Contract analysis

From: Sean Morrissey <smorrissey@calderwoodharkness.com> To: Kevin Driscoll <kdriscoll@genomedx.com> Cc: Christopher Aiken <caiken@calderwoodharkness.com> Date: Wed, 08 May 2024 03:47:00 -0000 Subject: OncoPrecise GXP-47 — Preliminary Crosswalk Comparator Analysis and Reimbursement Rate Positioning

Hope the week is going well on your end. I wanted to share our preliminary results on the crosswalk comparator analysis for OncoPrecise GXP-47's Medicare reimbursement rate positioning (Matter No. 1043-00002). Chris Aiken and I have completed the initial comparator identification and rate analysis, and the formal Reimbursement Rate Analysis Memorandum is on track for delivery the week of May 13. I've copied Raymond g

As you know, under CMS's Clinical Laboratory Fee Schedule framework, new PLA codes are typically priced via the crosswalk methodology — the reimbursement rate is set by identifying existing codes for tests with comparable resource requirements, methodologies, and clinical applications. We identified three primary comparators based on test methodology (NGS-based multi-gene oncology panels), specimen type, and clinical

1. **PLA Code 0250U — Elara Genomic Sciences, Inc., "GeneSight Onco-48"** - Current Medicare reimbursement rate: **$3,742 per test** - 48-gene NGS panel for solid tumor profiling - Most directly comparable in terms of gene count and platform methodology

2. **CPT Code 81455 — Targeted genomic sequence analysis panel, solid organ neoplasm, 51 or more genes** - Current Medicare reimbursement rate: **$2,919 per test** - Generic stacking code for large NGS panels; represents the floor/baseline for multi-gene oncology NGS testing - Lower rate reflects its status as a non-proprietary code without algorithm-based reporting

3. **PLA Code 0239U — Marlowe Asset Management Molecular Diagnostics, Inc., "TumorMap Pro"** - Current Medicare reimbursement rate: **$4,206 per test** - Proprietary multi-gene expression panel with algorithmic scoring output for treatment selection - Highest-rated comparator; most analogous in terms of algorithm-derived composite score output

**Weighted Average and Target Rate Analysis**

The simple weighted average of the three comparators comes to ($3,742 + $2,919 + $4,206) ÷ 3 = **$3,622.33 per test**. GDT's target reimbursement rate of **$3,850 per test** represents a **6.28% premium** over this weighted average (($3,850 − $3,622.33) ÷ $3,622.33). That premium falls within a range that crosswalk pricing panels have historically accepted, but it will require affirmative justification — which brings

We see three principal bases for arguing a premium over the weighted average:

- **Proprietary TRI algorithm.** The Therapy Response Index score is a novel, validated composite metric not replicated by any comparator test. The algorithmic component adds analytical complexity and unique clinical decision-making value that goes beyond raw genomic profiling.

- **Specificity of clinical application.** OncoPrecise GXP-47 targets a defined clinical decision point — ICI versus platinum-based chemotherapy in Stage IIIB/IV NSCLC — whereas comparators like CPT 81455 and Elara's GeneSight Onco-48 are broader tumor profiling tools. That specificity of intended use supports a differentiated pricing argument.

- **Cost-of-test economics.** The RNA extraction from FFPE tissue and 47-gene expression quantification require specialized reagents and bioinformatics infrastructure that may support a higher resource-based cost argument relative to the comparator set.

On the precedent side, the Marlowe Asset Management TumorMap Pro (0239U at $4,206) is particularly helpful. CMS accepted a rate significantly above the generic CPT 81455 baseline for that test, largely on the strength of its algorithm-based reporting output — a dynamic that maps well onto the TRI score's role in GXP-47.

One flag: we will also analyze the gapfill pricing alternative in the formal memorandum as a fallback if crosswalk is not accepted by the pricing panel, though crosswalk remains the preferred and more predictable pathway.

To strengthen the premium justification, it would be very helpful if you and Raymond could provide the following cost data for OncoPrecise GXP-47:

- **Direct cost per test:** Reagent costs, consumables, RNA extraction materials, and sequencing run allocation. - **Indirect cost per test:** Bioinformatics pipeline compute costs, TRI algorithm processing, quality control, technician labor allocation, and laboratory overhead attributable to GXP-47. - **Capital equipment amortization:** Allocated share of sequencing platform and laboratory instrumentation costs.

This cost breakdown will allow us to demonstrate that GDT's actual cost structure supports a rate above the weighted average comparator level — a resource-based argument that meaningfully reinforces the clinical differentiation story.

One question for Raymond in particular: do Verdant Life Sciences Capital's existing financial models already contain a per-test cost breakdown at this level of granularity that could be shared, or would Raymond's team need to prepare one independently? Either way works on our end — just want to plan accordingly.

If at all possible, we'd appreciate receiving the cost data by **Friday, May 10**, so we can incorporate it into the memorandum targeted for delivery on May 14.

Since the crosswalk analysis feeds directly into the revenue projections that Verdant and GDT have been modeling, I want to flag the key assumptions for alignment purposes:

- Projected Year 1 test volume: 8,500 tests - Medicare mix: 62% of total volume - At the $3,850 target rate → Year 1 projected Medicare revenue: 8,500 × 0.62 × $3,850 = **$20,290,500** - Commercial payer volume at 38%, average commercial reimbursement rate of $4,400/test → Year 1 commercial revenue: 8,500 × 0.38 × $4,400 = **$14,212,000** - **Year 1 total projected revenue: $34,502,500** - At full ramp (Year 3, 22,00

These projections are obviously contingent on successful coverage. We're aware of the current uncertainty around the CLARITY-LUNG trial timeline and the impact of the interim results, but for purposes of rate positioning, the analysis proceeds on the assumption that clinical validation data will ultimately support an LCD filing.

- Formal Reimbursement Rate Analysis Memorandum (covering both crosswalk and gapfill scenarios) targeted for delivery **May 14, 2024**. - The memorandum will include the supporting Excel workbook with the crosswalk model and revenue sensitivity analysis. - If you or Janet Carraway have additional comparators you'd like us to consider, we're happy to incorporate them. Chris has been coordinating with Janet on the codi

Thanks, Kevin. I'm available by phone or email if any questions come up in the meantime.

Sean Morrissey Senior Associate Healthcare & Life Sciences Calderwood & Harkness LLP 1700 K Street NW, Suite 900 Washington, DC 20006 (202) 555-0148 | smorrissey@calderwoodharkness.com

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