PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT NOT FOR DISTRIBUTION WITHOUT PRIOR AUTHORIZATION OF GENERAL COUNSEL
CALDERWOOD & HARKNESS LLP
Counselors at Law 1700 K Street NW, Suite 900 Washington, DC 20006 Telephone: (202) 555-7400
MEMORANDUM
TO: Theresa Nakamura, General Counsel & Vice President of Regulatory Affairs Genome Dx Therapeutics Inc. 4720 Torrey Pines Road, Suite 300 San Diego, CA 92130
FROM: Miriam Calloway, Partner, Healthcare & Life Sciences Practice Calderwood & Harkness LLP
DATE: May 28, 2024
RE: Matter Wind-Down Memorandum and Work Product Preservation Summary — OncoPrecise GXP-47 Medicare Coverage and Coding Strategy (Matter No. 1043-00002; Client No. 47832)
CC: Kevin Driscoll, VP of Market Access & Reimbursement, Genome Dx Therapeutics Inc. Joel Strauss, Partner, Calderwood & Harkness LLP Sean Morrissey, Senior Associate, Calderwood & Harkness LLP
PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT This memorandum and all attachments hereto are protected by the attorney-client privilege and the attorney work product doctrine. This communication is intended solely for the use of the addressee(s) named above. Any unauthorized review, use, disclosure, or distribution is strictly prohibited. If you have received this communication in error, please notify the sender immediately and destroy all copies.
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I. PURPOSE AND BACKGROUND
This memorandum is delivered pursuant to the wind-down instruction communicated by Theresa Nakamura, General Counsel and Vice President of Regulatory Affairs of Genome Dx Therapeutics Inc. ("GDT"), to Miriam Calloway, Partner at Calderwood & Harkness LLP ("Calderwood & Harkness" or the "Firm"), on May 23, 2024. That instruction followed the GDT Board of Directors' resolution adopted on May 22, 2024, to defer the commercial launch of OncoPrecise GXP-47 indefinitely (the "Launch Deferral").
The Board's decision to defer the commercial launch was prompted by two principal developments. First, the interim analysis results from the CLARITY-LUNG clinical validation trial (NCT05891247) were released on March 29, 2024. Those interim results demonstrated a positive predictive value ("PPV") of 0.68 against a pre-specified target of PPV ≥ 0.75, and a negative predictive value ("NPV") of 0.71 against a pre-specified target of NPV ≥ 0.80. While the Data Safety Monitoring Board ("DSMB") recommended continued enrollment at its April 5, 2024 meeting and characterized the results as inconclusive rather than negative, the interim data fell short of the performance benchmarks that would be required to support a Medicare coverage application under the MolDx program's evidentiary standards. Second, Pinnacle Health Ventures ("PHV"), GDT's lead institutional investor, issued a formal recommendation on May 17, 2024, through Elena Marchetti, Partner and GDT Board Member, advising GDT to defer the commercial launch of OncoPrecise GXP-47 until final clinical validation data is available and meets the pre-specified endpoints.
As background, Calderwood & Harkness was engaged by GDT on February 14, 2024, to develop and execute a comprehensive Medicare coverage and coding strategy for OncoPrecise GXP-47, a proprietary 47-gene RNA expression panel designed to predict immunotherapy checkpoint inhibitor ("ICI") therapy response in patients with Stage IIIB/IV non-small-cell lung cancer ("NSCLC"). The engagement encompassed four principal workstreams: (i) obtaining a unique Proprietary Laboratory Analyses ("PLA") code through the American Medical Association ("AMA") CPT Editorial Panel; (ii) securing a local coverage determination ("LCD") from Cascade Fiscal Intermediaries, LLC ("CFI"), the Medicare Administrative Contractor ("MAC") for Jurisdiction E, through the MolDx program administered by Ridgeline Administrative Services ("RAS"); (iii) establishing an optimal Medicare reimbursement rate through the crosswalk and gapfill pricing processes administered by the Centers for Medicare & Medicaid Services ("CMS"); and (iv) assessing the feasibility of obtaining a national coverage determination ("NCD") from CMS, including evaluation of the Coverage with Evidence Development ("CED") framework.
