VRCI Verici Dx Plc

Verici Dx plc

("Verici Dx" or the "Company") 

2023 Annual Results

Strong delivery on key strategic objectives

Verici Dx plc (AIM: VRCI), a developer of advanced clinical diagnostics for organ transplant, announces its audited final results for the year ended 31 December 2023.

Strategic progress

Operational highlights

Financial highlights

Business update and investor briefing

An update on progress across the Company's products, initiatives, and projects will be provided in early Q3 together with an investor meeting at that point. Further details will be announced in due course.

Commenting on the performance and outlook, Sara Barrington, Chief Executive Officer, said:

"2023 was a transformational year for Verici Dx with excellent strategic progress resulting in the successful transition from a research-focused entity to a commercial-stage company, with two clinically validated products and substantial opportunities for further value creation.

We believe the steps Verici Dx has taken to strengthen its balance sheet means we are now very well positioned to progress our strategic ambitions. The focus throughout the rest of 2024 is therefore to advance multiple growth and value creation initiatives, whilst maintaining our strong financial discipline. I look forward to providing further updates in due course."

Enquiries:

Footnotes:

1.   Earnings before income tax, depreciation and amortisation, adjusted to exclude exceptional items.

About Verici Dx plc www.vericidx.com

Verici Dx is a developer of a complementary suite of leading-edge tests forming a kidney transplant platform for personalised patient and organ response risk to assist clinicians in medical management for improved patient outcomes. The underlying technology is based upon artificial intelligence assisted transcriptomic analysis to provide RNA signatures focused upon the immune response and other biological pathway signals critical for transplant prognosis of risk of injury, rejection and graft failure from pre-transplant to late stage. The Company also has a mission to accelerate the pace of innovation by research using the fully characterised data from the underlying technology, including through collaboration with medical device, biopharmaceutical and data science partners.

The foundational research was driven by a deep understanding of cell-mediated immunity and is enabled by access to expertly curated collaborative studies in highly informative cohorts in kidney transplant.

Chair's Statement

2023 stands out as a pivotal chapter in Verici Dx's history, reflecting a period of excellent strategic progress and a transformative leap from a research-focused entity to a commercial-stage company with two clinically validated products and substantial opportunities for further value creation.

The year saw several significant achievements, foremost among them was securing a global licensing and commercialisation agreement with One Lambda, Inc., (a company within Thermo Fisher Scientific Inc.) ("Thermo Fisher") in November 2023. This followed the successful clinical validation of Clarava™, our pre-transplant prognosis test for the risk of early acute rejection ("EAR") in patients having received a kidney transplant from a deceased donor. This exclusive license grants Thermo Fisher the rights to transfer and further develop as appropriate the assay for pre-transplant risk assessment for validation as a Laboratory Developed Test ("LDT") in its CLIA laboratory in the U.S., as well as the sole right, but not obligation, to manufacture, distribute and sell the assay worldwide. The license agreement includes an upfront payment to the Company, along with a number of further payments conditional upon operational deliverables related to technology transfer and related publications. The initial upfront payment was received before year end. In addition, Verici Dx granted Thermo Fisher a non-exclusive license for access to a portion of the Company's urine samples, demonstrating the additional value in the Company's data and sample assets for research. Under the above arrangements, payment events for Verici Dx over the 12 months following entry into that agreement are expected to total approximately US$5 million with a further milestone-linked payment thereafter, in addition to ongoing royalties on tests sold.

Another highlight was announcing that, in December 2023, the data from the Company's successful international validation study for Tutivia™ was peer reviewed and published in The American Journal of Transplantation. This is the official journal of both the American Society of Transplantation and the American Society of Transplant Surgeons with a combined membership of approximately 6,000 transplant professionals. Tutivia™ is our post-transplant diagnostic test focused on acute cellular rejection ("ACR") including sub-clinical rejection, which was commercially launched in January 2023 and which we are continuing to roll out.

