REG - Renalytix PLC - Audited Full Year Fiscal 2024 Results
21/11/2024 07:00
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RNS Number : 0459N Renalytix PLC 21 November 2024
Renalytix plc
("Renalytix" or the "Company")
Audited Full Year Fiscal 2024 Results
LONDON and NEW YORK, 21 November 2024 - Renalytix plc (LSE: RENX) (OTCQB:
RNLXY), an artificial intelligence-enabled in vitro diagnostics company,
focused on optimizing clinical management of kidney disease to drive improved
patient outcomes and health care cost reduction, reports audited financial
results for the fiscal year ended 30 June 2024.
The Company has now largely completed its reorganization from development
activities to commercial sales, and has implemented a new large customer
launch of kidneyintelX.dkd post-period end. With growing commercial adoption,
significantly lower operating expenses, an 80% reduction of outstanding debt
obligations, and an £11.8m funding closed on 4 November 2024, Renalytix is
funded and projected to deliver anticipated profitability in two years with no
further funding requirements.
kidneyintelX.dkd, is the only kidney prognostic test that is FDA approved; has
full Medicare reimbursement granted at $950 per test; is recommended in the
international clinical care guidelines; is available to approximately 14m US
diabetic kidney disease ("DKD") patients; and is able to address the needs of
approximately ~250M DKD patients globally.
Full Year Fiscal 2024 highlights
Continued commercial progress
· Achieved full Medicare reimbursement at $950 per reportable result in
May
· Launched the FDA-approved kidneyintelX.dkd across all existing
customers to replace the KidneyIntelX laboratory developed test
· Recommended for use in international clinical care guidelines (Kidney
Disease Improving Global Outcomes)
· kidneyintelX.dkd commercial launch begun in September with a large
New York-based physician group practice primary care network serving over
500,000 patients
· Issued three-year guidance on expected revenue growth: c. $3.2m in
FY25, $8.5m in FY26 and $17.5m in FY27
· Hired new commercial leadership with a track record of diagnostic
sales success
· Revamped customer service and ordering process to improve doctor
experience during test ordering
Funded to profitability in two years
· £11.8m fundraise completed in November, is expected take the Company
through profitability and cash-flow break-even in two years
· Successfully renegotiated senior convertible loan notes and accounts
payable removing more than 80% of cash obligations over next three years (c.
£485,000 per month)
· US trading platform moved to OTCQB(®) Venture Market and expected
re-instatement of Foreign Private Issuer ("FPI") status in January for
additional excepted savings of up to £1.9m annually
· Over-all monthly cash burn expected to be reduced to £560,000 target
by the end of FY25
Corporate Highlights
· Julian Baines, MBE appointed as Executive Chairman
· Daniel Levangie resigned from Board of Directors
James McCullough, CEO of Renalytix commented: "We now have everything in place
to scale test ordering and expand our unique biomarker precision medicine
services. The incoming Trump Administration's refocusing of the US Government
on chronic disease cost control makes this a particularly enticing time to
establish a new, FDA approved standard of care in one of the largest unmet
preventative medicine opportunities, chronic kidney disease."
Investors are advised to read the results for the 12 months ended 30 June
2024, which has been filed with the U.S. Securities and Exchange Commission on
Form 10-K.
For further information, please contact:
Renalytix plc www.renalytix.com (http://www.renalytix.com)
James McCullough, CEO Via Walbrook PR
Stifel (Nominated Adviser and Joint Broker) Tel: 020 7710 7600
Nicholas Moore / Nick Harland / Ben Good
Oberon Capital (Joint Broker) Tel: 020 3179 5300
Mike Seabrook / Nick Lovering
Walbrook PR Limited Tel: 020 7933 8780 or renalytix@walbrookpr.com
(mailto:renalytix@walbrookpr.com)
Paul McManus / Alice Woodings Mob: 07980 541 893 / 07407 804 654
CapComm Partners
Peter DeNardo Tel: 415-389-6400 or investors@renalytix.com (mailto:investors@renalytix.com)
About Renalytix
Renalytix (LSE: RENX) (OTCQB: RNLXY) is an artificial intelligence enabled in
vitro diagnostics and laboratory services company that is the global founder
and leader in the field of bioprognosis™ for kidney health. In late 2023,
our kidneyintelX.dkd test was recognized as the first and only FDA-authorized
prognostic test to enable early-stage CKD (stages 1-3b) risk assessment for
progressive decline in kidney function in T2D patients. By understanding how
disease will progress, patients and clinicians can take action earlier to
improve outcomes and reduce overall health system costs.
Unrecognized and uncontrolled kidney disease remains one of the largest
barriers to controlling cost and suffering in the United States and the United
Kingdom's medical system, affecting over 14 million and 8 million people,
respectively. After five years of development and clinical validation,
kidneyintelX.dkd is the only FDA approved prognostic tool capable of
understanding a patient's risk with kidney disease early where treatment has
maximal effect. kidneyintelX.dkd is now being deployed across large physician
group practices and health systems in select regions of the United States.
The over 10,000 patients that have been tested by kidneyintelX.dkd have
produced a substantial body of real-world performance data. In patient
populations where kidneyintelX.dkd has been deployed, a demonstrated and
significant increase in diagnosis, prognosis, and treatment rates have been
recorded. kidneyintelX.dkd now has full reimbursement established by Medicare,
the largest insurance payer in the United States, at $950 per reportable
result. kidneyintelX.dkd is also recommended for use in the international
chronic kidney disease clinical guidelines (KDIGO).