This memorandum serves the following purposes:
(a) Summary of Completed Work Product. It provides a comprehensive summary of all work product delivered by Calderwood & Harkness to GDT during the course of the engagement, including memoranda, draft applications, analyses, and presentations.
(b) Identification of Pending Deliverables. It identifies all pending deliverables and workstreams that will not be completed as a result of the matter wind-down, including the consequences of non-completion.
(c) Work Product Preservation and Document Retention. It outlines the arrangements for preservation of work product, document retention, and maintenance of attorney-client privilege.
(d) Reactivation Recommendations. It provides detailed recommendations for the reactivation of the Medicare coverage and coding strategy when GDT is positioned to resume its commercial launch efforts.
(e) Transition and Coordination. It addresses transition and handoff considerations with respect to GDT's other counsel, retained consultants, investors, and financial counterparties.
The matter will be formally closed effective June 3, 2024. A separate Matter Closure Letter will be issued confirming closure.
This memorandum is delivered concurrently with the Analysis of Pacific Coast National Bank Milestone Covenant Memorandum (the "PCNB Covenant Analysis"), which is attached hereto as Attachment B and is discussed further in Sections III.F.1 and VII.C below.
II. ENGAGEMENT SUMMARY
A. Scope of Engagement
The engagement was formalized through an engagement letter executed on February 14, 2024 (the "Engagement Letter"), addressed to Theresa Nakamura in her capacity as General Counsel of GDT. The Engagement Letter defined the scope of Calderwood & Harkness's representation as the development and execution of a Medicare coverage and coding strategy for OncoPrecise GXP-47, encompassing four principal workstreams:
(1) CPT/PLA Coding Strategy. Analysis of coding alternatives, preparation and submission of a PLA code application to the AMA CPT Editorial Panel, and monitoring of the PLA code assignment process.
(2) LCD Application and MolDx Technical Assessment. Preparation of a MolDx technical assessment dossier for submission to RAS, preparation and filing of an LCD request with CFI, and management of the LCD review process through CFI and the MolDx program.
(3) Medicare Reimbursement Rate Analysis. Development of a crosswalk and gapfill pricing strategy to establish the Medicare reimbursement rate for the PLA code, including identification and analysis of crosswalk comparators and preparation of the pricing submission to CMS.
(4) NCD Pathway Feasibility Assessment. Assessment of the feasibility and strategic advisability of pursuing an NCD from CMS, including evaluation of the traditional NCD pathway and the CED framework.
The Calderwood & Harkness engagement team consisted of the following attorneys:
• Miriam Calloway, Partner, Healthcare & Life Sciences Practice (Washington, D.C.) — Responsible Partner with overall strategic oversight and client relationship management;
• Joel Strauss, Partner, Healthcare & Life Sciences Practice (San Francisco) — Billing Partner and strategic advisor on NCD pathway and CMS policy matters;
• Sean Morrissey, Senior Associate, Healthcare & Life Sciences Practice (Washington, D.C.) — Lead Associate responsible for day-to-day management of all workstreams, preparation of memoranda and draft applications, and coordination with consultants;
• Christopher Aiken, Associate, Healthcare & Life Sciences Practice (San Francisco) — Working Associate responsible for research, drafting, and analytical support across all workstreams.
In performing the engagement, Calderwood & Harkness coordinated its work with two external consultants retained directly by GDT:
• Carraway Regulatory Advisors, Inc. (Janet Carraway, Principal, Chicago, IL) — Retained by GDT for coding and billing mechanics, including technical aspects of the PLA code application preparation. Carraway worked jointly with Calderwood & Harkness on the draft PLA code application.
• Larkfield Health Economics, LLC (Dr. Nathan Ostroff, Principal Consultant, Bethesda, MD) — Retained by GDT for health economics and outcomes research ("HEOR") analysis, including the cost-effectiveness model and clinical utility economic analysis incorporated into the MolDx technical assessment dossier. Calderwood & Harkness reviewed Larkfield's work product for purposes of the dossier submission.