We were also pleased to note that the pricing for both TutiviaTM and ClaravaTM was confirmed and finalised by the Centers for Medicare & Medicaid Services ("CMS") at the proposed rates of $2,650 per test, effective from 1 January 2024. Coverage is the final stage for Medicare reimbursement and the technical assessment file for coverage under the Local Coverage Determination ("LCD") was submitted Q1 2024. It is expected that a coverage determination will be obtained by the end of 2024.

Turning to our third product, ProtegaTM, at the start of the year we completed enrolment for the longer duration clinical validation study. This is a liquid biopsy that aims to predict the risk of fibrosis and long-term graft failure. Together with Clarava™ and Tutivia™, this will allow Verici Dx to offer end-to-end testing for kidney transplant patients and their clinicians. Post year-end, the scheduled 12 months post operation visits for enrolled patients were completed and, as planned following our recent fundraise, the clinical trial protocol was extended to include a 24-month post-transplant visit for participants to further support the long-term outcomes data. This is expected to conclude the study visits for the clinical trial.  Protega will be assessed on an interim basis with these results expected in the first half of 2025.

This progress across all three of our lead tests reflects the Company's strategic focus, clear product differentiation, and significant competitive advantages. The tests are based upon RNA signatures which return high performance in risk stratifying patients so that clinicians can proactively tailor care pathways. The highly inclusive clinical trial, which was designed to be as close to what would be found in clinical practice, also included longitudinal sample collection and transcriptional sequencing across blood, urine and tissue. This has yielded an unparalleled data and biorepository asset for research use, including collaborations. This value is already being recognised, as evidenced by the non-exclusive license fee paid by Thermo Fisher for access to the urine samples. The Company will continue to build its sample and data assets over time and expects further monetisation over time, alongside the potential to enhance its own products and their positioning from the insights obtained.

In addition, Verici Dx has also made strong operational progress, receiving further recognition for our clinical laboratory which has now achieved CLIA certification, allowing us to process tests from 51 states. This exemplifies the Company's commitment to a quality-focused approach to providing advanced kidney transplant diagnostics services to clinicians and patients in need. In addition, the laboratory gained accreditation from the internationally recognised College of American Pathology (CAP), further affirming our commitment to operating at the highest standards expected by healthcare providers, patients and regulatory bodies.

During 2023 we registered two significant new patents that extend our intellectual property portfolio and protect our proprietary methods of predicting and diagnosing sub-clinical and clinical acute kidney rejection.

Despite the challenging global financing environment, we have significantly strengthened our financial position through both the Thermo Fisher agreement in November 2023, as detailed above, and also the early 2024 equity fundraise which raised a total of £6.5m in gross proceeds (£6.0 m net) through the issue of 72,222,222 new ordinary shares. Verici Dx is grateful to its existing shareholders for their continued support and delighted to welcome those new to the register.

Together, these transactions, and our assumptions, extend our cash runway into 2026 and position us well as we continue to make progress during a busy 2024. Our strategic focus this year will be to advance multiple growth initiatives in parallel, with the potential to build greater value in the Company and we have made a strong start to the year in this regard.

On behalf of the Board, I would like to thank our dedicated colleagues who have contributed to the Company's success in the past year, the patients and their caregivers who have taken, and are taking, part in our clinical trials as we work towards our goal of improving patients' lives throughout the kidney transplant journey, and our investors and partners for their continued support throughout the year.

Julian Baines

Non-executive Chair

29 May 2024

Chief Executive Officer Report

At Verici Dx, we are driven by an unrelenting focus on improving potential outcomes for all transplant patients, with an initial focus on kidney transplants. We aim to do this by providing early predictive tests to cover the full transplant lifecycle, from pre-transplant to late stage, thereby meeting a critical need by enabling clinicians to make more informed treatment decisions. To this end, 2023 has been a transformational year with the delivery of many significant strategic objectives. These achievements relate both to our products, where we benefit from our differentiated offering and clear competitive advantages which are covered in detail below, and to our laboratory and clinical operations where we see growing recognition for the strength and quality of our platform.