For more information, visit www.renalytix.com
(https://urldefense.proofpoint.com/v2/url?u=https-3A__www.globenewswire.com_Tracker-3Fdata-3Dg2rinqbAgg-2Dq5Zua64QfEh-5FImbC7cxpKB9fMEOz3nEgvr6IRtzAZxj77HJRk18dPdtyNTnCS5wIJ1D5jW3xgasJVSc2vtdKOkE7HOw0-2DTGX3cjSHd3i-5FCzFCyLZWUcSKJ8HLs45taXYF90tcW2H5jvJQ66-2Dptubg5SflXxITasXe8SzRw4G-2DCC8UkUEiwPPxyMy0tKineVUS68YuLWDU-2DxoRT-5FxA0mQEJiSlXcxjS4LOlrRcqdgIF2u9l4n8MGLypRT141E4e4yN-2D23wvBu55Q-3D-3D&d=DwMFAw&c=euGZstcaTDllvimEN8b7jXrwqOf-v5A_CdpgnVfiiMM&r=fSst1AtlXyuqcs3cHJXcCRilbI1Qm1WfjNYkVgQfiLE&m=x5AOF5f6YP3tVZ9mKlaIkDkd0lIL7rPPjgjD_AtJ3r5QFzDl5BYrag-ph5zsTQMe&s=1brUk7TUUdW3DplDx8C44VC2kkAYTrWlTciydIqpjoo&e=)
.
CEO Statement
During the prior year we have taken considerable and painful steps to
reorganize our Company and complete the transition from a development-phase
organization to a commercial growth-phase business. With substantive
reductions in operating expenses, restructuring of debt and payable
obligations, and in November, the completion of a fresh institutional funding,
we now believe that the Company will be able to achieve profitability in 2
years.
With the positive June Medicare coverage decision, kidneyintelX.dkd has just
completed the trifecta of FDA approval, insurance reimbursement and guidelines
recommendation. kidneyintelX.dkd is now the only regulated and reimbursed test
available for early prognosis, a cornerstone in understanding who is at risk
and who to treat with lifetime drug therapy for some 14 million patients with
diabetic kidney disease in the United States.
In the United States, over 80% of our $4.5 trillion national healthcare budget
is spent on chronic disease. Yet the U.S. has one of the poorest
life-expectancies in the developed world - a U.S. male can expect to live 10
years less than in Japan or Switzerland. Chronic kidney disease, the third
fastest-growing cause of death globally, is one of the principal drivers of
this unsustainable dynamic.
The great news is that new drug therapies such as SGLT2 inhibitors and GLP1
agonists are now available for individuals with diabetes and kidney disease
and have dramatically changed the game. However, we simply cannot afford to
blanket prescribe these expensive drugs across such large populations at costs
approaching $30,000 per year for life.(1 )
kidneyintelX.dkd opens the door to heavily vetted prognostic risk assessment
to front-line doctors making critical choices during the short patient visit
times allotted. Indeed, world experts, including in the 2024 clinical
guidelines(2), are now strongly advocating prognosis to enable a personalized
approach to treatment and patient identification. And to put this in
perspective, kidneyintelX.dkd prognosis can be executed for less than one
month's worth of drug therapy cost.
After a multi-year process, the decision in May 2024 by Medicare contractor
National Government Services to provide full coverage for kidneyintelX.dkd at
$950 per reportable result, is now allowing for settlement of billed tests in
under 30 days and an increase to our realized average sales price. Achieving
Medicare insurance coverage represents a key commercial milestone given that
Medicare and its related insurance plans make up the majority of our
addressable patient market in the United States.
We are continuing to perfect the commercial implementation of kidneyintelX.dkd
into doctor practice groups using the electronic medical record system to
automatically identify eligible patients for testing, accompanied by a doctor
best practice alert. Our sales team is now able to walk into this
message-integrated environment with doctors already alerted to at-risk
patients with the actionable benefits of kidneyintelX.dkd. We are seeing the
benefits of this integrated approach to order generation this quarter and
expect to leverage this model with additional large group practices in
calendar 2025.
The Environment is Heating Up for kidneyintelX.dkd
Chronic disease and preventative medicine are now taking center stage with
regard to policy on both sides of the Atlantic to address unsustainable
healthcare costs.
The return of a Trump Administration has already brought the discussion on
chronic disease management policy to the forefront. U.S. Health and Human
Services Secretary nominee Robert Kennedy has pledged to "end the chronic
disease epidemic in the country". The KidneyIntelX prognostic program
benefited greatly from the previous Trump Administration's chronic disease
regulatory and insurance policy environment. We also note a parallel policy
discussion emerging in the United Kingdom with Health Secretary, Wes
Streeting's chronic disease platform for revival of NHS. Law makers on both
sides of the Atlantic have woken to the fact that without controlling chronic
disease, of which kidney disease is a large component, there will be no taming
health care budgets. We would expect kidneyintelX.dkd, to have renewed
opportunities to support both governments' preventative medicine goals.
Also, of strategic importance to the kidneyintelX.dkd top line was New York
Governor Kathy Hochul's signing into law of Senate Bill1196a/Assembly Bill
1673a (
https://www.governor.ny.gov/news/governor-hochul-takes-action-protect-public-health-signs-legislative-package-support-patients
(https://www.governor.ny.gov/news/governor-hochul-takes-action-protect-public-health-signs-legislative-package-support-patients)
) which requires all insurance companies, including state Medicaid, to cover
comprehensive diagnostic biomarker testing for patients beginning January
1(st), 2025. While we will remain cautious about actual government
implementation dates, this type of legislation has received broad bi-partisan
support and can have a significant positive impact on kidneyintelX.dkd
adoption, average testing sales price and revenue recognition. Other states in
our commercial focus are also in process of enacting similar legislation and
we will provide updates as they become available.