The engagement did not encompass corporate, intellectual property, securities, or general transactional matters for GDT, which remained within the scope of Whitford & Sable LLP's representation. Likewise, the engagement did not extend to clinical trial design or management, FDA regulatory submissions, or laboratory compliance matters, except to the extent that such matters were relevant to the Medicare coverage and coding strategy.
B. Fee Arrangement and Budget
Pursuant to the Engagement Letter, the engagement was conducted on an hourly rate basis. The applicable hourly rates for the engagement team were as follows:
The Engagement Letter provided a budgeted fee estimate for the full scope of the engagement through LCD issuance (exclusive of NCD application, if pursued separately) in the range of $475,000 to $575,000. This estimate was based on the assumption that the engagement would proceed through all four workstreams to completion, including PLA code assignment, LCD filing, LCD review and issuance, and reimbursement rate establishment.
As of the termination of the engagement, the actual fees and disbursements incurred were as follows:
Fees Incurred:
A total of 0.2 hours recorded by Christopher Aiken were written off by the Firm, reflecting administrative time that did not meet the Firm's billing standards.
Disbursements Incurred:
Total Billed: $220,777.68 (fees of $218,437.50 plus disbursements of $2,340.18).
Invoice Summary:
The final invoice (INV-1043-00002-003) will be issued on June 10, 2024, covering the final billing period from April 15, 2024 through the matter closure date of June 3, 2024. A partial payment of $6,000.00 has been received against this invoice, leaving an outstanding balance of $73,592.56. The outstanding balance and payment arrangements are discussed further in Section VIII.A below.
The total fees incurred through termination represent approximately 38% to 46% of the original budgeted range, reflecting the fact that the engagement was terminated before the completion of the LCD filing and review process, which constituted the most resource-intensive phase of the anticipated work.
C. Key Engagement Timeline
The following table summarizes the principal milestones during the engagement in chronological order:
The timeline above reflects the key inflection point at which the CLARITY-LUNG interim results (March 29, 2024) triggered a reassessment of the engagement's strategy and pacing, ultimately leading to the Board's decision to defer the commercial launch and the consequent wind-down of this engagement.
III. SUMMARY OF COMPLETED WORK PRODUCT AND DELIVERABLES
During the approximately three-and-a-half-month engagement period, Calderwood & Harkness produced a substantial body of work product across all four engagement workstreams, as well as ancillary analyses and presentations. This section provides a detailed summary of each completed deliverable, organized by workstream.
A. Coding Strategy Workstream
The coding strategy workstream was the first workstream initiated upon engagement, as the assignment of a unique PLA code was a necessary prerequisite for the downstream LCD filing and reimbursement rate establishment processes. The deliverables in this workstream are summarized below.
1. Coding Strategy Memorandum (March 11, 2024). The Coding Strategy Memorandum was prepared by Sean Morrissey and Christopher Aiken, with review by Miriam Calloway, and was delivered to Theresa Nakamura and Kevin Driscoll on March 11, 2024.
This memorandum presented a comprehensive analysis of the coding alternatives available for OncoPrecise GXP-47 under the AMA Current Procedural Terminology ("CPT") system. Specifically, the memorandum analyzed the following pathways:
(a) Use of existing generic CPT codes. The memorandum evaluated the option of billing OncoPrecise GXP-47 under existing CPT codes, most notably CPT 81455 (next-generation sequencing, solid organ neoplasm, DNA and RNA analysis when performed, 51 or more genes). While CPT 81455 would provide immediate billing capability without the delay associated with a PLA code application, the memorandum identified significant disadvantages: the CPT 81455 Medicare reimbursement rate ($2,919) was substantially below the target rate required to achieve GDT's revenue projections, and the use of a generic code would not distinguish OncoPrecise GXP-47 from competing tests in the marketplace or in the eyes of payers.
