improvements in kidney disease prognosis, transplant
management, clinical care, patient stratification for drug clinical
trials, and drug target discovery (visit www.kidneyintelx.com). For
more information, visit www.renalytix.com.
Forward-Looking
StatementsStatements contained in this press release
regarding matters that are not historical facts are
“forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995, as amended. Examples of
these forward-looking statements include statements concerning: the
commercial prospects of KidneyIntelX, including whether
KidneyIntelX will be successfully adopted by physicians and
distributed and marketed, the rate of testing with KidneyIntelX in
health care systems, expectations and timing of announcement of
real-world testing evidence, the potential for KidneyIntelX to be
approved for additional indications, our expectations regarding
regulatory and reimbursement decisions, the ability of KidneyIntelX
to curtail costs of chronic and end-stage kidney disease, optimize
care delivery and improve patient outcomes, and our expectations
and guidance related to partnerships, testing volumes and revenue
for future periods. Words such as “anticipates,” “believes,”
“estimates,” “expects,” “intends,” “plans,” “seeks,” and similar
expressions are intended to identify forward-looking statements. We
may not actually achieve the plans and objectives disclosed in the
forward-looking statements, and you should not place undue reliance
on our forward-looking statements. Any forward-looking statements
are based on management’s current views and assumptions and involve
risks and uncertainties that could cause actual results,
performance or events to differ materially from those expressed or
implied in such statements. These risks and uncertainties include,
among others: that KidneyIntelX is based on novel artificial
intelligence technologies that are rapidly evolving and potential
acceptance, utility and clinical practice remains uncertain; we
have only recently commercially launched KidneyIntelX; and risks
relating to the impact on our business of the COVID-19 pandemic or
similar public health crises. These and other risks are described
more fully in our filings with the Securities and Exchange
Commission (SEC), including the “Risk Factors” section of our
annual report on Form 20-F filed with the SEC on October 21, 2021,
and other filings we make with the SEC from time to time. All
information in this press release is as of the date of the release,
and we undertake no obligation to publicly update any
forward-looking statement, whether as a result of new information,
future events, or otherwise, except as required by law.
RENALYTIX PLC
Operational Update and Financial Results
for the three and nine months ended March 31, 2022
Unless otherwise indicated, all references in
this report, to the terms “Renalytix,” “Renalytix plc,” “the
company,” “we,” “us” and “our” refer to Renalytix plc together with
its subsidiaries. We recommend that you read the discussion below
together with our audited financial statements and the notes
thereto, which appear in our Annual Report on Form 20-F for the
year ended June 30, 2021, filed with the Securities and Exchange
Commission on October 21, 2021 (our “Annual Report”).
The statements in this discussion regarding our
expectations regarding our market opportunity, partnerships,
reimbursement, regulatory approval, cash runway, revenue guidance,
capital requirements and future performance, as well as all other
non-historical statements are forward-looking statements.
Forward-looking statements involve known and unknown risks and
uncertainties that may cause our actual results, performance or
achievements to be materially different from any future results,
performance or achievements expressed or implied by the
forward-looking statements. These risks and uncertainties include,
but are not limited to, the risks and uncertainties set forth in
the “Risk Factors” section of our Annual Report and any subsequent
reports that we file with the SEC. See also the section titled
“Forward-Looking Statements” above.
OPERATIONAL REVIEW
About Renalytix
At Renalytix, we are helping lead the charge to
introduce simple, more accurate prognosis and effective care
management for the estimated 850 million people worldwide with
chronic kidney disease. In the United States alone, chronic kidney
disease affects close to an estimated 37 million people and is
responsible for one of the largest cost drivers in the national
medical system. Early identification, prognosis and treatment
beginning with primary care physicians is essential if we are to
stem the growing social cost and suffering associated with kidney
disease.
With our lead product, KidneyIntelX, our goal is
to shift the conversation from kidney disease to kidney health
through a more accurate understanding of early-stage risk. With the
deployment of KidneyIntelX this year, Renalytix has become a global
leader in the new field of bioprognosis, a biology-driven approach
to risk assessment that relies on integrating information from a
simple blood draw and a patient’s health record to produce an
accurate picture of kidney health. A doctor can use KidneyIntelX
results to act on patients at high risk of kidney disease
progression or failure at an early stage where active management
and therapeutics have the best opportunity to impact outcomes and
cost before it is too late.
We have crossed key data, reimbursement and
regulatory hurdles during a relatively short time-period since we
began operations in 2018 through a public listing on AIM, a market
of the London Stock Exchange. We subsequently expanded our capital
base by raising a further $17 million in July 2019, $85 million
through a listing on the Nasdaq Global Market in July 2020, and
$26.8 million through an equity and convertible note financing in
April 2022. The commercial roll-out of our kidney health solution,
KidneyIntelX, is underscored by:
- A 10-year
government-wide contract with the U.S. General Services
Administration at $950 per test
- Hiring of sales,
medical science liaison, and customer service support for national
coverage
- Joint program
with American Diabetes Association® to improve overall kidney
health in patients with type 2 diabetes
- The Centers for
Medicare & Medicaid Services awarding a national price of $950
per test
- 33 state
Medicaid program authorization contracts
- Launch of
myIntelX national provider access portal for on-line ordering of
KidneyIntelX
- Partnerships
announced with the Mount Sinai Health System, University of Utah,
Atrium Health, Wake Forest Baptist Health, Capital District
Physicians’ Health Plan (CDPHP), St. Joseph's Health and Singing
River Health System
- New York State
Department of Health approval
- A distinct
Common Procedural Terminology (CPT) Code for reimbursement granted
by the American Medical Association
- 26 private payor
coverage determinations
- Multi-center,
peer reviewed clinical studies validating the clinical
effectiveness and utility dynamics of KidneyIntelX for identifying
patients at high risk for rapid kidney disease progression and/or
kidney failure in the earliest stages of kidney disease
About KidneyIntelX
Our novel platform, KidneyIntelX, uses a
machine-learning enabled algorithm to process predictive blood
biomarkers with key features from a patient’s health record to
generate an early and accurate kidney health risk score. The score
identifies those patients at the most risk for kidney disease
progression and/or failure and further guides ongoing clinical
decisions.
KidneyIntelX is initially indicated for use with
adults who have diagnosed kidney disease and diabetes – diabetic
kidney disease or DKD. Future KidneyIntelX products in development
intend to expand the indicated uses to include broader chronic
kidney disease, health equity strategies and kidney health
monitoring through treatment. Diabetes is the leading cause of
chronic kidney disease, accounting for more than 40% of new cases,
and DKD patients are the highest contributors to emergency room
dialysis. Unfortunately, many DKD patients are unaware that they
either have kidney disease or that their disease has been
progressing, often uncontrolled, for many years and now find
themselves making difficult decisions about late-stage treatments.
We believe this predicament is largely avoidable and have built the
KidneyIntelX care model to ultimately provide the estimated 210,000
primary care physicians in the United States with a comprehensive
suite of information and guidelines driven follow-on action.
KidneyIntelX was designed as an expandable
platform which is able to add indicated uses and a monitoring
capability, all within an FDA regulated framework. Potential
expansion may include extending into additional populations of
chronic kidney disease patients beyond those with diabetes,
including patients of African ancestry with the APOL1 high-risk
genotype. We also intend to develop solutions for use in other
large chronic disease patient populations, like cardiovascular
disease.
Operational Progress
Renalytix is pleased to report continued
KidneyIntelX testing volume growth under a backdrop of increasing
insurance coverage and new medical systems coming on-line. In our
New York launch market, KidneyIntelX utilization has continued to
accelerate through the end of March. We have now provided
integrated advanced risk assessment services for over 3,000
patients with kidney disease and diabetes. In addition, over the
past six months KidneyIntelX clinical testing has now been brought
on-line within the Veterans Health Administration, our Albany New
York physician led payor partner, Atrium Health and Wake Forest
Baptist Health in the Southeast. We estimate our current
serviceable patient population with insurance payment availability
for KidneyIntelX testing at greater than one million patients.
Our commercial focus in calendar year 2022
remains on regions where our health system partnerships provide a
base for adoption of KidneyIntelX testing. As of the end of March
2022, we have four regional sales managers and 12 account
executives focused on the Veterans Health Administration. We have
also added a regional manager and three sales executives focused on
the New York market. This sales effort is being complemented by a
medical education effort led by a team of seven medical liaisons
and our partnership with the National Kidney Foundation to offer
chronic kidney disease education nationally. We expect additional
health providers to be brought on-line in the next few months,
including recently announced St. Josephs Health in central New York
State, and now expect to exceed 20 health centers running
KidneyIntelX patient risk assessment in calendar 2022.
Reimbursement and Regulatory
Insurance payment remains the biggest factor to
driving KidneyIntelX adoption and revenue growth. Over the past
year, we have consistently demonstrated that we can secure payment
for KidneyIntelX from a diverse set of insurance sources. To date,
we have received 26 private insurance coverage contracts, and
contracted with 33 state Medicaid programs. Our $950 reportable
pricing structure has been established by National Medicare and a
10-year government contract covering, among others, payment for
patient testing in the Veterans Health Administration Medical
system.
Under our real-world evidence study program with
Mount Sinai Health System, several metrics are pointing to greater
efficiencies being achieved with KidneyIntelX physician onboarding,
including the fact that time to first KidneyIntelX order from
education/training has dropped to three days currently from eleven
days in our fiscal second quarter.
Our partnership model with Mount Sinai Health
System under our real-world evidence study program is validating
the engagement of population health departments and KidneyIntelX
electronic health record integration to improving primary care
physician access to advanced prognosis in kidney disease. The
advantages of an integrated KidneyIntelX solution in a large
hospital system include 1) broad physician education and care
pathway support, 2) electronic test ordering and reporting, 3)
advanced data analytics and 4) patient education and support.
Our laboratory testing infrastructure and
personnel include the capacity to scale efficiently as distribution
opportunities expand in fiscal 2022 and 2023. We have now achieved
CAP Accreditation and ISO Certification for both Salt Lake City and
New York City laboratories, all important parts to expand testing
services and qualify for certain reimbursement.
Continuing to build a robust peer-reviewed
published data pool is a compelling driver for payer and market
adoption. In January, data was published in American Journal of
Nephrology demonstrating the value of KidneyIntelX for monitoring
patient response to new drug therapy in 1,325 multinational
clinical trial cohort patients. And in February, at the World
Congress of Nephrology, we provided results demonstrating
KidneyIntelX provides robust prognostic information to better
predict the future rate of decline in kidney function compared with
current standard diagnostics in patients with early-stage chronic
kidney disease and type 2 diabetes.
Current trading and outlook
We reported testing revenues of $0.8 million in
our fiscal third quarter, compared to $0.7 million in Q2 and $0.5
million in Q1. Volumes with Mount Sinai continued to increase in Q3
and, while the first half of Q4 saw an initial reduction in these
due to temporary changes in procedures and automation systems at
Mount Sinai, the second half of Q4 has seen a return to Q3 levels.
We anticipate that continued increasing Mount Sinai volumes,
coupled with additional hospital systems coming on-line in fiscal
2023, will result in corresponding increases in testing volumes.
Based on information available as of today, we anticipate
Renalytix’s revenue for the 2022 fiscal year ending June 30, 2022
to be approximately $2.9 million (of which $2.7 million is testing
revenue), up from $1.5 million in FY 2021, of which $0.4 million
was testing revenue.
In the fiscal second quarter, we made a number
of one-time investments pertaining to the recruiting, equipping,
training and deploying of our salesforce, and associated marketing
and other expenses to enable them to be most successful in the
field. We are pleased with the sales infrastructure we now have in
place to pursue the large Veterans Health Administration and
commercial hospital opportunities that are available to us. As we
grow the business, we plan to exercise continued prudent cash
discipline.