Excellent progress across our lead products

By meticulously adhering to our disciplined cost management strategy, we carefully selected our investments and allocated organisational resources throughout the year. This focused approach directly contributed to measurable advancements across our strategic plan which has continued to evolve with access to further funding in early 2024.

Our first product is the post-transplant test, Tutivia^TM, which was clinically validated in 2022 and commercially launched at the start of 2023. During the year, we continued to work with leading US transplant centres to support the adoption and integration of Tutivia^TM into their clinical pathways to encourage consistent and recurring utilisation. Following some initial short-term delays by clinical centres as they analysed the potential impact on the overall market of announcements made by CMS, we saw an acceleration in the early adopter programme through the later part of 2023.

We were delighted to announce in December 2023 that the data from the Company's successful pivotal international validation study for Tutivia^TM had been peer reviewed and published in The American Journal of Transplantation, the official journal of both the American Society of Transplantation and the American Society of Transplant Surgeons with a combined membership of approximately 6,000 transplant professionals. Publication in a leading scientific journal is a crucial step in the commercialisation of a new product as the peer-review process supports the verification of the reliability and credibility of the research, building trust and confidence within the scientific community. Publication is also a key element in the application by Verici Dx for Tutivia^TM to obtain a local coverage determination ("LCD") for Medicare reimbursement, opening the test up for Medicare patients and increasing the likelihood of the test being adopted by centres. The Technical Assessment ("TA") File for this was submitted post year-end., an important step in the pathway for reimbursement coverage from Medicare. We expect a period of review and questions during the course of 2024 and expect to have a determination by the end of the year. Submitting the TA means that the Company will be able to apply for retrospective reimbursement on tests used after the submission was made, once the subsequent LCD is granted. The award of the LCD is also required before we can recognise revenues.

Turning to our pre-transplant test, Clarava^TM, we announced the successful results from our multi-centre clinical validation study in July 2023. The study, which included a broad and diverse group of patients preparing to receive a kidney transplant across 13 centres, demonstrated a statistically significant result, identifying patients that are at increased risk for a kidney rejection event in the critical first 60 to 90 days post-transplant after receiving a kidney from a deceased donor. This equates to around 65,000 eligible patients per year. Study data analysis of the clinical performance of Clarava^TM determined that patients of high risk based on their test result were approximately six times more likely to have a rejection than those of low risk. As noted in the Chair's Statement, this in turn led to the signing of a global licensing and commercialisation agreement with Thermo Fisher to further develop an assay for pre-transplant prognostic testing for risk of early kidney rejection which was announced on 15 November 2023.

It is worth noting that the Centers for Medicare & Medicaid Services ("CMS") finalised the Clinical Laboratory Fee Schedule ("CLFS") payment rate of $2,650 for both Clarava^TM and Tutvivia^TM, with the rate taking effect for three years from 1 January 2024. Having a national payment rate established by CMS represents another step toward securing reimbursement for testing by Medicare.

Moving on to Protega^TM, this is the third blood-test product to emerge from our platform of personalised, predictive RNA signature tests and completes our proposed blood-based portfolio for end-to-end kidney transplant testing, from pre-transplant to long-term damage. Enrolment into the longer duration validation study was finalised in the first quarter of 2023. We expect that the final validation point will be completed after follow-up at the 24-month point for the last patient tested, which is expected to be in Q1 2025. The Company expects to be able to review interim data before this point and we will provide further updates as appropriate.

Clear product differentiation and competitive advantages

Our portfolio of innovative kidney transplant tests use advanced next-generation sequencing to define a personalised risk profile for each patient using RNA signatures. This allows for the early prognosis of transplant rejection, enabling a meaningful risk stratification for care pathways. A high-risk patient identified by Tutivia is six times more likely to be having a rejection that a low-risk patient.  In Clarava this increased to seven times. This is a significant advantage over currently available tests, which detect evidence of damage already occurred and may be confounded by other conditions. 