Reorganized for Expense Reduction and Commercial Execution
In Fiscal year 2024, we completed a substantial reorganization of our business
and raised enough money to secure the run through profitability. Our execution
was painful, wholly necessary and only available to us now that we have
achieved the regulatory, outcomes data and reimbursement trifecta. The Company
is now devoting the significant majority of resources to our sales program
with much less cash required to operate. Two big moves below have allowed us
to target a cash burn rate of £560,000 or less per month by the end of FY25
(June).
· Debt and Payables Reduction
Post year end, we have successfully renegotiated the terms of our £8.7
million amortizing senior convertible loan notes. We have improved our
accounts payable situation and negotiated with other accounts payable
creditors to reduce or write-off their balances. The various actions that
we've taken will substantially reduce the Company's monthly cash burn and we
estimate that this will remove more than 80% of the total forecasted cash
obligations of the Company over the next three years (approximately £485,000
per month).
· Transfer of U.S. Trading to OTCQB and Re-qualification of Foreign
Private Issuer Status
Having considered the benefits versus the costs of maintaining the Nasdaq
listing, we have decided to transition U.S. trading of our ADS securities to
the OTCQB (®) Venture Market, which is operated by OTC Markets Group, from
the NASDAQ Global Market on October 7(th). In addition, at our next testing
date for Foreign Private Issuer ("FPI") status, the Company expects to qualify
as an FPI. We anticipate that transferring the trading to OTCQB and
re-acquisition of FPI status will provide significant savings of up to £1.9
million p.a.
Financing
Post year end, the Company raised an additional £11.8 million with strong
institutional demand that exceeded our initial funding target. Inside
management was an important investment player, and we received long-term
cornerstones from both large UK and US institutions.
Board changes
It is with great pleasure that Renalytix has secured Julian Baines MBE as our
new Executive Chairman. Julian was formerly the Non-Executive Chairman of
Renalytix from March 2018 to June 2020. I am also delighted Christopher Mills,
our long-serving Chairman will continue on the Board as a Non-Executive
Director of the Company.
Thank you for your continued confidence.
James McCullough, Chief Executive Officer
Notes
(1)Clinical practice is moving towards the "four pillars" of diabetic kidney
disease therapeutic management which includes combination use of ACEi/ARB,
SGLT2 inhibitors, Finerenone and GLP1 RAs. Estimated costs of SGLT2
Inhibitors, Finerenone and GLP1 RA are $12k, $7.9K and $11.6K annually.
(2)https://kdigo.org/wp-content/uploads/2024/03/KDIGO-2024-CKD-Guideline.pdf
(https://kdigo.org/wp-content/uploads/2024/03/KDIGO-2024-CKD-Guideline.pdf)
Financial Review
The results presented cover FY24. The presentational currency for Renalytix
plc and its subsidiaries (together, the "Group") is the United States Dollar.
INCOME STATEMENT
Revenue
The Group recognized a total of $2.3 million in revenue in the financial year
ended 30 June 2024 ("FY24") (financial year ended 30 June 2023 ("FY23"): $3.4
million) which was comprised of $2.15 million in revenue related to testing
services (FY23: $3.12 million) as well as $0.14 million related to
pharmaceutical services revenue (FY23: $0.28 million).
Cost of sales
The cost of sales associated with the services performed and commercial
testing revenue was $2.1 million for FY24 (FY23: $2.7 million).
Administrative costs
During FY24, administrative expenses totaled $30.7 million (FY23: $43.1
million). The major items of expenditure were general and administrative costs
which included $12.1 million in employee-related costs (FY23: $21 million),
$7.1 million in subcontractors, legal, accounting, and other professional fees
(FY23: $5.9 million), $5.1 million in external R&D Services, lab supplies
and lab services (FY23: $8.0 million), $1.4 million in insurance (FY23: $2.7
million), $2 million in depreciation and amortisation (FY23: $2.1 million),
$0.7 million in marketing and public relations (FY23: $1.3 million), $1.1
million in IT related costs (FY23: $1.3million), $0.5 million in office
related expenses including rent (FY23: $0.4 million), $0.2 million in stock
exchange listing and filing fees (FY23: $0.1 million) and $0.5 million in
other expenses (FY23: $0.3 million).
Gain (loss) on financial assets at fair value through profit or loss
The Group accounts for the investment in Verici Dx plc ("Verici Dx") equity
securities at fair value, with changes in fair value recognized in the income
statement. During the year ended 30 June 2024, we recorded a loss of $0.5
million to adjust the Verici Dx investment to fair value. During the year
ended 30 June 2023, we recorded a loss of $1.3 million to adjust the Verici Dx
investment to fair value.
Fair value adjustment of convertible debt
We elected to account for the convertible notes at fair value with qualifying
changes in fair value recognized through the income statement until the notes
are settled. This excludes fair value adjustments related to
instrument-specific credit risk, which are recognized in OCI. For the year
ended 30 June 2024, we recorded a loss of $3.8 million to adjust the
convertible notes to fair value. For the year ended 30 June 2023, we recorded
a loss of $3.1 million to adjust the convertible notes to fair value.