FINANCIAL REVIEW
Financial review of the three-month
period ended March 31, 2022 and comparison to prior year
period
Our operating loss for the three months ended
March 31, 2022, was $14.5 million (March 31, 2021: $8.1 million)
and the net loss attributable to ordinary shareholders for the
three months ended March 31, 2022, was $14.7 million (March 31,
2021: $8.8 million).
Revenue
During the three months ended March 31, 2022, we
recognized $0.8 million of revenue related to KidneyIntelX testing.
There was $0.1 million of revenue related to KidneyIntelX testing
and $0.6 million of professional services revenue for the three
months ended March 31, 2021.
Cost of Revenue
During the three months ended March 31, 2022,
cost of revenue consisted of $0.7 million primarily attributable to
KidneyIntelX testing, including labor and materials costs directly
related to revenue generating activities. There was $0.2 million of
cost of revenue for the three months ended March 31, 2021.
Research and Development
Costs
Research and development expenses increased by
$0.8 million, from $3.1 million for the three months ended March
31, 2021 to $3.9 million for the three months ended March 31, 2022.
The increase was driven by employee related expenses, lab supplies
and professional fees associated with the utility studies at Mount
Sinai, Wake Forest and University of Utah.
General and Administrative
Costs
General and administrative expenses increased by
$5.3 million, from $5.5 million for the three months ended March
31, 2021 to $10.8 million for the three months ended March 31,
2022. The increase was primarily due to a $4.3 million increase in
compensation, reimbursable expenses and related benefits, including
share-based payments, due to increased headcount, a $0.7 million
increase in consulting and professional fees including marketing
expense, a $0.2 million increase in computers, software and IT
costs, and a $0.1 million increase in other operating expenses.
Performance of Contract Liability to
Affiliate
In May 2020, we and the Icahn School of Medicine
at Mount Sinai entered into an operating agreement to form a joint
venture, Kantaro Biosciences LLC, or Kantaro, for the purpose of
developing and commercializing laboratory tests for the detection
of antibodies against SARS-CoV-2 originally developed by Mount
Sinai. During the three months ended March 31, 2022, we recognized
$0.03 million of expense related to the performance of our contract
liability with Kantaro compared to $0.1 million during the three
months ended March 31, 2021. This represents the allocation of
costs related to performing services on behalf of Kantaro.
Foreign Currency Loss
During the three months ended March 31, 2022, we
recorded an unrealized foreign exchange gain of $2.4 million
primarily attributable to intercompany loans and cash balances
denominated in currencies other than the functional currency. We
recorded an unrealized foreign currency loss of $1.1 million during
the three months ended March 31, 2021.
Fair Value Adjustments to VericiDx
Investment
We account for our investment in VericiDx using
the equity method of accounting and have elected to use the fair
value option to value the investment. During the three months ended
March 31, 2022, we recorded a loss of $2.6 million to adjust the
VericiDx investment to fair value. We recorded a gain of $0.3
million during the three months ended March 31, 2021.
Financial review of the nine months
ended March 31, 2022 and comparison to prior year
period
Our operating loss for the nine months ended
March 31, 2022, was $40.1 million (March 31, 2021: $22.1 million)
and the net loss attributable to ordinary shareholders for the nine
months ended March 31, 2022, was $40.1 million (March 31, 2021:
$24.9 million).
Revenue
During the nine months ended March 31, 2022, we
recognized $1.9 million of revenue related to KidneyIntelX and $0.2
million of revenue related to services performed for AstraZeneca.
During the nine months ended March 31, 2021, we recognized $0.4
million of pharmaceutical services revenue related to the statement
of work with AstraZeneca, $0.6 million of services revenue related
to work performed for Mount Sinai and $0.1 million of KidneyIntelX
testing revenue.
Cost of Revenue
During the nine months ended March 31, 2022,
cost of revenue consisted of $1.4 million primarily attributable to
KidneyIntelX testing, including labor and materials costs directly
related to revenue generating activities. There was $0.4 million of
cost of revenue for the nine months ended March 31, 2021.
Research and Development
Costs
Research and development expenses increased by
$4.7 million, from $7.3 million for the nine months ended March 31,
2021 to $12.0 million for the nine months ended March 31, 2022. The
increased R&D expense was driven by employee related expenses
and professional fees associated with the utility studies at Mount
Sinai, Wake Forest and University of Utah.
General and Administrative
Costs
General and administrative expenses increased by
$12.7 million, from $16.3 million for the nine months ended March
31, 2021 to $29.0 million for the nine months ended March 31, 2022.
The increase was primarily due to a $8.7 million increase in
compensation, reimbursable expenses and related benefits, including
share-based payments, due to increased headcount, a $2.7 million
increase in consulting and professional fees including marketing
expense, a $1.0 million increase in computers, software and IT
costs and a $0.3 million increase in other operating expenses.
Performance of Contract Liability to
Affiliate
In May 2020, we and the Icahn School of Medicine
at Mount Sinai entered into an operating agreement to form a joint
venture, Kantaro Biosciences LLC, or Kantaro, for the purpose of
developing and commercializing laboratory tests for the detection
of antibodies against SARS-CoV-2 originally developed by Mount
Sinai. During the nine months ended March 31, 2022, we recognized
$0.2 million of expense related to the performance of our contract
liability with Kantaro compared to $0.9 million during the nine
months ended March 31, 2021. This represents the allocation of
costs related to performing services on behalf of Kantaro.
Foreign Currency Gain
(Loss)
During the nine months ended March 31, 2022, we
recorded an unrealized foreign exchange gain of $4.6 million
primarily attributable to intercompany loans and cash balances
denominated in currencies other than the functional currency. We
recorded an unrealized foreign currency loss of $8.8 million during
the nine months ended March 31, 2021.
Fair Value Adjustments to VericiDx
Investment
We account for our investment in VericiDx using
the equity method of accounting and have elected to use the fair
value option to value the investment. During the nine months ended
March 31, 2022, we recorded a loss of $4.6 million to adjust the
VericiDx investment to fair value. We recorded a gain of $5.4
million during the nine months ended March 31, 2021.
Liquidity and Capital
Resources
Since our inception, we have incurred net
losses. As of March 31, 2022, we had an accumulated deficit of
$127.6 million.
We expect to incur additional losses in the near
future, and we expect our expenses to increase in connection with
our ongoing activities, particularly as we continue to
commercialize and scale KidneyIntelX, particularly as we conduct
our ongoing and planned clinical utility and other studies for
KidneyIntelX for its commercial launch, develop and refine our
artificial intelligence technology platform, seek regulatory
clearances or approvals for KidneyIntelX or any other product we
develop, establish and maintain partnerships with healthcare
systems, pursue our coverage and reimbursement strategy and
continue to invest in our infrastructure to support our
manufacturing and other activities. In addition, we expect to incur
additional costs associated with operating as a public company in
the United States. The timing and amount of our operating
expenditures will depend largely on:
- the cost, progress
and results of our ongoing and planned validation studies and
health economic studies;
- the cost, timing
and outcome of entering into and maintaining partnership agreements
with healthcare systems for the commercial sale of
KidneyIntelX;
- the cost of
manufacturing clinical and commercial supply of KidneyIntelX;
- the cost, timing
and outcome of regulatory review of KidneyIntelX, including any
post-marketing studies that could be required by regulatory
authorities;
- the cost, timing
and outcome of identified and potential future commercialization
activities, including manufacturing, marketing, sales and
distribution, for KidneyIntelX;
- the costs and
timing of preparing, filing and prosecuting patent applications,
maintaining and enforcing our intellectual property rights and
defending any intellectual property-related claims, including any
claims by third parties that we are infringing upon their
intellectual property rights;
- the timing and
amount of future revenue, if any, received from commercial sales of
KidneyIntelX;
- the sales price and
availability of adequate third-party coverage and reimbursement for
KidneyIntelX;
- the effect of
competing technological and market developments; and
- the extent to which
we acquire or invest in businesses, products and technologies, such
as Kantaro, although we currently have no other commitments or
agreements to complete any such transactions.
To date, we have primarily financed our
operations through equity and debt financings. As of March 31,
2022, we had cash and cash equivalents of $32.4 million. We believe
that our pre-financing cash balance together with the aggregate
$26.8 million of gross proceeds raised in April 2022 will enable us
to fund our current operating plan for at least the next 12 months.
We have based this estimate on assumptions that may prove to be
wrong, and we could use our available capital resources sooner than
we currently expect.
Until such time, if ever, as we can generate
substantial revenue from sales of KidneyIntelX tests, we expect to
finance our cash needs through a combination of securities
offerings, debt financings, collaborations, strategic alliances and
marketing, distribution or licensing arrangements with third
parties. 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. Historically, we
have not obtained traditional bank debt financing. EKF provided
short-term debt financing that was repaid in November 2018 and we
received a loan in an aggregate principal amount of $255,000
pursuant to the Paycheck Protection Program (the “PPP”) under the
Coronavirus Aid, Relief, and Economic Security (CARES) Act and
implemented by the U.S. Small Business Administration. In April
2022, we announced that we had closed a fundraising transaction
comprising (1) an $8.8 million equity subscription at $7.25 per ADS
($3.625 per ordinary share) and (2) a $21.2 million aggregate
principal amount of convertible bonds with an issue price of 85 per
cent of the principal amount (resulting in net cash proceeds of
$18.02 million), 5.5% coupon (payable in cash or shares at the
Company’s option) and a 5-year term. This transaction is further
described in our Report on Form 6-K filed on April 1, 2022. See
Note 13 to our financial statements found elsewhere in this
report.
Cash Flows
Net cash used in operating activities
During the nine months ended March 31, 2022, net
cash used in operating activities was $31.8 million and was
primarily attributable to our $40.1 million net loss including a
$4.7 million net change in our operating assets and liabilities and
$3.7 million in noncash charges. The change in our operating assets
and liabilities was primarily attributable to a $7.0 million
increase in accrued expenses and other current liabilities, driven
by a $4.0 million current liability related to funds received from
the Icahn School of Medicine at Mount Sinai ahead of the April
equity investment, offset by a $2.9 million decrease in prepaid
expenses and other current assets. Noncash charges were primarily
related to $2.9 million in share-based compensation and the $4.6
million fair value adjustment of our Verici securities, offset by a
$4.2 million unrealized foreign exchange gain.
During the nine months ended March 31, 2021, we
used $23.3 million of cash in operating activities primarily
attributable to our net loss of $25.5 million. This use of cash was
partially offset by $2.2 million in noncash items such as
depreciation and amortization, share-based compensation, equity
losses in Kantaro, change in fair value of our VericiDx investment
and foreign exchange remeasurement losses. The net cash outflow
from changes in our operating assets and liabilities remained
relatively unchanged.
Net cash used in investing activities
During the nine months ended March 31, 2022, net
cash used in investing activities was $0.7 million, primarily
attributable to $0.6 million for purchases of lab and office
equipment and $0.1 million in software development costs.
During the nine months ended March 31, 2021, net
cash used in investing activities was $0.5 million and primarily
attributable to $1.0 million in proceeds from short-term
investments. This was offset by $0.9 million for the purchase of
lab and office equipment, $0.4 million of software development
costs and an increase of $0.2 million related to our note
receivable from a related party. In addition, cash decreased by
$0.06 million due to the deconsolidation of VericiDx.
Net cash used in financing activities
During the nine months ended March 31, 2022, net
cash provided by financing activities was $0.3 million and was
primarily attributable to $0.1 million in proceeds from the
issuance of ordinary shares under our employee stock purchase
program as well as $0.2 million in proceeds from the exercise of
stock options.