Our tests enable doctors to have accurate, data-driven clinical information, to assist their care decision-making for patients including choices made about immunosuppressive therapy protocols and may also inform other aspects of the post-transplant care pathway over time. This has not only near-term scope to reduce the unnecessary and serious consequences from over- or under-dosing for immunosuppression in conjunction with kidney transplant, but also to improve the longevity of transplanted kidneys and, by reducing the risk and rate of transplant failure, much broader potential to deliver huge health economic benefits by improving transplant outcomes.

Tutivia™ has a number of important differentiators from current biomarker tests. One is the ability to risk stratify patients as early as the first week post-transplant for all types of patients and all types of rejection. The validation trial demonstrated that about 25% of patients were high risk and with an odds (or hazard) ratio of 5.74 which indicated that these high-risk patients were about 6 times more likely than the low-risk patients to be having, or at imminent risk of having, an acute rejection. This therefore enables clinicians to act proactively, rather than reactively, to rejection events. Tutivia™ also demonstrated that it was not confounded by other events such as the BK virus, which requires a different treatment care pathway to that of rejection.

Another differentiating feature is that other currently available single blood tests which look for signs of transplant damage typically have a high Negative Predictive Value ("NPV") but are non-specific. This means that if the blood test returns a negative result, clinicians can be confident that there is no current rejection occurring but remain uncertain whether a positive result is from a rejection or an infection, or physical trauma. Consequently, these tests function primarily as a 'rule out' tool, but this is limiting for clinicians, who may need to know with some degree of confidence whether their patient requires further interventions.

Crucially, in contrast to other tests, our validation study was a blinded 'all-comers' patient population across 13 international transplant centres. This means that we were able to test the power of Tutivia™ within a clinically realistic context that included all types of rejection and all types of patients. We believe that Tutivia™ is the only product currently on the market to have been validated so comprehensively. This broad testing population compared with more targeted sub-populations will lead to a more muted performance overall but still managed to return the highest performance amongst its comparators for positive predictive value ("PPV") but not at the statistical price of NPV, as the overall performance was well balanced with a NPV of 79%.

Turning to our pre-transplant test, Clarava^TM, we announced the successful results from our multi-centre clinical validation study in July 2023. The study, which included a broad and diverse group of patients preparing to receive a kidney transplant across 13 centres, demonstrated a statistically significant result, identifying patients that are at increased risk for a kidney rejection event in the critical first 60 to 90 days post-transplant after receiving a kidney from a deceased donor. Importantly for a risk assessment tool, the study data analysis of the clinical performance of Clarava^TM determined that patients of high risk based on their test result were approximately seven times more likely to have a rejection than those of low risk. This is based upon the patient's likely immune response to a transplanted kidney from a deceased donor without knowing the condition of the organ or its compatibility with the patient, and so is unique information for the clinician.

Continued delivery of significant operational milestones

During the period, we successfully progressed our laboratory registration status under the CLIA Certificate of Compliance by the Centers for Medicare & Medicaid ("CMS") and are pleased to confirm that Verici Dx is now fully accredited in 51 states. This enables us to test samples from patients based in any of these states. We are currently working on reaching accreditation in the last remaining state of New York and hope to receive this later in 2024.

We were pleased to receive confirmation that the Medicare price recommendation of $2,650 was finalised for both Clarava^TM and Tutivia^TM. This rate was established through the "gapfill" process for both Tutivia^TM (CPT 0320U) and Clarava^TM (CPT 0319U) and became effective as of 1 January 2024. Gapfill pricing is a method used by CMS to establish a payment rate for clinical diagnostic laboratory tests when no comparable test is priced on the CLFS and involves setting the payment rate for the test at the median of rates established by local Medicare contractors. Coverage determination for Tutivia will be applied for through a technical assessment application under the Local Coverage Determination ("LCD") in the Palmetto region of MolDx. Following submission of this application in Q1 2024, the review process is now well underway, and a determination is expected later in 2024. The Company is able to make retrospective claims for any tests used following formal acceptance of the application, once the LCD is granted.