Finance income (expense)
During the year ended 30 June 2024, we recognized a gain of $0.2 million,
which was comprised of $0.2 million of grant income, $0.2 million interest
income earned on our cash deposits, and offset by $0.5 million of foreign
exchange losses and $0.1 million of realized loss on the sale of Verici Dx
shares. During the year ended 30 June 2023, we recognized a gain of $0.5
million, which was comprised of $0.2 million of income related to the
dissolution of Kantaro, $0.3 million of income for refunds from Citibank, $0.1
million interest income earned on our cash deposits, and offset by $0.1
million of foreign exchange losses.
BALANCE SHEET
Inventory
Inventory consists of consumable materials used by the labs to carry out
KidneyIntelX tests. Inventory on hand at 30 June 2024 totaled $0.3 million
(FY23: $0.7 million).
Fixed Assets
Property, plant, and equipment consists of laboratory equipment being used to
support testing and product development activities. At 30 June 2024, the group
held $0.2 million in net property, plant, and equipment (FY23: $1.0 million).
Intangible assets
The Group held Nil net book value of intangible assets at 30 June 2024 (FY23:
$12.5 million). The Group has fully impaired its intangible assets. The
intangible assets were made up of payments to Mount Sinai for license fees,
patent costs for the intellectual property underlying KidneyIntelX, as well as
amounts capitalized as development costs. Intangible assets also included the
value of the biomarker business purchased (in exchange for ordinary shares in
the Company) from EKF Diagnostics Holdings plc. In addition to impairment
charges the intangible assets decreased over the year due to amortization and
the impact of foreign exchange translation at year end.
Investment in Verici Dx
At the end of FY24 the group held 8,831,682 shares in Verici Dx, the fair
value of the investment in Verici Dx was $0.7 million at 30 June 2024 (FY23:
$1.5 million).
Convertible Note
In April 2022, the Company issued amortising senior convertible bonds with a
principal amount of $21.2 million due in April 2027 (the "Bonds"). The Bonds
were issued at 85% par value with total net proceeds of $18.0 million. The
Company elected to account for the Bonds at fair value. As at 30 June 2024,
the Bonds had a fair value of $8.5 million. At 30 June 2023, the Bonds had a
fair value of $11.9 million. Post year end, the convertible note has been
restructured with approximately $3.96 million converted to equity through the
issuance of 33,000,000 ordinary shares at 9 pence per share and the balance
restructured as a new unsecured convertible bond. The new convertible bond
will accrue interest at a rate of 5.5 per cent. per annum, if paid in cash, or
7.5 per cent. per annum, if rolled into the principal amount of the bond, at
the discretion of the Company. The New Convertible Bond will have a maturity
date of 31 July 2029 and may not be converted before 1 April 2026 except in
the event that the Company undertakes a further qualifying equity issuance in
the future, in which case the New Convertible Bond may be converted at the
placing price thereunder. The New Convertible Bond is callable by the Company
at any time prior to maturity.
Cash
The Group had cash on hand of $4.7 million (FY23: $24.7 million). Cash and
equivalents are held in several deposit accounts in the US ($2.4 million), UK
($2.1 million) and IRE ($0.1 million).
Consolidated Income Statement
FOR THE YEAR ENDED 30 JUNE 2024
2024 2023
$'000 $'000
Continuing Operations
Revenue 2,289 3,403
Cost of Sales (2,076) (2,702)
Gross profit 213 701
Administrative expenses (30,733) (43,056)
Operating loss (30,520) (42,355)
Share of Net loss in Associate accounted for using the equity method - (9)
Impairment of Intangibles (10,472) -
Gain (loss) on financial assets at fair value through profit or loss (505) (1,273)
Fair value adjustment of convertible debt (3,750) (3,093)
Finance (expenses) / income - net (223) 509
Loss before tax (45,470) (46,221)
Taxation - (2)
Loss for the Year (45,470) (46,223)
Earnings per Ordinary share
Basic $ (0.42) $ (0.56)
Diluted $ (0.42) $ (0.56)
Consolidated Statement of Comprehensive Income
FOR THE YEAR ENDED 30 JUNE 2024
2024 2023
$'000 $'000
Loss for the year (45,470) (46,223)
Other comprehensive income:
Items that may be subsequently reclassified to profit or loss
Changes in the fair value of the convertible notes 306 719
Currency translation differences (270) (337)
Other comprehensive income for the year 36 382
Total comprehensive loss for the year (45,434) (45,841)
Consolidated Statements of Financial Position
AS AT 30 JUNE 2024
2024 2023
$'000 $'000
Assets
Non-current assets:
Property, plant and equipment 213 1,027
Right of use asset - 194
Intangible assets - 12,511
Other long term assets 71 51
Total non-current assets 284 13,783
Current assets
Inventory 271 718
Security Deposits 77 132
Financial asset at fair value through profit or loss 698 1,460
Trade and other receivables 722 776
Prepaid and other current assets 364 566
Cash and cash equivalents 4,680 24,682
Total current assets 6,812 28,334
Total assets 7,096 42,117
Equity attributable to owners of the parent
Share capital 491 299
Share premium 121,813 104,953
Share-based payment reserve 14,452 13,513
Accumulated other comprehensive income (1,086) (1,127)
Retained earnings/(deficit) (144,654) (99,184
Total (liability)/equity (8,984) 18,454
Liabilities
Current liabilities:
Trade and other payables 7,544 11,513
Current lease liabilities 46 156
Note payable current 4,159 4,463
Total current liabilities 11,749 16,132
Non-current liabilities
Note payable non-current 4,331 7,485
Non-current lease liabilities - 46
Total non-current liabilities 4,331 7,531
Total liabilities 16,080 23,663
Total equity and liabilities 7,096 42,117
Consolidated and Company's Statements of Cash Flows