During the nine months ended March 31, 2021, net
cash provided by financing activities was $76.9 million and was
primarily attributable to $79.2 million of proceeds from our IPO on
the Nasdaq Global Market which was partially offset by offering
costs of $2.3 million associated with the IPO that were paid in the
period.
Cash and Cash Equivalents
We had cash and cash equivalents of $32.4
million as of March 31, 2022, which decreased from $65.2 million as
of June 30, 2021 due to normal operations as we continue to
commercialize KidneyIntelX and grow our business. This was prior to
the completion of the $26.8 million (gross) financing package,
further details of which were announced on March 31, 2022, which
completed post-period end on April 8, 2022.
Critical accounting policies and
significant judgments and estimates
Our management's discussion and analysis of our
financial condition and results of operations is based on our
unaudited condensed consolidated financial statements, which we
have prepared in accordance with generally accepted accounting
principles in the United States, "U.S. GAAP". The preparation of
our unaudited condensed consolidated financial statements and
related disclosures requires us to make estimates and judgments
that affect the reported amounts of assets, liabilities, costs and
expenses, and the disclosure of contingent assets and liabilities
in our unaudited condensed consolidated financial statements. We
base our estimates on historical experience, known trends and
events and various other factors that we believe are reasonable
under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. We
evaluate our estimates and assumptions on an ongoing basis. Our
actual results may differ from these estimates under different
assumptions or conditions.
There have been no material changes to our
critical accounting policies from those described in "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" included in our Annual Report.
Recent accounting
pronouncements
See Note 3 to our financial statements found
elsewhere in this report for a description of recent accounting
pronouncements applicable to our financial statements.
JOBS Act transition period
In April 2012, the JOBS Act was enacted. Section
107 of the JOBS Act provides that an “emerging growth company” can
take advantage of the extended transition period provided in
Section 7(a)(2)(B) of the Securities Act of 1933, as amended, for
complying with new or revised accounting standards. An emerging
growth company can delay the adoption of certain accounting
standards until those standards would otherwise apply to private
companies. We have elected to take advantage of the extended
transition period for complying with new or revised accounting
standards and, as a result, our financial statements may not be
comparable to companies that comply with new or revised accounting
pronouncements as of public company effective dates. We are in the
process of evaluating the benefits of relying on other exemptions
and reduced reporting requirements under the JOBS Act. Subject to
certain conditions, as an emerging growth company, we may rely on
certain of these exemptions, including without limitation
exemptions to the requirements for (1) providing an auditor’s
attestation report on our system of internal controls over
financial reporting pursuant to Section 404(b) of the
Sarbanes-Oxley Act and (2) complying with any requirement that may
be adopted by the Public Company Accounting Oversight Board
regarding mandatory audit firm rotation or a supplement to the
auditor’s report providing additional information about the audit
and the financial statements, known as the auditor discussion and
analysis. We will remain an emerging growth company until the
earlier to occur of (a) the last day of the fiscal year (1)
following the fifth anniversary of the completion of our U.S. IPO,
(2) in which we have total annual gross revenues of at least $1.07
billion or (3) in which we are deemed to be a “large accelerated
filer” under the rules of the SEC, which means the market value of
our ordinary shares and ADSs that are held by non-affiliates
exceeds $700.0 million as of the prior December 31, or (b) the date
on which we have issued more than $1.0 billion in non-convertible
debt during the prior three-year period.
RENALYTIX PLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in
thousands, except share and per share data) |
|
March 31, 2022 |
|
|
June 30, 2021 |
|
Assets |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
32,361 |
|
|
$ |
65,128 |
|
Accounts receivable |
|
|
1,009 |
|
|
|
594 |
|
Prepaid expenses and other current assets |
|
|
3,837 |
|
|
|
993 |
|
Note receivable from Kantaro |
|
|
75 |
|
|
|
75 |
|
Receivable from affiliates |
|
|
1 |
|
|
|
1 |
|
Total current assets |
|
|
37,283 |
|
|
|
66,791 |
|
Property and equipment,
net |
|
|
2,850 |
|
|
|
2,490 |
|
Investment in VericiDx |
|
|
4,322 |
|
|
|
9,295 |
|
Investment in Kantaro |
|
|
11 |
|
|
— |
|
Total assets |
|
$ |
44,466 |
|
|
$ |
78,576 |
|
|
|
|
|
|
|
|
Liabilities and Shareholders’
Equity |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
Accounts payable |
|
$ |
2,056 |
|
|
$ |
1,403 |
|
Accounts payable – related party |
|
|
1,007 |
|
|
|
361 |
|
Accrued expenses and other current liabilities |
|
|
6,689 |
|
|
|
4,602 |
|
Accrued expenses – related party |
|
|
5,031 |
|
|
|
224 |
|
Deferred revenue |
|
|
67 |
|
|
|
122 |
|
Payable to affiliate – current |
|
|
187 |
|
|
|
350 |
|
Total current liabilities |
|
|
15,037 |
|
|
|
7,062 |
|
Other liabilities |
|
|
14 |
|
|
|
53 |
|
Total liabilities |
|
|
15,051 |
|
|
|
7,115 |
|
|
|
|
|
|
|
|
Commitments and contingencies
(Note 8) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity: |
|
|
|
|
|
|
Ordinary shares, £0.0025 par value per share: 76,869,831 shares
authorized; 72,308,930 and 72,197,286 shares issued and outstanding
at March 31, 2022 and June 30, 2021, respectively |
|
|
220 |
|
|
|
220 |
|
Additional paid-in capital |
|
|
153,604 |
|
|
|
150,407 |
|
Accumulated other comprehensive income |
|
|
3,156 |
|
|
|
8,276 |
|
Accumulated deficit |
|
|
(127,565 |
) |
|
|
(87,442 |
) |
Total shareholders’ equity |
|
|
29,415 |
|
|
|
71,461 |
|
Total liabilities and shareholders’ equity |
|
$ |
44,466 |
|
|
$ |
78,576 |
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
RENALYTIX PLC
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)
|
|
Three Months Ended |
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
Nine Months Ended |
|
(in
thousands, except share data) |
|
March 31, 2022 |
|
|
March 31, 2021 |
|
|
March 31, 2022 |
|
|
March 31, 2021 |
|
Revenue |
|
$ |
812 |
|
|
$ |
619 |
|
|
$ |
2,139 |
|
|
$ |
1,019 |
|
Cost of revenue |
|
|
685 |
|
|
|
169 |
|
|
|
1,404 |
|
|
|
426 |
|
Gross profit |
|
|
127 |
|
|
|
450 |
|
|
|
735 |
|
|
|
593 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
3,887 |
|
|
|
3,104 |
|
|
|
12,019 |
|
|
|
7,311 |
|
General and administrative |
|
|
10,809 |
|
|
|
5,547 |
|
|
|
29,012 |
|
|
|
16,258 |
|
Performance of contract liability to affiliate |
|
|
(32 |
) |
|
|
(130 |
) |
|
|
(163 |
) |
|
|
(889 |
) |
Total operating expenses |
|
|
14,664 |
|
|
|
8,521 |
|
|
|
40,868 |
|
|
|
22,680 |
|
Loss from operations |
|
|
(14,537 |
) |
|
|
(8,071 |
) |
|
|
(40,133 |
) |
|
|
(22,087 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in net (losses)
earnings of affiliate |
|
|
(26 |
) |
|
|
(8 |
) |
|
|
11 |
|
|
|
(229 |
) |
Foreign currency gain (loss),
net |
|
|
2,447 |
|
|
|
(1,095 |
) |
|
|
4,587 |
|
|
|
(8,783 |
) |
Fair value adjustment to
VericiDx investment |
|
|
(2,575 |
) |
|
|
337 |
|
|
|
(4,596 |
) |
|
|
5,355 |
|
Other (expense) income,
net |
|
|
(4 |
) |
|
|
61 |
|
|
|
8 |
|
|
|
228 |
|
Net loss |
|
|
(14,695 |
) |
|
|
(8,776 |
) |
|
|
(40,123 |
) |
|
|
(25,516 |
) |
Net loss attributable to
noncontrolling interest |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(611 |
) |
Net loss attributable to
ordinary shareholders |
|
|
(14,695 |
) |
|
|
(8,776 |
) |
|
|
(40,123 |
) |
|
|
(24,905 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
(loss): |
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange translation adjustment |
|
|
(2,632 |
) |
|
|
1,163 |
|
|
|
(5,120 |
) |
|
|
9,504 |
|
Comprehensive loss |
|
|
(17,327 |
) |
|
|
(7,613 |
) |
|
|
(45,243 |
) |
|
|
(16,012 |
) |
Comprehensive loss
attributable to noncontrolling interest |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(72 |
) |
Comprehensive loss
attributable to Renalytix |
|
$ |
(17,327 |
) |
|
$ |
(7,613 |
) |
|
$ |
(45,243 |
) |
|
$ |
(15,940 |
) |
Net loss per ordinary
share—basic and diluted |
|
$ |
(0.20 |
) |
|
$ |
(0.12 |
) |
|
$ |
(0.56 |
) |
|
$ |
(0.35 |
) |
Weighted average ordinary
shares—basic and diluted |
|
|
72,297,309 |
|
|
|
72,035,126 |
|
|
|
72,274,979 |
|
|
|
71,294,883 |
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
RENALYTIX PLC
CONDENSED CONSOLIDATED STATEMENTS OF
SHAREHOLDERS’ EQUITY (UNAUDITED)
|
|
Ordinary shares |
|
|
Additionalpaid-in |
|
|
Accumulatedothercomprehensive |
|
|
Accumulated |
|
|
Totalshareholders’ |
|
(in thousands, except share and per share
data) |
|
Shares |
|
|
Amount |
|
|
capital |
|
|
income (loss) |
|
|
deficit |
|
|
equity |
|
Balance at July 1, 2021 |
|
|
72,197,286 |
|
|
$ |
220 |
|
|
$ |
150,407 |
|
|
$ |
8,276 |
|
|
$ |
(87,442 |
) |
|
$ |
71,461 |
|
Shares issued under the employee share purchase plan |
|
|
10,920 |
|
|
|
— |
|
|
|
120 |
|
|
|
— |
|
|
|
— |
|
|
|
120 |
|
Exercise of stock options |
|
|
32,500 |
|
|
|
— |
|
|
|
86 |
|
|
|
— |
|
|
|
— |
|
|
|
86 |
|
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
997 |
|
|
|
— |
|
|
|
— |
|
|
|
997 |
|
Currency translation adjustments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,585 |
) |
|
|
— |
|
|
|
(2,585 |
) |
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(10,106 |
) |
|
|
(10,106 |
) |
Balance at September 30,
2021 |
|
|
72,240,706 |
|
|
$ |
220 |
|
|
$ |
151,610 |
|
|
$ |
5,691 |
|
|
$ |
(97,548 |
) |
|
$ |
59,973 |
|
Exercise of stock options |
|
|
68,224 |
|
|
|
— |
|
|
|
111 |
|
|
|
— |
|
|
|
— |
|
|
|
111 |
|
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
941 |
|
|
|
— |
|
|
|
— |
|
|
|
941 |
|
Currency translation adjustments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
97 |
|
|
|
— |
|
|
|
97 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(15,322 |
) |
|
|
(15,322 |
) |
Balance at December 31,
2021 |
|
|
72,308,930 |
|
|
$ |
220 |
|
|
$ |