In addition, registration for Medicaid has been approved in 15 states, as well as with BlueCross Blue Shield of Tennessee, the largest health benefit plan company in the state, with a further 12 states pending. Together, Medicaid and Medicare patients account for 65% of all transplant recipients across the US.

The Company's intellectual property was further secured by the issuance of two key US patents during the year. These support and protect the Company's core technologies in RNA signature biomarker tests used for assessment of the prognostic risk pre-transplant (Clarava^TM) and post-transplant (Tutivia^TM) risk of acute kidney transplant rejection, providing protection in the US until 2039 and 2036 respectively. The patents underpinning Tutivia have also been previously granted in Europe, China and Australia. The protection of the Company's intellectual property is fundamental to our strategy of amassing full transcriptomic data from the biological systems and interactions associated with transplant rejection and, over the longer term, informing transplant analysis in other organs and in the broader field of immune-mediated diseases.

In November 2023, we achieved ISO 27001 certification for our Information Security Management System ("ISMS"). This demonstrates the robustness of our systems and processes in maintaining the highest level of data protection for our patients, clients, partners, and stakeholders.

Completion of partnerships and agreements

In November 2023, the Company announced an agreement for an exclusive license granting Thermo Fisher the rights to transfer an assay for pre-transplant risk assessment for further development as a Laboratory Developed Test ("LDT") in its CLIA laboratory in the U.S., as well as the sole right, but not obligation, to manufacture, distribute and sell the assay worldwide. The license agreement included an upfront payment to the Company, along with a number of further payments conditional upon operational deliverables related to technology transfer and related publications. This initial upfront payment was received before year end. In addition, Verici Dx has granted Thermo Fisher a non-exclusive license for access to a portion of the Company's urine samples, demonstrating the additional value in the Company's data and sample assets for research. Under the above arrangements, payment events for Verici Dx over the 12 months following entry into the license agreement are expected to total approximately US$5 million with a further milestone-linked payment thereafter, in addition to ongoing royalties on tests sold. A total of $2.8 million of the c.$5 million has been received to the date of this report.

In January 2024, the Company announced a collaboration with The Westmead Institute for Medical Research based in Sydney, Australia, on a newly awarded, 4-year federal research grant. This forms part of the Australian Government's Medical Research Future Fund (MRFF) "Genomics Health Futures Mission". The collaboration between Verici Dx and The Westmead Institute for Medical Research aims to improve the understanding of factors contributing to graft loss in organ transplants, focusing on genetic differences between donor and recipient beyond the well-known HLA¹ mismatches. By incorporating a broader range of genetic data through multiple cohorts with varying ethnic backgrounds, the goal is to enhance the prediction and management of risks associated with organ transplants, ultimately leading to better outcomes for patients. Verici Dx will use its CAP-accredited/CLIA-certified laboratory to perform sequencing from blood samples across 3 sites, as well as apply its existing biomarker tests to the samples to assess their use in this diverse population.

Management and staff

As of 31 December 2023, the Company had 14 Full Time Equivalents ("FTE") employees. At the time of this report, we have increased our headcount to 19 FTE as we augment our commercial and bioinformatics team. We are privileged to have such a rich, diverse talent pool and the continued engagement and commitment of our people is critically important.

Financials

Statement of Comprehensive Income

The Company recorded its first revenues in the year, arising from the license agreement with Thermo Fisher, representing the transfer of the urine samples. We also invoiced, and received payment by year-end, on a further $1,500,000 in the year under this agreement, which is recorded as deferred income on the balance sheet in accordance with IFRS revenue recognition requirements.