FOR THE YEAR ENDED 30 JUNE 2024
2024 2023
$'000 $'000
Cash flows from operating activities:
Loss before income tax (45,470) (46,221)
Adjustments for
Depreciation 184 341
Amortisation 2,255 2,151
Impairment of assets 10,472 -
Impairment of property and equipment 631 -
Share-based payments 1,083 1,560
Share of net loss of associate - 9
Reversal of Kantaro Liability - (55)
Unrealized loss on financial asset at fair value through profit or loss 505 1,273
Realized loss on sale of ordinary shares in Verici Dx 136 -
Fair value adjustment of convertible debt 3,750 3,093
Foreign Exchange gain (165) (1,008)
Changes in working capital
Trade and other receivables 54 125
Prepaid assets and other current assets 202 1,298
Related party receivable 55 75
Inventory 447 442
Security Deposits - 141
Trade and other payables (3,969) 4,148
Deferred Revenue - (46)
Net cash used in operating activities (29,830) (32,674)
Cash flows from investing activities:
Proceeds from sale of investments 117 -
Investment in Renalytix Inc - -
Net cash generated by investing activities 117 -
Cash flows from financing activities
Repayment of convertible notes (1,660) (4,288)
Issue of shares (net of issue costs) 11,817 19,306
Proceeds from the issuance of ordinary shares under employee share purchase 93 261
plan
Lease payments (156) (160)
Net cash generated from financing activities 10,094 15,119
Net decrease in cash and cash equivalents (19,619) (17,555)
Cash and cash equivalents at beginning of period 24,682 41,333
Effect of exchange rate changes on cash (383) 904
Cash and cash equivalents at end of period 4,680 24,682
Consolidated Statement of Changes in Equity
FOR THE YEAR ENDED 30 JUNE 2024
Share-based Accumulated
other
Share Capital Share Premium payment reserve comprehensive income Retained deficit Total Equity
$'000 $'000 $'000 $'000 $'000 $'000
At 30 June 2022 241 85,444 11,954 (1,509) (52,961) 43,169
Comprehensive income
Loss for the year - - - - (46,223) (46,223)
Other comprehensive income
Changes in fair value of convertible notes - - - 719 - 719
Currency translation differences - - - (337) - (337)
Total comprehensive income - - - 382 (46,22) (45,841)
Transactions with Owners
Share-based payments - - 1,559 - - 1,559
Shares issues under ESPP 1 260 - - - 261
Shares issued under Securities Purchase Agreement 57 20,240 - - - 20,297
Less issue costs - (991) - - - (991)
Total transactions with owners of the parent, recognized directly in equity 58 19,509 1,559 - - 21,126
At 30 June 2023 299 104,953 13,513 (1,127) (99,184) 18,454
Comprehensive income
Loss for the year - - - (45,470) (45,470)
Other comprehensive income
Changes in fair value of convertible notes - - 306 - 306
Currency translation differences - (5) - (265) - (270)
Total comprehensive income - (5) - 41 (45,470) (45,434)
Transactions with Owners
Share-based payments - 1,083 - - 1,083
Shares issues under ESPP - 93 - - - 93
Shares issued for repayment of convertible bond 30 4,978 - - - 5,008
Vesting of RSUs 1 138 (144) (5)
Shares issued under Securities Purchase Agreement 161 13,372 - - - 13,533
Less issue costs (1,716) - - - (1,716
Total transactions with owners of the parent, recognized directly in equity 192 16,865 939 - - 17,996
At 30 June 2024 491 121,813 14,452 (1,086) (144,654) (8,984)
Notes to the Financial Statements
1. GENERAL INFORMATION AND BASIS OF PRESENTATION
Renalytix Plc (the "Company") is a company incorporated in the United Kingdom.
The Company is a public limited company, which is listed on the AIM market of
the London Stock Exchange and Nasdaq global market. The address of the
registered office is 2 Leman Street, London, United Kingdom, E1W 9US. The
Company was incorporated on 15 March 2018 and its registered number is
11257655.
The principal activity of the Company and its subsidiaries (together "the
Group") is as a developer of artificial intelligence- enabled diagnostics for
kidney disease.
The financial statements are presented in United States Dollars ("USD")
because that is the currency of the primary economic environment in which the
Group operates.
2. BASIS OF PRESENTATION
The Group and Company's financial statements have been prepared in accordance
with UK-adopted International Accounting Standards and with the requirements
of the Companies Act 2006.
The preparation of financial statements in conformity with IFRS requires the
use of certain critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the Group's accounting
policies.
3. SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these
financial statements are set out below.
Going concern
The Group and Company fund their day-to-day working capital needs through
existing cash reserves. The Directors have evaluated the use of the going
concern basis in preparing these financial statements.
The Group has historically experienced recurring losses and negative cash
flows. Despite this, significant strides have been made in the
commercialisation of kidneyintelX.dkd, and business objectives have been
realigned for sharper focus. For the year ending 30 June 2024, the Group
recorded a loss of $45.5 million, with cash reserves of $4.7 million at
year-end. Substantial steps have been taken to refine the Company's commercial
strategy to achieve consistent, scalable results in the coming periods. Key
actions taken include:
● Cost reductions: During the year, the Company significantly reduced its cost
base, halving employee numbers from over 80 to around 40 post-year-end, and
cutting legal, professional, R&D expenses and other expenses which are not
necessary at this stage of the business. In Q1 2025 (quarter ending September
2024), operating expenses were 4.2 million, down over 50% from $8.8 million in
Q1 2024 (quarter ending September 2023). The Group projects operating expenses
for FY 2025 to be significantly lower than FY 2024's total of $30.7 million.