152,662 |
|
|
$ |
5,788 |
|
|
$ |
(112,870 |
) |
|
$ |
45,800 |
|
Exercise of stock options |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
942 |
|
|
|
— |
|
|
|
— |
|
|
|
942 |
|
Currency translation adjustment |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,632 |
) |
|
|
— |
|
|
|
(2,632 |
) |
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(14,695 |
) |
|
|
(14,695 |
) |
Balance at March 31, 2022 |
|
|
72,308,930 |
|
|
$ |
220 |
|
|
$ |
153,604 |
|
|
$ |
3,156 |
|
|
$ |
(127,565 |
) |
|
$ |
29,415 |
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
RENALYTIX PLC
CONDENSED CONSOLIDATED STATEMENTS OF
SHAREHOLDERS’ EQUITY (UNAUDITED)
|
|
Ordinary shares |
|
|
Additionalpaid-in |
|
|
Accumulated other comprehensive |
|
|
Accumulated |
|
|
Totalshareholders’(deficit) equityattributable
to |
|
|
Noncontrolling |
|
|
Totalshareholders’ |
|
(in thousands, except share and per share
data) |
|
Shares |
|
|
Amount |
|
|
capital |
|
|
income (loss) |
|
|
deficit |
|
|
Renalytix |
|
|
interests |
|
|
equity |
|
Balance at July 1, 2020 |
|
|
59,416,134 |
|
|
$ |
179 |
|
|
$ |
69,650 |
|
|
$ |
(1,200 |
) |
|
$ |
(52,717 |
) |
|
$ |
15,912 |
|
|
$ |
— |
|
|
$ |
15,912 |
|
Sale of ordinary shares in initial public offering on Nasdaq, net
of offering costs and underwriting fees of $9,007 |
|
|
12,613,500 |
|
|
|
40 |
|
|
|
76,094 |
|
|
|
— |
|
|
|
— |
|
|
|
76,134 |
|
|
|
— |
|
|
|
76,134 |
|
VericiDx distribution in specie |
|
— |
|
|
|
— |
|
|
|
1,638 |
|
|
|
(25 |
) |
|
|
— |
|
|
|
1,613 |
|
|
|
(1,613 |
) |
|
|
— |
|
Share-based compensation expense |
|
— |
|
|
|
— |
|
|
|
501 |
|
|
|
— |
|
|
|
— |
|
|
|
501 |
|
|
|
— |
|
|
|
501 |
|
Currency translation adjustments |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,255 |
|
|
|
— |
|
|
|
2,255 |
|
|
|
(67 |
) |
|
|
2,188 |
|
Net loss |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(7,221 |
) |
|
|
(7,221 |
) |
|
|
(393 |
) |
|
|
(7,614 |
) |
Balance at September 30,
2020 |
|
|
72,029,634 |
|
|
$ |
219 |
|
|
$ |
147,883 |
|
|
$ |
1,030 |
|
|
$ |
(59,938 |
) |
|
$ |
89,194 |
|
|
$ |
(2,073 |
) |
|
$ |
87,121 |
|
VericiDx noncontrolling interest upon deconsolidation |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,296 |
|
|
|
2,296 |
|
Share-based compensation expense |
|
— |
|
|
|
— |
|
|
|
525 |
|
|
|
— |
|
|
|
— |
|
|
|
525 |
|
|
|
— |
|
|
|
525 |
|
Currency translation adjustments |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6,086 |
|
|
|
— |
|
|
|
6,086 |
|
|
|
(5 |
) |
|
|
6,081 |
|
Net loss |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(8,908 |
) |
|
|
(8,908 |
) |
|
|
(218 |
) |
|
|
(9,126 |
) |
Balance at December 31,
2020 |
|
|
72,029,634 |
|
|
$ |
219 |
|
|
$ |
148,408 |
|
|
$ |
7,116 |
|
|
$ |
(68,846 |
) |
|
$ |
86,897 |
|
|
$ |
— |
|
|
$ |
86,897 |
|
Shares issued under the employee share purchase plan |
|
|
17,652 |
|
|
|
— |
|
|
|
111 |
|
|
|
— |
|
|
|
— |
|
|
|
111 |
|
|
|
— |
|
|
|
111 |
|
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
631 |
|
|
|
— |
|
|
|
— |
|
|
|
631 |
|
|
|
— |
|
|
|
631 |
|
Currency translation adjustment |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,163 |
|
|
|
— |
|
|
|
1,163 |
|
|
|
— |
|
|
|
1,163 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(8,776 |
) |
|
|
(8,776 |
) |
|
|
— |
|
|
|
(8,776 |
) |
Balance at March 31, 2021 |
|
|
72,047,286 |
|
|
$ |
219 |
|
|
$ |
149,150 |
|
|
$ |
8,279 |
|
|
$ |
(77,622 |
) |
|
$ |
80,026 |
|
|
$ |
— |
|
|
$ |
80,026 |
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
RENALYTIX PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (UNAUDITED)
(in thousands) |
|
Nine Months EndedMarch 31,
2022 |
|
|
Nine Months EndedMarch 31,
2021 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
Net loss |
|
$ |
(40,123 |
) |
|
$ |
(25,516 |
) |
Adjustments to reconcile net
loss to net cash used in operating activities |
|
|
|
|
|
|
Gain on VericiDx deconsolidation |
|
|
— |
|
|
|
(46 |
) |
Depreciation and amortization |
|
|
354 |
|
|
|
182 |
|
Share-based compensation |
|
|
2,880 |
|
|
|
1,657 |
|
Realized gain on short-term investments |
|
|
— |
|
|
|
(18 |
) |
Equity in (net earnings) losses of affiliate |
|
|
(11 |
) |
|
|
229 |
|
Fair value adjustment to VericiDx investment |
|
|
4,596 |
|
|
|
(5,355 |
) |
Unrealized foreign exchange loss (gain) loss |
|
|
(4,169 |
) |
|
|
5,546 |
|
Changes in operating assets
and liabilities: |
|
|
|
|
|
|
Accounts receivable |
|
|
(415 |
) |
|
|
(68 |
) |
Prepaid expenses and other current assets |
|
|
(2,915 |
) |
|
|
(1,951 |
) |
Receivable from affiliates |
|
|
— |
|
|
|
(143 |
) |
Accounts payable |
|
|
673 |
|
|
|
240 |
|
Accounts payable – related party |
|
|
646 |
|
|
|
— |
|
Accrued expenses and other current liabilities |
|
|
2,091 |
|
|
|
2,491 |
|
Accrued expenses – related party |
|
|
4,893 |
|
|
|
287 |
|
Deferred revenue |
|
|
(55 |
) |
|
|
— |
|
Payable to affiliate – current |
|
|
(163 |
) |
|
|
(890 |
) |
Other liabilities |
|
|
(39 |
) |
|
|
53 |
|
Net cash used in operating
activities |
|
|
(31,757 |
) |
|
|
(23,302 |
) |
|
|
|
|
|
|
|
Cash flows from investing
activities: |
|
|
|
|
|
|
Purchases of property and
equipment |
|
|
(619 |
) |
|
|
(879 |
) |
Software development
costs |
|
|
(103 |
) |
|
|
(428 |
) |
Proceeds from short-term
investments |
|
|
— |
|
|
|
1,000 |
|
Note receivable – related
party |
|
|
— |
|
|
|
(167 |
) |
Decrease in cash (VericiDx
deconsolidation) |
|
|
— |
|
|
|
(62 |
) |
Net cash used in investing
activities |
|
|
(722 |
) |
|
|
(536 |
) |
|
|
|
|
|
|
|
Cash flows from financing
activities: |
|
|
|
|
|
|
Gross proceeds from the
issuance of ordinary shares, net of underwriting fees |
|
|
— |
|
|
|
79,182 |
|
Payment of offering costs |
|
|
— |
|
|
|
(2,305 |
) |
Proceeds from the issuance of
ordinary shares under employee share purchase plan |
|
|
120 |
|
|
|
111 |
|
Proceeds from exercise of
stock options |
|
|
197 |
|
|
|
— |
|
Net cash provided by financing
activities |
|
|
317 |
|
|
|
76,988 |
|
Effect of exchange rate
changes on cash |
|
|
(605 |
) |
|
|
3,633 |
|
Net (decrease) increase in
cash and cash equivalents |
|
|
(32,767 |
) |
|
|
56,783 |
|
Cash and cash equivalents,
beginning of period |
|
|
65,128 |
|
|
|
13,293 |
|
Cash and cash equivalents, end
of period |
|
$ |
32,361 |
|
|
$ |
70,076 |
|
Supplemental noncash investing
and financing activities: |
|
|
|
|
|
|
Deemed distribution of
VericiDx ordinary shares |
|
$ |
— |
|
|
$ |
75 |
|
Conversion of distribution of
VericiDx note receivable into VericiDx ordinary shares |
|
$ |
— |
|
|
$ |
2,556 |
|
Software development costs in
accounts payable and accrued expenses |
|
$ |
— |
|
|
$ |
195 |
|
Purchase of property and
equipment in accounts payable and accrued expenses |
|
$ |
50 |
|
|
$ |
31 |
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
RENALYTIX PLC
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
1. Business and risks
Renalytix and its wholly-owned subsidiaries,
Renalytix AI, Inc. and Renalytix AI Limited (collectively,
“Renalytix”, or the “Company”) is an artificial
intelligence-enabled in vitro diagnostics company focused on
optimizing clinical management of kidney disease to drive improved
patient outcomes and significantly lower healthcare costs.
KidneyIntelX, the Company’s 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. Additionally,
the Company has successfully completed the first stage of a
statement of work with AstraZeneca Pharmaceuticals LP
(“AstraZeneca”) to conduct a feasibility study to determine the
impact of the use of the Company’s KidneyIntelX platform to
optimize utilization of various CKD agents. Further, in December
2020 the Company entered into a master service agreement with
AstraZeneca for future services of this nature. As a result of the
initial success with AstraZeneca the Company plans to pursue
further collaborations with pharmaceutical companies and make
‘Pharmaceutical Services Revenue’ a core part of the business going
forward with the goal of improving guideline-based standard-of-care
for optimal utilization of existing and novel therapeutics using
the KidneyIntelX testing platform and proprietary care management
software.
Since inception in March 2018, the Company has
focused primarily on organizing and staffing the Company, raising
capital, developing the KidneyIntelX platform, conducting clinical
validation studies for KidneyIntelX, establishing and protecting
its intellectual property portfolio and commercial laboratory
operations, pursuing regulatory clearance and developing a
reimbursement strategy. To date, the Company has generated de
minimis revenue from the sales of KidneyIntelX tests. The Company
has funded its operations primarily through equity and debt
financings.
The Company is subject to risks and
uncertainties common to early-stage companies in the diagnostics
industry, including, but not limited to, ability to secure
additional capital to fund operations, compliance with governmental
regulations, development by competitors of new technological
innovations, dependence on key personnel and protection of
proprietary technology. To achieve widespread usage, KidneyIntelX
and additional diagnostic products currently under development will
require extensive clinical testing and validation prior to
regulatory approval and commercialization. These efforts require
significant amounts of additional capital, adequate personnel, and
infrastructure and extensive compliance-reporting capabilities.
2. Liquidity and Going
Concern
The Company has incurred recurring losses and
negative cash flows from operations since inception and had an
accumulated deficit of $127.6 million as of March 31, 2022. The
Company anticipates incurring additional losses until such time, if
ever, that it can generate significant sales of KidneyIntelX or any
future products currently in development. Management believes its
cash and cash equivalents of $32.4 million as of March 31, 2022
together with the aggregate $26.8 million of gross proceeds raised
in April 2022, are sufficient to fund the projected operations for
at least the next twelve months from the issuance date of these
financial statements. Substantial additional capital will be needed
by the Company to fund its operations, expand its commercial
activities and develop other potential diagnostic related
products.
The Company plans to seek additional funding
through public or private equity offerings, debt financings, other
collaborations, strategic alliances, and licensing arrangements.