(b) Proprietary Laboratory Analyses (PLA) code. The memorandum recommended that GDT pursue a unique PLA code for OncoPrecise GXP-47. A PLA code would provide a test-specific identifier, capture the proprietary nature of the Therapy Response Index ("TRI") algorithm that distinguishes OncoPrecise GXP-47 from generic genomic profiling tests, and support a premium reimbursement rate through the crosswalk pricing process. The memorandum detailed the AMA CPT Editorial Panel's PLA code application requirements, including the submission format, required supporting documentation, and the typical review timeline.
The memorandum concluded with a clear recommendation to pursue the PLA code pathway, which formed the basis for the subsequent preparation of the PLA code application.
2. Draft PLA Code Application (March 22, 2024). The draft PLA Code Application was prepared jointly by Calderwood & Harkness (Morrissey and Aiken) and Carraway Regulatory Advisors (Janet Carraway), and was delivered to GDT on March 22, 2024 for review and comment. The application was prepared in conformity with the AMA's required submission format and included the following key elements:
Proposed PLA Code Descriptor: "OncoPrecise GXP-47 (Genome Dx Therapeutics Inc.), genomic profiling, non-small-cell lung cancer, 47-gene RNA expression panel, formalin-fixed paraffin-embedded tissue, algorithm-derived Therapy Response Index (TRI) score."
Test Methodology Description: A detailed description of the OncoPrecise GXP-47 assay methodology, including the RNA extraction process from formalin-fixed paraffin-embedded ("FFPE") tissue specimens, the 47-gene expression panel composition, the next-generation sequencing platform utilized, and the proprietary bioinformatics pipeline culminating in the algorithm-derived TRI score.
Clinical Indications: The application specified that OncoPrecise GXP-47 is indicated for use in adult patients with Stage IIIB or Stage IV NSCLC who are candidates for ICI therapy, to predict treatment response and guide therapy selection.
Specimen Type: FFPE tissue from tumor biopsy or surgical resection.
Laboratory Information: The application identified GDT's clinical laboratory with CLIA Certificate No. 05D2187432 and National Provider Identifier ("NPI") 1902847365 as the sole laboratory authorized to perform the test, consistent with PLA code requirements.
The application was targeted for submission to the AMA CPT Editorial Panel in advance of the September 2024 meeting, with a submission deadline of June 28, 2024. As discussed in Section IV.A below, the application was not submitted prior to the matter wind-down.
Status: Drafted; not submitted.
3. Draft PLA Code Application Cover Letter. A draft cover letter to accompany the PLA code application was prepared by Christopher Aiken and reviewed by Miriam Calloway. The cover letter was addressed to the AMA CPT Editorial Panel and served to introduce GDT as the applicant, provide a high-level summary of OncoPrecise GXP-47 and its clinical utility, and reference the key supporting evidence, including the analytical validation publication in the Journal of Molecular Oncology Diagnostics, Volume 18, Issue 4, pp. 412–429, December 2022. The cover letter was structured to present the application in its most favorable light while adhering to the professional and scientific tone expected by the CPT Editorial Panel.
Status: Drafted; not sent.
B. LCD/MolDx Workstream
The LCD/MolDx workstream constituted the core of the engagement and generated the largest volume of work product. The objective of this workstream was to prepare and file a comprehensive application for Medicare local coverage of OncoPrecise GXP-47 through the MolDx program, which serves as the primary pathway for Medicare coverage of advanced molecular diagnostic tests. The deliverables are summarized below.
1. LCD Regulatory Landscape Memorandum (Late February 2024). This background research memorandum was prepared by Morrissey and Aiken in the initial weeks of the engagement and served as a foundational reference document for the entire LCD/MolDx workstream. The memorandum provided:
(a) A comprehensive overview of the current Medicare coverage landscape for next-generation sequencing ("NGS")-based oncology diagnostic tests, including the CMS National Coverage Determination for NGS-based diagnostic tests (NCD 90.2, effective March 16, 2018, and subsequent reconsiderations), and the scope and limitations of that NCD as applied to laboratory-developed tests such as OncoPrecise GXP-47;
(b) A detailed survey of existing LCDs and NCDs for comparable molecular diagnostic tests, with particular attention to the evidentiary standards applied by CFI and RAS in evaluating tests within the MolDx program;
(c) An analysis of MolDx program requirements, including the MolDx technical assessment process, the types and quality of evidence required to support a coverage recommendation, and the typical review timeline from dossier submission to LCD issuance;
(d) A review of recent CMS policy developments relevant to the coverage of molecular diagnostic tests, including the evolving interpretation of the "clinical utility" evidentiary standard and the increasing emphasis on prospective clinical validation data.