● Fundraising: A post-year-end fundraising in November 2024 raised approximately
$14.9 million after expenses and substantially restructured the outstanding
liabilities on the financial position. Approximately $3.9 million in
convertible notes was converted to equity along with a $750K liability
converted to a mix of equity and five year long non-amortizing
loan. Additionally, the remaining balance of the convertible note was
converted to an interest-only non-amortizing loan due July 2029 with interest
fixed at 5.5% p.a. if paid in cash or 7.5% p.a. if rolled into the balance of
the loan.
● Commercial Growth: Recent initiatives to expand kidneyintelX.dkd include the
rollout of commercial testing with a new health system, Advantage Care
Physicians (ACPNY"), with test ordering and processing having commenced in
September 2024. Additionally, a significant expansion in patient blood draw
options, a simplified test order requisition form to reduce doctor workload,
and improvements in customer service and test services billing all offer an
improved end-to-end user experience which the Company believes will support
continued test volume growth.
Despite these measures, historical losses and ongoing cash needs pose a
challenge to the Group's going concern status. The Directors recognize that
continued operation may require additional capital to fund operations, support
commercial growth, and develop new products. Although there are no immediate
plans for further funding via equity or debt, the Group aims to build investor
confidence through effective use of the current fundraising and strategic
initiatives over the next 12 months.
The Company has incurred recurring losses and negative cash flows from
operations since inception and had an accumulated deficit in retained earnings
of $145.5 million as of 30 June 2024. The Company anticipates incurring
additional losses until such time, if ever, that it can generate significant
sales of kidneyIntelX.dkd or KidneyIntelX technology services income.
The Company's ability to continue as a going concern is contingent upon
successful execution of management's intended plan over the next 24 months to
improve the Company's liquidity and profitability, which includes, without
limitation:
● The achievement of certain testing volumes in the lab;
● Continued expansion of reimbursement policies and contracts with commercial
payers; and
● Continued management of operating and commercial expenses.
As a result of the Company's losses and its projected cash needs, along with
the limited recent history of test order volume increases, as defined in the
accounting literature, substantial doubt exists about the Company's ability to
continue as a going concern. Subsequent to 30 September 2024, the Company has
successfully raised approximately $14.9 million in new equity capital and
restructured the existing long-term debt recorded on the Balance Sheet.
However, the Company does have a history of operating losses and it has been
expensive to deliver all of the milestones to commercialize the
kidneyintelX.dkd test. Should the company require additional capital it may
not be available 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 future financing may adversely affect the
holdings or the rights of the Company's shareholders. Should it be necessary,
if the Company is unable to obtain funding it 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. As such, management has concluded that there is a
going concern uncertainty. The consolidated financial statements do not
include any adjustments that may result from the outcome of this going concern
uncertainty.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and its subsidiary undertakings. The Group controls an entity when
the Group is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns
through its power over the entity. The existence and effect of potential
voting rights that are currently exercisable or convertible are considered
when assessing whether the Group controls another entity.
Subsidiaries are fully consolidated from the date on which control is
transferred to the Group. They are de-consolidated from the date that control
ceases.
All intra-group balances and transactions, including any unrealized income and
expense arising from intra-group transactions, are eliminated in full in
preparing the consolidated financial statements. Unrealized gains arising from
transactions with equity accounted investees are eliminated against the
investment to the extent of the Group's interest in the investee. Unrealized
losses are eliminated in the same way as unrealized gains, but only to the
extent that there is no evidence of impairment
Intangible assets
(a) Trademarks, trade names and licenses
Separately acquired trademarks and licenses are shown at historical cost.
Trademarks and licenses acquired in a business combination are recognized at
fair value at the acquisition date. Trademarks and licenses have a finite
useful life and are carried at cost less accumulated amortisation.
Amortisation is calculated using the straight-line method to allocate the cost
of trademarks and licenses over the contractual license period of 10 to 15
years and is charged to administrative expenses in the income statement.
(b) Development costs and trade secrets
Development costs have a finite useful life and are carried at cost less
accumulated amortisation.
Expenditure incurred on the development of new or substantially improved
products or processes is capitalized, provided that the related project
satisfies the criteria for capitalisation, including the project's technical
feasibility and likely commercial benefit. All other research and development
costs are expensed to profit or loss as incurred.
Development costs are amortised over the estimated useful life of the products
with which they are associated. amortisation commences when a new product is
in commercial production. The amortisation is charged to administrative
expenses in the income statement. The estimated remaining useful lives of
development costs are reviewed at least on an annual basis.
The carrying value of capitalized development costs is reviewed for potential
impairment at least annually and if a product becomes unviable and an
impairment is identified the deferred development costs are immediately
charged to the income statement. Amortisation has not yet commenced.
Trade secrets, including technical know-how, operating procedures, methods and
processes, are recognized at fair value at the acquisition date. Trade secrets
have a finite useful life and are carried at cost less accumulated
amortisation. amortisation has not yet commenced.
Impairment of non-financial assets
Assets that have an indefinite life or where amortisation has not yet
commenced are tested annually for impairment. Assets that are subject to
amortisation are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is recognized for the amount by which the carrying amount
exceeds its recoverable amount.
The recoverable amount is the higher of an asset's fair value less costs to
sell and value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks
specific to the asset for which the estimates of future cash flows have not
been adjusted.