The Company may not be able to obtain financing on acceptable
terms, or at all, and the Company may not be able to enter into
strategic alliances or other arrangements on favorable terms, or at
all. The terms of any financing may adversely affect the holdings
or the rights of the Company’s shareholders. If the Company is
unable to obtain funding, the Company could be required to delay,
curtail or discontinue research and development programs, product
portfolio expansion or future commercialization efforts, which
could adversely affect its business prospects.
3. Basis of presentation and summary of
significant accounting policies
The accompanying unaudited interim condensed
consolidated financial statements have been prepared in conformity
with generally accepted accounting principles in the United States
(“U.S. GAAP”). Any reference in these notes to applicable guidance
is meant to refer to U.S. GAAP as found in the Accounting Standards
Codification (“ASC”) and Accounting Standards Updates (“ASU”) of
the Financial Accounting Standards Board (“FASB”).
In the opinion of management, the accompanying
unaudited interim condensed consolidated financial statements
include all normal and recurring adjustments (which consist
primarily of accruals and estimates that impact the financial
statements) considered necessary to present fairly the Company’s
financial position as of March 31, 2022 and its results of
operations for the three and nine months ended March 31, 2022 and
2021 and cash flows for the nine months ended March 31, 2022 and
2021. Operating results for the three and nine months ended March
31, 2022, are not necessarily indicative of the results that may be
expected for the year ending June 30, 2022. The unaudited interim
condensed consolidated financial statements, presented herein, do
not contain the required disclosures under U.S. GAAP for annual
financial statements. The accompanying unaudited interim condensed
consolidated financial statements should be read in conjunction
with the annual audited consolidated financial statements and
related notes as of and for the year ended June 30, 2021.
Principles of consolidation
The unaudited interim condensed consolidated
financial statements include the accounts of Renalytix plc, and its
wholly-owned subsidiaries, Renalytix AI, Inc. and Renalytix AI
Limited. All inter-company balances and transactions have been
eliminated in consolidation. The Company accounts for investments
in which it has significant influence but not a controlling
financial interest using the equity method of accounting.
Use of estimates
The preparation of the condensed consolidated
financial statements in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the condensed
consolidated financial statements and reported amounts of expenses
during the reporting period. Actual results could differ from those
estimates. Due to the uncertainty of factors surrounding the
estimates or judgments used in the preparation of the condensed
consolidated financial statements, actual results may materially
vary from these estimates.
Estimates and assumptions are periodically
reviewed, and the effects of revisions are reflected in the
condensed consolidated financial statements in the period they are
determined to be necessary. Significant areas that require
management’s estimate include the assumptions used in determining
the fair value of share-based awards, recording the prepaid/accrual
and associated expense for research and development activities
performed for the Company by third parties, determining useful
lives of property and equipment and capitalized software, the
assessment of noncontrolling interest and equity method
investments, fair value measurements (including those related to
VericiDx), the payable to affiliates and the consolidation and
deconsolidation of variable interest entities.
Segment information
The Company manages its operations as a single
operating segment for the purposes of assessing performance and
making operating decisions. The Company’s singular focus is to make
significant improvements in kidney disease diagnosis and prognosis,
clinical care, patient stratification for drug clinical trials, and
drug target discovery.
Foreign currency
The Company’s condensed consolidated financial
statements are presented in U.S. dollars, the reporting currency of
the Company. The functional currency of Renalytix plc and Renalytix
AI Limited is GB Pounds. The functional currency of Renalytix AI,
Inc. is the U.S. dollar. Assets and liabilities of Renalytix plc
and Renalytix AI Limited are translated at the rate of exchange at
period-end, while the statements of operations are translated at
the weighted average exchange rates in effect during the reporting
period. The net effect of these translation adjustments is shown as
a component of accumulated other comprehensive income. Transaction
gains and losses resulting from exchange rate changes on
transactions denominated in currencies other than the functional
currency are included in income in the period in which the change
occurs and reported in the consolidated statements of operations
and comprehensive loss.
Concentrations of credit risk and major
customers
Financial instruments that potentially subject
the Company to concentrations of credit risk consist principally of
cash and accounts receivable balances. Periodically, the Company
maintains deposits in accredited financial institutions in excess
of federally insured limits. The Company deposits its cash in
financial institutions that it believes have high credit quality
and are not exposed to any unusual credit risk beyond the normal
credit risk associated with commercial banking relationships and
has not experienced any losses on such accounts.
The Company’s accounts receivable are derived
from revenue earned from customers located in the U.S. All of the
Company’s revenue has been generated from four customers for the
nine months ended March 31, 2022, and two customer for the nine
months ended March 31, 2021. The Company performs initial and
ongoing credit reviews on customers, which involve consideration of
the customers’ financial information, their location, and other
factors to assess the customers’ ability to pay.
Fair value of financial
instruments
At March 31, 2022 and June 30, 2021, the
Company’s financial instruments included accounts receivable,
prepaid expenses and other current assets, accounts payable and
accrued expenses and other current liabilities. The carrying
amounts of these assets and liabilities approximates fair value due
to their short-term nature.
Fair value option
Under the Fair Value Option Subsections of ASC
subtopic 825-10, Financial Instruments – Overall, the Company has
the irrevocable option to report most financial assets and
financial liabilities at fair value on an instrument-by-instrument
basis, with changes in fair value reported in earnings (see Note
5).
Cash and cash equivalents
The Company considers all highly liquid
investments purchased with an original maturity of 90 days or less
to be cash equivalents. As of March 31, 2022, the Company had a
cash balance of $32.4 million. As of June 30, 2021, the Company had
a cash balance of $65.1 million.
Accounts receivable
Accounts receivable are recorded at the invoice
amount and are non-interest bearing. The Company considers
receivables past due based on the contractual payment terms. The
Company reserves specific receivables if collectability is no
longer reasonably assured. Estimates for allowances for doubtful
accounts are determined based on existing contractual obligations,
historical payment patterns, and individual customer circumstances.
No reserves have been recorded as of March 31, 2022 or June 30,
2021.
Property and equipment
Property and equipment are recorded at cost.
Depreciation is determined using the straight-line method over the
estimated useful lives ranging from three to ten years.
Expenditures for maintenance and repairs are expensed as incurred
while renewals and betterments are capitalized. When property and
equipment are sold or otherwise disposed of, the cost and related
accumulated depreciation are eliminated from the accounts and any
resulting gain or loss is reflected in operations.
Performance of contract liability to
affiliate
In May 2020, the Company and the Icahn School of
Medicine at Mount Sinai entered into an operating agreement
(“Kantaro Operating Agreement”) to form a joint venture, Kantaro
Biosciences LLC (“Kantaro”), for the purpose of developing and
commercializing laboratory tests for the detection of antibodies
against SARS-CoV-2 originally developed by Mount Sinai. Kantaro has
partnered with Bio-Techne Corporation to develop and launch the new
test which is designed for use in any authorized clinical testing
laboratory without the need for proprietary equipment. During the
three and nine months ended March 31, 2022, the Company recognized
$0.03 million and $0.16 million, respectively, related to the
performance of the contract liability with Kantaro. During the
three and nine months ended March 31, 2021, the Company recognized
$0.13 million and $0.89 million, respectively, related to the
performance of the contract liability with Kantaro. This represents
the allocation of costs for performing services on behalf of
Kantaro.
Equity method investments
The Company accounts for equity investments
where it owns a non-controlling interest, but has the ability to
exercise significant influence, under the equity method of
accounting. Under the equity method of accounting, the original
cost of the investment is adjusted for the Company’s share of
equity in the earnings of the equity investee and reduced by
dividends and distributions of capital received, unless the fair
value option is elected, in which case the investment balance is
marked to fair value each reporting period and the impact of
changes in fair value of the equity investment are reported in
earnings.
Kantaro Biosciences LLC
As the Company can exert significant influence
over, but does not control, Kantaro’s operations through voting
rights or representation on Kantaro’s board of directors, the
Company accounts for this investment using the equity method of
accounting. The Company records its share in Kantaro’s earnings and
losses in the condensed consolidated statement of operations. The
Company assesses its investment for other-than-temporary impairment
when events or changes in circumstances indicate that the carrying
amount of the investment might not be recoverable and recognize an
impairment loss to adjust the investment to its then-current fair
value. The Company owned 25% of the membership equity units in
Kantaro at March 31, 2022 and June 30, 2021.
VericiDx Limited
As the Company can exert significant influence
over, but does not control, VericiDx’s operations through
representation on VericiDx’s board of directors, the Company
accounts for this investment as an equity method investment and has
elected the fair value option because VericiDx’s stock price is
readily observable via the London Stock Exchange. Under the fair
value option, the investment in VericiDx is recorded at fair value
at each reporting period with subsequent changes in fair value
reported in the condensed consolidated statements of operations and
comprehensive loss. Based on closing stock price of VericiDx, the
fair value of the investment in VericiDx was $4.3 million at March
31, 2022 and $9.3 million at June 30, 2021. During the three and
nine months ended March 31, 2022, the Company recorded a fair value
adjustment of $(2.6) million and $(4.6) million, respectively, in
the condensed consolidated statements of operations and
comprehensive loss. During each of the three and nine months ended
March 31, 2021, the Company recorded a fair value adjustment of
$0.3 million and $5.4 million in the condensed consolidated
statements of operations and comprehensive loss. The Company owned
5.8% of the ordinary shares of VericiDx at March 31, 2022 and 6.9%
of the ordinary shares of VericiDx at June 30, 2021.
Impairment assessment
The Company evaluates its investments that are
in unrealized loss positions, if any, and equity method investments
for other-than-temporary impairment on a quarterly basis (see Note
5). Such evaluation involves a variety of considerations, including
assessments of the risks and uncertainties associated with general
economic conditions and distinct conditions affecting specific
issuers or investees. Factors considered by the Company include (i)
the length of time and the extent to which an investment’s fair
value has been below its cost; (ii) the financial condition, credit
worthiness, and near-term prospects of the issuer; (iii) the length
of time to maturity; (iv) future economic conditions and market
forecasts; (v) the Company’s intent and ability to retain its
investment for a period of time sufficient to allow for recovery of
market value; (vi) an assessment of whether it is more likely than
not that the Company will be required to sell its investment before
recovery of market value; and (vii) whether events or changes in
circumstances indicate that the investment’s carrying amount might
not be recoverable.
Software development costs
The Company follows the provisions of ASC 985,
Software, which requires software development costs for software to
be marketed externally to be expensed as incurred until the
establishment of technological feasibility, at which time those
costs are capitalized until the software is available for general
release and amortized over its estimated useful life of ten years.
Technological feasibility is established upon the completion of a
working model that has been validated.
Revenue recognition
The Company accounts for revenue under ASC 606 –
Revenue from Contracts with Customers (“ASC 606”). Pursuant to ASC
606, the Company recognizes revenue when a customer obtains control
of promised goods or services. The Company records the amount of
revenue that reflects the consideration that it expects to receive
in exchange for those goods or services. The Company applies the
following five-step model in order to determine this amount: (i)
identification of the promised goods or services in the contract;
(ii) determination of whether the promised goods or services are
performance obligations, including whether they are distinct in the
context of the contract; (iii) measurement of the transaction
price, including the constraint on variable consideration; (iv)
allocation of the transaction price to the performance obligations;
and (v) recognition of revenue when (or as) the Company satisfies
each performance obligation.
The Company only applies the five-step model to
contracts when it is probable that it will collect the
consideration to which it is entitled in exchange for the goods or
services that it transfers to the customer. Once a contract is
determined to be within the scope of ASC 606 at contract inception,
the Company reviews the contract to determine which performance
obligations it must deliver and which of these performance
obligations are distinct. Certain contracts have options for the
customer to acquire additional services. The Company evaluates
these options to determine if a material right exists. If, after
that evaluation, it determines a material right does exist, it
assigns value to the material right based upon the renewal option
approach. The Company recognizes as revenue the amount of the
transaction price that is allocated to each performance obligation
when that performance obligation is satisfied or as it is
satisfied. The Company uses present right to payment and customer
acceptance as indicators to determine the transfer of control to
the customer occurs at a point in time. Sales tax and other similar
taxes are excluded from revenues.