The adjusted EBITDA loss, being the loss for the year, before the deduction of interest, taxation, amortisation and depreciation, and excluding the share-based payments charge, was US$7,585,000 (2022 - US$10,497,000). The reduction reflects the significant fall in research and development expenditure to US$2,429,000 (2022 - US$4,832,000) as enrolment into our clinical trials concluded, notwithstanding the increase in staff costs to US$3,813,000 (2022 - US$2,889,000) as the full year impact of the 6 new hires in 2022 is included. All research and development costs arise from third parties, this does not include any allocation of internal costs. We started the year with 15 full time employees, two left the business in the year and a further hire joined in January 2023 meaning we ended the year with 14 full time employees, both numbers excluding our non-executive directors. As noted above, this number has since increased to 19 as of the date of this report.

Statement of Financial Position and Cash Flows

Cash balance at year end was US$2,645,000 (2022 - US$9,805,000). Cash outflow from operations was US$7,160,000 (2022 - US$10,068,000) reflecting the lower loss for the year, with cash outflow on additions to tangible and intangible assets of US$231,000 (2022 - US$1,308,000). The biggest constituent of spend on capital expenditure in 2022 was the construction of our CLIA laboratory in Tennessee.

Within current and non-current liabilities, we entered a financing transaction in December 2022 to secure favourable terms on a new sequencer. At 31 December 2023 the liability was US$161,000 (2022 - US$239,000). We also entered into a five-year lease on our new CLIA laboratory in Tennessee in September 2022, resulting in the recognition of a right of use asset and corresponding liability. At 31 December 2023, the liability was US$379,000 (2022 - US$461,000). The largest balance within our accruals continues to be our accruals for costs incurred at the clinical trial sites not yet invoiced being US$772,000 (2022 - US$912,000).  The deferred revenue of US$1,500,000 (2022 - US$Nil) represents an amount invoiced, and received, in 2023 but to be recognised in income once the conditions for recognition as revenue are satisfied.

As of 31 December 2023, the Company had a cash balance of $2,645,000 (2022 - $9,805,000).

At the time of the equity fundraise, we set out a number of strategic priorities centred around the following key areas:

-     Stepwise additions to headcount and marketing budgets to accelerate product awareness and adoption for the core unlicensed portfolio, in particular with regard to Tutivia opportunities and the first Protega product validation;

-     Further development of both the urine samples and the Living Donor version of Clarava, utilising our own existing samples together with additional external samples;

-     Driving further value gains from the current and expanded research asset (samples and data)

We have made a strong start on the highest priority initiatives and will provide further updates on these as appropriate.

Outlook

The steps we have taken to bolster our financial position mean we are now very well positioned to progress our strategic ambitions. The focus this year will be to advance multiple growth and value creation initiatives over the short, medium and longer term, whilst maintaining our strong financial discipline.

Over the remainder of 2024 and beyond, we will look to accelerate the Tutivia^TM commercial rollout with more leading US transplant centres and expect to expand the revenue base. With additional sales personnel now in place, the support of further analysis from our recently recruited in-house bioinformaticians and further advocacy with key opinion leaders, we are primed to promote commercial progress in the second half of the year. We are continuing the longer duration Protega^TM study and are also maintaining our support to Thermo Fisher in their commercialisaton of Clarava^TM, with updates to be provided at the appropriate times. As previously stated, VericiDx is also looking at other licensing and collaborative opportunities.

We also have range of other opportunities to expand the product range, monetise our data assets, and potentially expand into new areas going forward. As previously indicated, there are additional research and product development opportunities from the clinical trial samples and data for example we will be assessing the role of urine based testing.  We can review the performance of tests being used in conjunction such as Clarava Deceased Donor and Tutivia or the interactions with Protega or the urine tests.  We are also looking to develop a living donor recipient version of Clarava once we have identified enough patient samples to power the validation study analysis.

We are also developing a health economics model to aid our commercialisation efforts, which we expect to submit for publication by the end of the year.

On behalf of the Board, I would like to thank our shareholders for their support in this transformational year. We look forward to delivering further progress over the course of 2024 as we pursue our strategy of transforming kidney transplant outcomes.

Sara Barrington

Chief Executive Officer

29 May 2024

Consolidated statement of financial position

Consolidated statement of cash flows