For the purposes of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash flows. Impairment
losses recognized for cash-generating units, to which goodwill has been
allocated, are credited initially to the carrying amount of goodwill. Any
remaining impairment loss is charged pro rata to the other assets in the
cash-generating unit.
Where an impairment loss subsequently reverses, the carrying amount of the
asset (cash-generating unit) is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does not exceed
the carrying amount that would have been determined had no impairment loss
been recognized for the asset (cash-generating unit) in the prior period. A
reversal of an impairment loss is recognized in the income statement
immediately. If goodwill is impaired however, no reversal of the impairment is
recognized in the financial statements.
Revenue Recognition
The Group recognizes revenue when a customer obtains control of contracted
goods or services. The Group records the amount of revenue that reflects the
consideration that it expects to receive in exchange for those goods or
services. The revenue recognition will be assessed under IFRS 15 - Revenue
from Contracts with Customers, to establish the principal and agent in the
relationship between the parties and with the end customer.
The Group 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. The Group 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 Group 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 Group 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 Group 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.
4. INCOME TAX
2024 2023
Group $'000 $'000
Deferred tax - -
Total deferred tax - -
Income tax (charge)/credit - -
No deferred asset is calculated on losses in FY24 as the probability of future
utilization is considered too remote.
Factors affecting the future tax charge
The standard rate of corporation tax in the UK is 25%.
2024 2023
$'000 $'000
Loss before tax 45,470 46,221
Tax Calculated at domestic tax rates applicable to the UK Standard of tax at 11,368 11,555
25% (2023: 25%)
Tax effects of:
Expenses not deductible for tax purposes (363) (872)
Losses on which no deferred tax asset is recognized (94) (85)
Tax credit for the year 10,911 10,598
Current Year Valuation Allowance (10,911) (10,598)
Prior year deferred tax asset - -
Reversal of tax asset at 30 June - -
Tax expense - (2)
Total Income Tax (Expense)/Credit - (2)
Net losses can be carried forward indefinitely to offset future taxable
profits however management has concluded that the realization of deferred tax
assets to be less than probable and recorded a full valuation allowance. No
deferred asset is calculated on losses in the UK totaling $154,825,000 where
the probability of future utilization is considered too remote.
5. NET LOSS PER 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 30 June 2024 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.
The following is a reconciliation of basic net loss per share to diluted net
loss per share for the fiscal years ended June 30, 2024, and 2023.
2024 2023
Basic earnings per share $ (0.42 ) $ (0.56 )
Average shares outstanding - basic 108,179,366 82,210,050
Convertible debt shares - -
Adjusted average shares outstanding - diluted 108,179,366 82,210,050
Diluted earnings per share $ (0.42 ) $ (0.56 )
The following potentially dilutive securities have been excluded from the
computation of diluted weighted-average shares of ordinary shares outstanding
as they would be anti-dilutive:
2024 2023
Stock options to purchase ordinary shares 7,473,866 4,968,576
Restricted stock units 7,930 40,340
Conversion of convertible note 3,264,719 5,441,199
10,746,515 10,450,115
6. INTANGIBLE ASSETS
Group Trademarks, Trade Names & Licenses Trade Secrets Development Costs Total
$'000 $'000 $'000 $'000
Cost
At 1 July 2022 9,279 6,275 4,055 19,609
Additions - - - -
Foreign translation 381 258 144 783
At 30 June 2023 9,660 6,533 4,199 20,392
Amortisation
At 1 July 2022 3,789 1,098 702 5,589
Charge for the year 922 624 432 1,978
Foreign Translation 199 75 40 314
At 30 June 2023 4,910 1,797 1,174 7,881
Net book value
At 30 June 2023 4,750 4,736 3,025 12,511
Cost
At 1 July 2023 9,660 6,533 4,199 20,392
Additions - - - -
Impairment (9,687) (6,551) (4,209) (20,447)
Foreign translation 27 18 10 55
At 30 June 2024 - - - -
Amortisation
At 1 July 2023 4,910 1,797 1,174 7,881
Charge for the year 963 651 447 2,061
Impairment (5,892) (2,457) (1,626) (9,975)
Foreign Translation 19 9 5 33
At 30 June 2024 - - - -
Net book value
At 30 June 2024 - - - -
7. SUBSEQUENT EVENTS
On July 15, 2024, the Company announced the repayment of $1.06 million of the
principal amount of the Company's convertible bond and the interest for the
period through the issuance of 2,275,000 Ordinary Shares and 4,641,161
American Depositary Shares ("ADSs"). 11,557,322 new ordinary shares of
£0.0025 each in the capital of the Company will be issued to settle including
conversion of 4,641,161 ADSs (9,282,322 Ordinary Shares with each ADS
representing two Ordinary Shares). After settlement of the repayment, the
principal remaining under the convertible bond will be reduced by $1.06
million to $11.66 million.