Cost of revenue
Cost of revenue consists of costs directly
attributable to the services rendered, including labor costs and
lab consumables 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 and other studies for KidneyIntelX to determine
clinical value and performance in different CKD populations.
Research and development costs are expensed as incurred.
Share-based compensation
The Company measures equity classified
share-based awards granted to employees and nonemployees based on
the estimated fair value on the date of grant and recognizes
compensation expense of those awards over the requisite service
period, which is the vesting period of the respective award. The
Company accounts for forfeitures as they occur. For share-based
awards with service-based vesting conditions, the Company
recognizes compensation expense on a straight-line basis over the
service period. The fair value of each stock option grant is
estimated on the date of grant using the Black-Scholes
option-pricing model, which requires inputs based on certain
subjective assumptions, including the expected stock price
volatility, the expected term of the option, the risk-free interest
rate for a period that approximates the expected term of the
option, and the Company’s expected dividend yield. The Company was
a privately-held organization prior to November 2018 and has been a
publicly-traded company for a limited period of time and therefore
lacks company-specific historical and implied volatility
information for its shares. Therefore, it estimates its expected
share price volatility based on the historical volatility of
publicly-traded peer companies and expects to continue to do so
until such time as it has adequate historical data regarding the
volatility of its own traded share price. The expected term of the
Company’s stock options has been determined utilizing the
“simplified” method for awards that qualify as “plain-vanilla”
options. The risk-free interest rate is determined by reference to
the U.S. Treasury yield curve in effect at the time of grant of the
award for time periods approximately equal to the expected term of
the award. Expected dividend yield is none based on the fact that
the Company has never paid cash dividends on ordinary shares and
does not expect to pay any cash dividends in the foreseeable
future.
The Company classifies share-based compensation
expense in its condensed consolidated statement of operations and
comprehensive loss in the same manner in which the award
recipient’s payroll costs are classified or in which the award
recipient’s service payments are classified.
Comprehensive loss
Comprehensive loss includes net loss as well as
other changes in shareholders’ equity that result from transactions
and economic events other than those with shareholders. For the
periods presented the only other changes in shareholders’ equity is
from foreign currency translation.
Net loss per ordinary share
Basic net loss per ordinary share is computed by
dividing net loss by the weighted average number of ordinary shares
outstanding during each period. Diluted net loss per ordinary share
includes the effect, if any, from the potential exercise or
conversion of securities, such as options which would result in the
issuance of incremental ordinary shares. Potentially dilutive
securities outstanding as of March 31, 2022 and 2021 have been
excluded from the computation of diluted weighted average shares
outstanding as they would be anti-dilutive. Therefore, the weighted
average number of shares used to calculate both basic and diluted
net loss per share are the same.
As of March 31, 2022 and 2021, there were
4,560,901 and 3,683,858 shares, respectively, issuable upon
exercise of outstanding options that were anti-dilutive and
excluded from diluted loss per share for the three and nine months
ended March 31, 2022 and 2021, respectively.
Emerging growth company
The Company is an emerging growth company as
defined in the Jumpstart Our Business Startups Act of 2012, as
amended (the “JOBS Act”). Under the JOBS Act, companies have
extended transition periods available for complying with new or
revised accounting standards. The Company has elected to avail
itself of this exemption and, therefore, while the Company is an
emerging growth company it will not be subject to new or revised
accounting standards at the same time that they become applicable
to other public emerging growth companies that have not elected to
avail themselves of this exemption.
Recently issued accounting
pronouncements
In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842) ("ASU 2016-02" or "Topic 842"), in order to
increase transparency and comparability among organizations by,
among other provisions, recognizing lease assets and lease
liabilities on the balance sheet for those leases classified as
operating leases under previous U.S. GAAP. For public companies,
ASU 2016-02 is effective for fiscal years beginning after December
15, 2018 (including interim periods within those periods) using a
modified retrospective approach and early adoption is permitted. In
transition, entities may also elect a package of practical
expedients that must be applied in its entirety to all leases
commencing before the adoption date, unless the lease is modified,
and permits entities to not reassess (a) the existence of a lease,
(b) the lease classification or (c) the determination of initial
direct costs, as of the adoption date, which effectively allows
entities to carryforward accounting conclusions under previous U.S.
GAAP. In July 2018, the FASB issued ASU 2018-11, Leases (Topic
842): Targeted Improvements, which provides entities an optional
transition method to apply the guidance under Topic 842 as of the
adoption date, rather than as of the earliest period presented. In
June 2020, the FASB issued ASU No 2020-05 that further delayed the
effective date of Topic 842 to fiscal years beginning after July 1,
2022, and interim periods within those years. The Company is
currently evaluating the impact of adopting this guidance to its
condensed consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13,
Financial Instruments - Credit Losses: Measurement of Credit Losses
on Financial Instruments, which requires measurement and
recognition of expected credit losses for financial assets held at
the reporting date based on historical experience, current
conditions, and reasonable and supportable forecasts. This is
different from the current guidance as this will require immediate
recognition of estimated credit losses expected to occur over the
remaining life of many financial assets. The new guidance will be
effective for the Company on July 1, 2023. The Company is currently
evaluating the impact of adopting this guidance to its consolidated
financial statements.
In January 2020, FASB issued ASU 2020-01,
Investments-Equity Securities (Topic 321), Investments-Equity
Method and Joint Ventures (Topic 323), and Derivatives and Hedging
(Topic 815) ("ASU2021-01"), which, generally, provides guidance for
investments in entities accounted for under the equity method of
accounting. ASU 2020-01 is effective for all entities with fiscal
years beginning after December 15, 2021, including interim periods
therein. The Company is currently evaluating the impact of adopting
this guidance to its consolidated financial statements.
4. Revenue
Testing services revenue
Testing services revenue is generated from the
KidneyIntelX platform, which provides analytical services to
customers. Each individual test is a performance obligation that is
satisfied at a point in time upon completion of the testing process
(when results are reported) which is when control passes to the
customer and revenue is recognized. During the three and nine
months ended March 31, 2022, the Company recognized $0.8 million
and $1.9 million, respectively, of testing services revenue. Sales
tax and other similar taxes are excluded from revenues. During the
three and nine months ended March 31, 2021, the Company recognized
$0.1 million and $0.1 million, respectively of testing services
revenue.
Pharmaceutical services revenue
Pharmaceutical services revenue is generated
from the provision of analytical services to customers. Contracts
with customers generally include an initial upfront payment and
additional payments upon achieving performance milestones. The
Company uses present right to payment and customer acceptance as
indicators to determine the transfer of control to the customer
which may occur at a point in time or over time depending on the
individual contract terms. Sales tax and other similar taxes are
excluded from revenues.
During the three and nine months ended March 31,
2022, the Company recognized $0.0 million and $0.2 million,
respectively, of pharmaceutical services revenue where performance
obligations are satisfied over time. During the, the three and nine
months ended March 31, 2021 Company recognized $0.0 million and
$0.4 million, respectively, of pharmaceutical services revenue
where performance obligations are satisfied over time.
Professional services revenue
Professional services revenue consists of
services related to the creation of a branded care navigation
portal/pathway for use with KidneyIntelX. Revenue is recognized
when control of the promised services is transferred to customers
and the performance obligation is fulfilled in an amount that
reflects the consideration that the Company expects to be entitled
in exchange for those services.
The company did not recognize any professional
services revenue during the three and nine months ended March 31,
2022. During the three and nine months ended March 31, 2021 the
company recognized $0.6 million and $0.6 million, respectively, of
other services revenue where performance obligations are satisfied
at a point in time.
Deferred revenue
Deferred revenue represents the allocated
transaction price to the material right which will be recognized as
revenue when the renewal options are exercised which is expected to
occur over the next 21 months.
The following table summarizes the changes in
deferred revenue:
|
|
March 31, 2022 |
|
|
June 30, 2021 |
|
Balance, beginning of period |
|
$ |
122 |
|
|
$ |
— |
|
Deferral of revenue |
|
|
67 |
|
|
|
250 |
|
Revenue recognized |
|
|
(122 |
) |
|
|
(128 |
) |
Balance, end of period |
|
$ |
67 |
|
|
$ |
122 |
|
5. Fair value measurements and the fair
value option
Assets and liabilities recorded at fair value on
a recurring basis in the condensed consolidated balance sheets are
categorized based upon the level of judgment associated with the
inputs used to measure their fair values. Fair value is defined as
the exchange price that would be received for an asset or an exit
price that would be paid to transfer a liability in the principal
or most advantageous market for the asset or liability in an
orderly transaction between market participants on the measurement
date. Valuation techniques used to measure fair value must maximize
the use of observable inputs and minimize the use of unobservable
inputs. The authoritative guidance on fair value measurements
establishes a three-tier fair value hierarchy for disclosure of
fair value measurements as follows:
- Level 1 - Quoted
prices (unadjusted in active markets for identical assets or
liabilities)
- Level 2 - Inputs
other than quoted prices in active markets that are observable
either directly or indirectly
- Level 3 -
Unobservable inputs in which there is little or no market data,
which require the Company to develop its own assumptions
This hierarchy requires the use of observable
market data when available and to minimize the use of unobservable
inputs when determining fair value. The following fair value
hierarchy table presents information about the Company’s assets
measured at fair value on a recurring basis:
|
|
Fair value measurement at |
|
|
|
reporting date using |
|
(in thousands) |
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
March 31, 2022 |
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
Equity investment in VericiDx |
|
$ |
4,322 |
|
|
$ |
— |
|
|
$ |
— |
|
June 30, 2021 |
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
Equity investment in VericiDx |
|
$ |
9,295 |
|
|
$ |
— |
|
|
$ |
— |
|
Non-financial assets and liabilities
The Company’s non-financial assets, which
primarily consist of property and equipment and equity method
investments, are not required to be measured at fair value on a
recurring basis, and instead are reported at carrying value in its
condensed consolidated balance sheet. However, on a periodic basis
or whenever events or changes in circumstances indicate that they
may not be fully recoverable, the respective carrying value of
non-financial assets are assessed for impairment and, if ultimately
considered impaired, are adjusted and written down to their fair
value, as estimated based on consideration of external market
participant assumptions. Based on sales forecasts, the Company
concluded that its equity method investment in Kantaro was impaired
due to a shift in focus from COVID antibody testing to promoting
vaccination in the United States and European Union. As a result of
this shift, demand for COVID antibody testing decreased. The
forecasts indicate there is a prolonged period of time that
Kantaro’s fair value is below the carrying value of the investment
and the discounted and undiscounted cash flows are also below the
carrying value of the investment. For these reasons, the Company
concluded the decline in value is other-than-temporary. As such,
during the year ended June 30, 2021, the Company determined the
fair value using a discounted cash flow model and concluded that
the fair value of the equity method investment in Kantaro was
zero.
6. Property and equipment
Property and equipment consists of (in
thousands):
|
|
March 31, 2022 |
|
|
June 30, 2021 |
|
Lab equipment |
|
$ |
1,144 |
|
|
$ |
592 |
|
Software |
|
|
1,574 |
|
|
|
1,534 |
|
Office equipment |
|
|
121 |
|
|
|
84 |
|
Office furniture |
|
|
35 |
|
|
|
35 |
|
Leasehold improvements |
|
|
576 |
|
|
|
576 |
|
Construction in progress |
|
|
79 |
|
|
|
— |
|
Total |
|
|
3,529 |
|
|
|
2,821 |
|
Less accumulated depreciation and amortization |
|
|
(679 |
) |
|
|
(331 |
) |
|
|
$ |
2,850 |
|
|
$ |
2,490 |
|
Depreciation expense was $0.1 million and $0.2
million for the three and nine months ended March 31, 2022,
respectively. Depreciation expense was $0.05 million and $0.1
million for the three and nine months ended March 31, 2021,
respectively.
As of March 31, 2022 and June 30, 2021, there
was $1.1 million and $1.3 million, respectively, of unamortized
capitalized software development costs. Amortization expense
related to capitalized software development costs was $0.03 million
and $0.1 million for the three and nine months ended March 31,
2022, respectively. Amortization expense related to capitalized
software development costs was $0.03 million and $0.05 million for
the three and nine months ended March 31, 2021, respectively.
As of March 31, 2022, the expected amortization
expense for software for the next five years and thereafter is as
follows:
2022 (remaining three months) |
|
$ |
33 |
|
2023 |
|
|
130 |
|
2024 |
|
|
130 |
|
2025 |
|
|
130 |
|
2026 |
|
|
130 |
|
Thereafter |
|
|
567 |
|
|
|
$ |
1,120 |
|
7. Accrued expenses and other current
liabilities
Accrued expenses and other current liabilities
consisted of (in thousands):
|
|
March 31, 2022 |
|
|
June 30, 2021 |
|
Consulting and professional fees |
|
$ |
328 |
|
|
$ |
954 |
|
Research and development |
|
|
875 |
|
|
|
— |
|
Payroll and related
benefits |
|
|
4,701 |
|
|
|
3,493 |
|
Deferred offering |
|
|
504 |
|
|
|
— |
|
Other |
|
|
281 |
|
|
|
155 |
|
|
|
$ |
6,689 |
|
|
$ |
4,602 |
|
8. Commitments and
contingencies
Leases
The Company entered into operating lease
agreements for office space and laboratory testing facilities with
terms ranging from month-to-month to five years. During the three
and nine months ended March 31, 2022, the Company recognized rent
expense of $0.1 million and $0.3 million, respectively. During the
three and nine months ended March 31, 2021, the Company recognized
rent expense of $0.1 million and $0.3 million, respectively,
related to all leases.
The future minimum payments for noncancelable
leases with terms in excess of one year for each fiscal year are as
follows (in thousands):
2022 (remaining three months) |
|
$ |
33 |
|
2023 |
|
|
134 |
|
2024 |
|
|
138 |
|
2025 |
|
|
46 |
|
2026 |
|
|
— |
|
Thereafter |
|
|
— |
|
Total |
|
$ |
351 |
|
DaVita Inc.
In January 2021, the Company entered into a
Master Care Coordination Services Agreement with DaVita Inc.
(“DaVita”) whereby DaVita agreed to provide certain care
coordination services to covered patients as requested by the
Company ("Care Coordination Services"), with those covered patients
identified by the Company’s KidneyIntelX diagnostic and subject to
insurance coverage ("Covered Patients"). Those covered patients may
also be included in connection with various clinical research
studies or quality improvement initiatives (each a “Study”). Both
parties agreed to establish a joint steering committee to oversee
the care coordination services and exchange and evaluate results of
each Study. The Company will pay DaVita a monthly fixed fee based
on the number of covered patients. The initial term of the
agreement is three years with successive one-year renewals upon
written mutual agreement of both parties. For the Care Coordination
Services furnished by DaVita (or an affiliate of DaVita) under the
terms of a statement of work, the Company shall pay DaVita (or such
affiliate of DaVita) a monthly payment of (a) $10.00 in respect of
Care Coordination Services multiplied by the number of Covered
Patients, plus (b) $3.50, in respect of patient engagement
services, multiplied by the number of Covered Patients. No expenses
were recorded in the periods related to this agreement.
Employment agreements
The Company has entered into employment
agreements with certain key executives providing for compensation
and severance in certain circumstances, as set forth in the
agreements.
Retirement plans
The Company maintains a defined contribution
401(k) retirement plan which covers all U.S. employees. Employees
are eligible after three months of service. Under the 401(k) plan,
participating employees may make contributions in an amount up to
the limit set by the Internal Revenue Service on an annual basis.
The Company has a safe harbor plan and makes contributions to
employee accounts of 5% of compensation (as defined by the plan).
The Company contributed $0.1 million and $0.3 million for the three
and nine months ended March 31, 2022, respectively, and the Company
contributed $0.05 million and $0.1 million for the three and nine
months ended March 31, 2021, respectively.
Legal proceedings
The Company is not a party to any litigation and
does not have contingency reserves established for any litigation
liabilities. At each reporting date, the Company evaluates whether
or not a potential loss amount or a potential range of loss is
probable and reasonably estimable under the provisions of the
authoritative guidance that addresses accounting for
contingencies.
9. License and services
agreements
Mount Sinai license and sponsored
research agreements
On May 30, 2018, the Company entered into an
exclusive license agreement (the “ISMMS License Agreement”) and, on
March 7, 2019, a sponsored research agreement (the “ISMMS SRA”)
with Mount Sinai. Under the terms of the ISMMS License Agreement,
ISMMS granted the Company (i) an exclusive, sublicensable license
to use certain patent rights covering specific inventions
concerning the utilization of biomarkers guided artificial
intelligence techniques for detecting kidney functional decline
(the “ISMMS Technology”), (ii) a non-exclusive license under
unregistered licensed copyrights and licensed know-how and (iii) an
exclusive option to obtain licensed technology conceived after May
30, 2018. The Company is obligated to pay Mount Sinai $1.5 million
and $7.5 million in commercial milestone payments upon achieving
worldwide net sales of KidneyIntelX of $50.0 million and $300.0
million, respectively. The Company is also obligated to pay Mount
Sinai a 4% to 5% royalty on net sales of KidneyIntelX, 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, the Company is obligated to pay Mount Sinai between 15%
and 25% of any consideration received from a sublicensee.
Furthermore, the Company agreed to carry out and fund a clinical
utility study for KidneyIntelX at an estimated cost of $0.7
million.
As part of the ISMMS SRA, the Company has agreed
to fund several research projects to further develop the ISMMS
Technology. The Company incurred no expenses under the ISMMS SRA
for the three months ended March 31, 2022 and $0.4 million in
research and development expenses under the ISMMS SRA for the nine
months ended March 31, 2022. The Company incurred $0.03 million and
$0.3 million in research and development expenses under the ISMMS
SRA for the three and nine months ended March 31, 2021,
respectively.
Mount Sinai COVID-19 sponsored research
agreement
In August 2020, and as amended in December 2020,
the Company entered into a Multi-center Assessment of Survivors for
Kidney Disease after COVID-19 Study (the “MASKeD-COVID Study”) with
ISMMS. This study involves multiple major academic institutions,
including Mount Sinai, University of Michigan, Johns Hopkins, Yale
University and Rutgers University. The goal of this study is to
understand the long-term kidney epidemiology of CKD in survivors of
COVID-19 and validate KidneyIntelX for prediction of long-term
kidney outcomes post-COVID hospitalization that will inform further
prevention, treatment and clinical care.
Under the terms of the MASKeD-COVID Study, the
Company is obligated to pay for all direct and indirect costs
incurred under the sponsored research agreement in an amount
totaling $1.8 million. As of March 31, 2022, amounts due to ISMMS
under the MASKeD-COVID Study totaled $1.0 million. No expenses were
recorded during the three months ended March 31, 2022 and $0.6
million was expensed during the nine months ended March 31, 2022.
The Company did not incur any expenses related to this program
during the three and nine months ended March 31, 2021.
Joslin diabetes center
agreement
In October 2018, the Company purchased a
worldwide exclusive license agreement (the “Joslin Agreement”) with
the Joslin Diabetes Center, Inc. (“Joslin”) that was previously
entered into with EKF Diagnostics Holding Plc (“EKF”), a related
party, in July 2017. The license agreement provides the Company
with the right to develop and commercialize licensed products
covering a novel methodology of diagnosing and predicting kidney
disease using certain biomarkers (the “Joslin Diabetes
Technology”).
Under the terms of the Joslin Agreement, the
Company is obligated to pay Joslin aggregate commercial milestone
payments of $0.3 million and $1.0 million in commercial milestone
payments upon achieving worldwide net sales of licensed products
and processes of $2.0 million and $10.0 million, respectively. The
Company is also obligated to pay Joslin a 5% royalty on net sales
of any licensed products or licensed processes, subject to
customary reductions. The company accrued $0.1 million of royalties
due to Joslin as of March 31, 2022. Moreover, the Company is
obligated to pay Joslin 25% of any consideration received from a
sublicensee.
The Joslin Agreement initially expires on July
31, 2025 and is subject to an automatic five-year extension unless
either party notifies the other party of its intent not to extend
the agreement at least 180 days prior to initial expiration. Either
party may terminate the Joslin Agreement earlier upon an uncured
material breach of the agreement by the other party, the insolvency
of the other party, or in the event the other party is unable to
perform its obligations under the agreement for a specified period.
Additionally, Joslin may terminate the agreement in the event that
the Company ceases developing or commercializing licensed products
or processes, if the Company fails to maintain certain required
insurance policies, and if the Company fails to pay patent expenses
related to the licensed patents.
10. Shareholders’ equity
Ordinary shares
As of March 31, 2022, the Company had 76,869,831
ordinary shares authorized on a fully diluted basis. Each share
entitles the holder to one vote on all matters submitted to a vote
of the Company’s shareholders. Ordinary shareholders are entitled
to receive dividends as may be declared by the board of directors.
From inception through March 31, 2022, no cash dividends have been
declared or paid.
11. Share-based
compensation
Equity Incentive Plans
In November 2018, Company established the
Renalytix plc Share Option Plan (the “Plan”) and a U.S. Sub-Plan
and Non-Employee Sub-Plan. The Plans provide for the Company to
grant options, restricted share awards and other share-based awards
to employees, directors and consultants of the Company. As of March
31, 2022, there were 2,642,062 shares available for future issuance
under the Plans.
The Plans are administered by the board of
directors. The exercise prices, vesting and other restrictions are
determined at their discretion, except that all options granted
have exercise prices equal to the fair value of the underlying
ordinary shares on the date of the grant and the term of stock
option may not be greater than ten years from the grant date.
The options granted as of March 31, 2022 vest
equally over twelve quarters following the grant date, with the
exception of 80,724 options which vested immediately when granted,
1,077,100 options which vest 25% on the one year anniversary and
equally over twelve quarters following the one year anniversary and
500,000 which vest 1/12th on the commencement date and equally over
twelve quarters following the one year anniversary. If options
remain unexercised after the date one day before the tenth
anniversary of grant, the options expire. On termination of
employment, any options that remain unexercised are either
forfeited immediately or after a delayed expiration period,
depending on the circumstances of termination. Upon the exercise of
awards, new ordinary shares are issued by the Company.
The Company recorded share-based compensation
expense in the following expense categories in the condensed
consolidated statements of operations for the three and nine months
ended March 31, 2022 and 2021 (in thousands):
|
|
Three Months Ended March 31, |
|
|
Nine Months Ended March 31, |
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Research and development |
|
$ |
78 |
|
|
$ |
237 |
|
|
$ |
378 |
|
|
$ |
631 |
|
General and administrative |
|
|
845 |
|
|
|
374 |
|
|
|
2,432 |
|
|
|
973 |
|
|
|
$ |
923 |
|
|
$ |
611 |
|
|
$ |
2,810 |
|
|
$ |
1,604 |
|
The fair value of options is estimated using the
Black-Scholes option pricing model, which takes into account inputs
such as the exercise price, the value of the underlying ordinary
shares at the grant date, expected term, expected volatility,
risk-free interest rate and dividend yield. The fair value of each
grant of options during the nine months ended March 31, 2022 and
2021 were determined using the methods and assumptions discussed
below.