On 30 September 2024 the company announced that it had received commitments
from existing and new investors to raise £11.9m through a subscription of
128,738,833 new ordinary shares at 9 pence per share. The company also
issued 36,541,666 new ordinary shares at 9 pence per share to convert part
of the existing Convertible Debt to equity and convert part of the accounts
payable balance to equity. In respect to the convertible bond the company
successfully converted £2.97m of the bond to equity via the issue of 33
million new ordinary shares and the remaining balance treated as new unsecured
convertible bonds with interest at a rate of 5.5% per annum if paid in cash,
or 7.5% per annum if rolled into the principal amount of the debt, at the
discretion of the company. The new convertible bond will be non-amortizing,
have a maturity date of 31 July 2029 and may not be converted before 1 April
2026. The bonds are callable at the Company's option at any time prior to
maturity. In respect to the accounts payable balance with a professional
adviser, $750,000 has been restructured such that $425,000 of the balance has
been converted into equity and $325,000 has been restructured as a long term
promissory note, bearing paid-in-kind interest at 5% per annum. The new note
will be due at the earlier of 5 years from the initiation of the note, or
accelerated should the Company be acquired prior to maturity. The Company
may prepay the note at any time without penalty. The equity financing
commitments closed in two tranches, the first on October 8, 2024, and the
second on November 4, 2024, with all net proceeds received by the company on
the closing dates. All debt restructurings were effective with the second
close of the equity financing.
8. RECONCILIATION OF IFRS TO US GAAP
Since Renalytix's initial listing on Nasdaq, the Company has followed
accounting principles generally accepted in the United States of America ('US
GAAP'), both for internal as well as external purposes. The information below
is unaudited and does not form part of the statutory accounts.
Renalytix Form 10-K, which is based on US GAAP, contains differences from its
Annual Report, which is based on IFRS.
The Form 10-K and Annual Report are available on the Company's website
(www.renalytix.com). In order to help readers to understand the difference
between the Group's two sets of financial statements, Renalytix has provided,
on a voluntary basis, a reconciliation from IFRS to U.S. GAAP as follows:
BALANCE SHEET
GAAP IFRS GAAP vs IFRS
As at 30 June 2024 As at 30 June 2024 Difference
$'000 $'000 $'000
Assets
Cash 4,680 4,680 -
Accounts receivable 722 722 -
Prepaid expenses and other current assets 716 712 4 (a)
Property, plant and equipment, net 216 213 3 (a)
Intangibles, net - - - (b)
Investment in Verici Dx 698 698 -
Other assets 940 71 869 (c)
Total assets 7,972 7,096 876
Liabilities and stockholder's equity
Current Liabilities:
Note payable - current 4,159 4,159 -
Accounts payable 2,608 7,544 4,936 (d)
Accrued expenses and other current liabilities 3,354 - (3,354 ) (d)
Accrued expenses - related party 1,329 - (1,329 ) (d)
Current lease liability 45 46 1 (e)
Note payable - non current 4,331 4,331 -
Noncurrent lease liabilities - - -
Total Liabilities 15,826 16,080 254
Stockholders' (deficit) equity:
Ordinary shares, £0.0025 par value per share: 161,944,807 shares 478 491 13 (e)
authorized; 154,368,191 and 93,781,478 shares issued and
outstanding at June 30, 2024 and June 30, 2023, respectively
Additional paid in capital 204,893 136,265 (68,628 ) (f)
Accumulated other comprehensive (loss) income (1,443 ) (1,086 ) 357 (g)
Accumulated deficit (211,782 ) (144,654 ) 67,128 (h)
Total stockholders' (deficit) equity (7,854 ) (8,984 ) (1,130 )
Total liabilities and stockholders' (deficit) equity 7,972 7,096 (876 )
a. Represents other immaterial presentation differences between US GAAP
& IFRS
b. Under IFRS, the acquisition of licenses and subsequent development
efforts are capitalized and presented as intangible assets. Under U.S. GAAP,
such costs are expensed as incurred until technological feasibility has been
achieved or the assets are deemed to have future alternative use. In addition
to capitalized software costs which are recorded as property and equipment
under US GAAP and Intangibles under IFRS.
c. Difference is attributable to capitalized software costs which are
recorded as other assets under U.S. GAAP and Intangibles under IFRS.
d. Accounts payable and other current liabilities are presented in the
aggregate within the Annual report while broken out separately on the US GAAP
10-K. Difference represents other immaterial presentation differences and
audit adjustments.
e. Represents other immaterial audit adjustments.
f. Represents cancellation of share premium account and reduction in
accumulated deficit under IFRS in anticipation of a distribution of Fractal Dx
net assets to the shareholders of Verici Dx in prior year. In addition, stock
based compensation is recognized on a straight line basis under U.S. GAAP and
a graded vesting basis under IFRS which creates timing differences as to when
expenses are recorded.
g. Represents the difference in weighted average foreign exchange rates
and spot rates used for translation of financial statements under IFRS and
U.S. GAAP.
h. Represents cancellation of share premium and reduction in accumulated
deficit under IFRS in anticipation of a distribution of FractalDx net assets
to the shareholders of Verici Dx and differences noted within the Company's
consolidated statement of operations and comprehensive loss.
RECONCILIATION OF NET LOSS
$'000
Net loss in accordance with IFRS (45,470)
Stock compensation expense (626) (i)
Amortisation and impairment of intangibles 12,352 (j)
Other adjustments 288 (k)
Net loss in accordance with US GAAP (33,456)
i. Stock based compensation is recognized on a straight line basis
under U.S. GAAP and a graded vesting basis under IFRS which creates timing
differences as to when expenses are recorded.
j. Amortisation expense is higher on the IFRS books as a result of the
higher intangible asset balance. Under IFRS, the acquisition of licenses and
subsequent development efforts are capitalized and presented as intangible
assets. Under U.S. GAAP, such costs are expensed as incurred until
technological feasibility has been achieved or the assets are deemed to have
future alternative use. Impairment charge has also been provided against the
asset balance.
k. The remaining difference represents the aggregation of post year end
audit fee accruals, other immaterial audit adjustments and small accounting
standard difference.
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