- The expected term
of employee options is determined using the “simplified” method, as
prescribed in SEC’s Staff Accounting Bulletin No. 107, whereby the
expected life equals the arithmetic average of the vesting term and
the original contractual term of the option due to the Company’s
lack of sufficient historical data.
- The expected
volatility is based on historical volatility of the publicly-traded
common stock of a peer group of companies.
- The risk-free
interest rate is based on the interest rate payable on U.S.
Treasury securities in effect at the time of grant for a period
that is commensurate with the assumed expected term.
- The expected
dividend yield is none because the Company has not historically
paid and does not expect for the foreseeable future to pay a
dividend on its ordinary shares.
For the nine months ended March 31, 2022 and
2021, the grant date fair value of all option grants was estimated
at the time of grant using the Black-Scholes option-pricing model
using the following weighted average assumptions:
|
|
Nine Months Ended March 31, |
|
|
|
2022 |
|
|
2021 |
|
Expected term (in years) |
|
|
6.0 |
|
|
5.8 |
|
Expected volatility |
|
|
65.77 |
% |
|
|
67.10 |
% |
Risk-free rate |
|
|
1.43 |
% |
|
|
0.50 |
% |
Dividend yield |
|
|
— |
% |
|
|
— |
% |
The weighted average fair value of the options
granted during the nine months ended March 31, 2022 and 2021 was
$6.02 and $4.51 per share, respectively.
The following table summarizes the stock option
granted to employees and non-employees for the nine months ended
March 31, 2022:
|
|
Number ofshares underoption plan |
|
|
Weighted-averageexercise priceper option |
|
|
Weighted-averageremainingcontractuallife (in years) |
|
Outstanding at June 30, 2021 |
|
|
4,265,958 |
|
|
$ |
4.73 |
|
|
|
8.2 |
|
Granted |
|
|
515,000 |
|
|
$ |
10.06 |
|
|
|
|
Exercised |
|
|
(100,724 |
) |
|
$ |
1.89 |
|
|
|
|
Forfeited |
|
|
(119,333 |
) |
|
$ |
6.67 |
|
|
|
|
Outstanding at March 31, 2022 |
|
|
4,560,901 |
|
|
$ |
4.99 |
|
|
|
8.7 |
|
Exercisable at March 31, 2022 |
|
|
3,213,850 |
|
|
$ |
3.44 |
|
|
|
8.1 |
|
Vested at March 31, 2022 |
|
|
4,560,901 |
|
|
$ |
4.99 |
|
|
|
8.7 |
|
As of March 31, 2022, there was $8.1 million in
unrecognized compensation cost related to unvested options that
will be recognized as expense over a weighted average period of
1.91 years. The aggregate intrinsic value of options outstanding
and options exercisable at March 31, 2022 was $4.4 million and $4.4
million, respectively.
Employee Share Purchase
Plan
The Company’s 2020 Employee Share Purchase Plan
(the “ESPP”) became effective on August 17, 2020. The ESPP
authorizes the issuance of up to 850,000 shares of the Company’s
common stock. The number of shares of the Company’s common stock
that may be issued pursuant to rights granted under the ESPP shall
automatically increase on January 1st of each year, commencing on
January 1, 2021 and continuing for ten years, in an amount equal to
the lesser of one percent of the total number of shares of the
Company’s common stock outstanding on December 31st of the
preceding calendar year, and 2,000,000 ordinary shares, subject to
the discretion of the board of directors or remuneration committee
to determine a lesser number of shares shall be added for such
year.
Under the ESPP, eligible employees can purchase
the Company’s common stock through accumulated payroll deductions
at such times as are established by the board of directors or
remuneration committee. Eligible employees may purchase the
Company’s common stock at 85% of the lower of the fair market value
of the Company’s common stock on the first day of the offering
period or on the purchase date. Eligible employees may contribute
up to 15% of their eligible compensation. Under the ESPP, a
participant may not purchase more than $25,000 worth of the
Company’s common stock for each calendar year in which such rights
is outstanding. During the nine months ended March 31, 2022, 10,920
shares were purchased under the ESPP.
In accordance with the guidance in ASC 718-50 –
Compensation – Stock Compensation, the ability to purchase shares
of the Company’s common stock at 85% of the lower of the price on
the first day of the offering period or the last day of the
offering period (i.e. the purchase date) represents an option and,
therefore, the ESPP is a compensatory plan under this guidance.
Accordingly, share-based compensation expense is determined based
on the option’s grant-date fair value as estimated by applying the
Black Scholes option-pricing model and is recognized over the
withholding period. The Company recognized share-based compensation
expense of $0.2 million and $0.07 million during the three and nine
months ended March 31, 2022, respectively, and $0.02 million and
$0.05 million during the three and nine months ended March 31,
2021, respectively, related to the ESPP.
12. Related-party
transactions
EKF Diagnostic Holdings
During the three and nine months ended March 31,
2022, the Company incurred expenses of $0.1 million and $0.2
million, respectively, related to employees of EKF who provided
services to Renalytix and this amount is included in general and
administrative expenses in the condensed consolidated statements of
operations. During the three and nine months ended March 31, 2021,
the Company incurred expenses of $0.1 million and $0.1 million,
respectively, related to employees of EKF who provided services to
Renalytix and this amount is included in general and administrative
expenses in the condensed consolidated statements of
operations.
Icahn School of Medicine at Mount
Sinai
In May 2018, the Company secured its cornerstone
license agreement with the Icahn School of Medicine at Mount Sinai
("ISMMS") for research and clinical study work and intended
commercialization by the Company (see Note 9). As part of the
collaboration, ISMMS became a shareholder in the Company and has
subsequently made equity investments both in the Company’s IPO on
AIM in November 2018, the subsequent sale of ordinary shares in
July 2019 and the Company’s IPO on Nasdaq in July 2020. As of March
31, 2022, amounts due to ISMMS totaled $2.1 million and are
included within accrued expenses and other current liabilities and
accounts payable on the balance sheet. During the three and nine
months ended March 31, 2022, the Company incurred expenses of $0.2
million and $2.9 million, respectively, which are included in
research and development expenses in the condensed consolidated
statement of operations. During the three and nine months ended
March 31, 2021, the Company incurred expenses of $0.2 million and
$0.5 million, respectively, which are included in research and
development expenses in the condensed consolidated statement of
operations.
On March 31, 2022, the Company announced a
financing package which included a $4.0 million dollar equity
investment by ISMMS. At the time of the deal announcement and prior
to completion of the financing transaction, the Company received
$4.0 million in funds from ISMMS which were recorded as a $4.0
million current liability due to ISMMS, which is to be satisfied
upon successful completion of the financing transaction and
issuance of equity in April 2022, as noted in Note 13.
Kantaro Biosciences LLC
In connection with the formation of Kantaro, the
Company entered into a five-year Advisory Services Agreement
(“Advisory Agreement”) pursuant to which the Company has agreed to
provide certain advisory services to Kantaro. Pursuant to the
Kantaro Operating Agreement, Kantaro issued 750 Class A Units to
Mount Sinai in exchange for Mount Sinai granting licenses to
Kantaro under certain intellectual property rights of Mount Sinai
and 250 Class A Units to the Company as the sole consideration for
the services to be rendered by the Company under the Advisory
Agreement. A portion of the Company’s units are subject to
forfeiture if, prior to December 31, 2021, Kantaro terminates the
Advisory Agreement as a result of an uncured material breach of the
Advisory Agreement or in the event the Company is acquired by a
hospital or health system that serves all or any portion of the
service areas served by Mount Sinai. The Company determined the
fair value of the services to be provided under the Advisory
Agreement was $2.0 million and the fair value of the Class A units
received from Kantaro was $2.0 million. Fair value was determined
using discounted cash flows which is a Level 3 measurement in the
fair value hierarchy. The method requires several judgments and
assumptions which include discount rates and future cash flows,
among others. As a result of the prior year impairment charge
discussed in Note 5, the carrying value of the Kantaro investment
was written down to zero.
A contributing factor to the impairment
consideration for Kantaro was lower forecasted sales volume and
consequently, a lower time commitment from Renalytix employees.
Based on these circumstances, the Company adjusted the liability to
perform services to Kantaro under the Advisory Agreement during the
year ended June 30, 2021. As of March 31, 2022, the total liability
associated with the services was $0.2 million, of which the total
amount is classified as a current liability within the Payables to
affiliate - current line on the balance sheet.
For the three and nine months ended March 31,
2022, the Company recognized $0.1 million and $0.1 million,
respectively, in the statement of operations related to services
performed under the Advisory Agreement. For the three and nine
months ended March 31, 2022, $0.01 million and $0.1 million of
costs incurred related to the performance of the Advisory Agreement
services were included within research and development and $0.02
million and $0.06 million were included in general and
administrative expense, respectively. For the three and nine months
ended March 31, 2021, the Company recognized $0.1 million and $0.9
million, respectively, in the condensed consolidated statements of
operations related to services performed under the Advisory
Agreement. For the three and nine months ended March 31, 2021,
$0.04 million and $0.4 million of costs incurred related to the
performance of the Advisory Agreement services were included within
research and development and $0.04 million and $0.2 million were
included within general and administrative expense,
respectively.
In addition to the equity granted at formation,
in May 2020 the Company and Mount Sinai each committed to making a
loan to Kantaro. Mount Sinai committed to lend an initial amount of
$0.3 million and an additional $0.5 million thereafter. The Company
committed to lend an initial amount of $0.08 million and an
additional $0.17 million thereafter. Each loan bears interest at a
per year rate equal to 0.25%, compounded monthly, until repaid, and
is repayable from the first amounts that would otherwise constitute
cash available for distribution to the members of Kantaro (provided
that each loan repayment will be made, 75% to Mount Sinai and 25%
to the Company based on each investor’s proportionate ownership).
The Company loaned Kantaro $0.25 million and initially recorded a
note receivable. The Company elected to recognize the equity
investment losses based on the ownership level of each specific
investment and will continue to record equity method losses until
the amount of the loan receivable is reduced to zero. The loan had
a carrying value of approximately $0.075 million at both March 31,
2022 and June 30, 2021.
VericiDx
During the three and nine months ended March 31,
2022, the Company paid the salary of an executive of VericiDx and
VericiDx has agreed to reimburse the Company for those amounts. As
of March 31, 2022, amounts due from VericiDx were recorded within
the related party receivable line of the balance sheet and totaled
less than one thousand dollars. As of March 31, 2021, amounts due
from VericiDx totaled $0.2 million.
13. Subsequent events
The Company has evaluated subsequent events from
the condensed consolidated balance sheet date through the date at
which the condensed consolidated financial statements were
available to be issued, and determined there are no other items
requiring disclosure beyond those disclosed below.
In April 2022, the Company announced the
successful completion of (i) an $8.8 million equity subscription
(the "Equity Fundraise") and (ii) a subscription for convertible
bonds with an aggregate principal amount of $21.2 million, raising
aggregate gross proceeds of $26.8 million for the Company.
The convertible bonds were issued at 85% of the
principal amount (resulting in net cash proceeds of $18.02 million,
5.5% coupon (payable in cash or shares at the Company's option) and
a 5 year term. The Equity Fundraise consisted of subscriptions for
2,221,794 Ordinary Shares ("New Ordinary Shares") and 103,447
American Depositary Shares (“ADSs”) (the "New ADS"), at a price of
$7.25 per ADS (the "Reference ADS Price") or $3.625 per Ordinary
Share, equivalent to approximately 276 pence per Ordinary
Share.
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