This memorandum was used internally as a reference document and informed the strategic recommendations set forth in subsequent deliverables.
2. Clinical Evidence Gap Analysis Memorandum (April 15, 2024). The Clinical Evidence Gap Analysis Memorandum was prepared by Miriam Calloway and Sean Morrissey and was delivered to Theresa Nakamura, Kevin Driscoll, and Dr. Priya Sundaram (GDT's VP of Clinical Development) on April 15, 2024. This memorandum was prepared in direct response to the release of the CLARITY-LUNG interim analysis results on March 29, 2024, and the GDT Board's request at its April 9, 2024 meeting for a reassessment of the LCD filing strategy.
The memorandum presented the following analyses:
(a) Assessment of Interim Results Against Coverage Standards. The memorandum analyzed the CLARITY-LUNG interim data (PPV = 0.68 versus the pre-specified target of PPV ≥ 0.75; NPV = 0.71 versus the pre-specified target of NPV ≥ 0.80) in the context of the evidentiary standards applied by CFI and RAS under the MolDx program. The analysis concluded that the interim data, as reported, would likely be insufficient to support a favorable technical assessment from RAS and would create a material risk of a non-coverage determination by CFI.
(b) Identification of Specific Evidence Gaps. The memorandum identified the specific evidence gaps relative to the MolDx evidentiary framework, including: (i) the shortfall in PPV and NPV relative to the pre-specified performance benchmarks; (ii) the absence of completed prospective clinical validation (the interim analysis was based on only 523 of the targeted 1,200 enrolled patients); (iii) the limited evidence of clinical utility, as measured by impact on patient management decisions and health outcomes; and (iv) the absence of a comprehensive health economic analysis demonstrating cost-effectiveness, which was then in development by Larkfield Health Economics.
(c) Risk Assessment. The memorandum assessed the risk of a non-coverage determination if GDT were to proceed with an LCD filing based on the interim data. It noted the precedent of non-coverage determinations issued by CFI and other MACs for molecular diagnostic tests that submitted applications supported by incomplete or inconclusive clinical validation data, and the significant negative consequences of such determinations, including the difficulty of obtaining reconsideration and the adverse signaling effect to commercial payers.
(d) Supplemental Evidence Strategies. The memorandum evaluated potential supplemental evidence strategies that might be pursued to strengthen the coverage application in the absence of final CLARITY-LUNG data, including: retrospective analyses using existing biobank specimens; sub-group analyses from the interim dataset; real-world evidence from early adopter clinical sites; and published literature on the analytical validity and biological plausibility of RNA expression-based ICI response prediction. The memorandum concluded that while such supplemental evidence could provide incremental support, it would be unlikely to overcome the fundamental gap created by the lack of completed prospective clinical validation.
This memorandum was a pivotal deliverable in the engagement, as it provided the evidentiary foundation for the revised strategy recommendation set forth in the subsequent Revised LCD/MolDx Strategy Memorandum.
3. Revised LCD/MolDx Strategy Memorandum (April 22, 2024). The Revised LCD/MolDx Strategy Memorandum was prepared by Miriam Calloway and Sean Morrissey and was delivered to Theresa Nakamura and Kevin Driscoll on April 22, 2024. This memorandum was prepared at the direction of the GDT Board of Directors, which, at its April 9, 2024 meeting, requested a formal reassessment and revision of the LCD filing strategy in light of the CLARITY-LUNG interim results.
The principal recommendation of this memorandum was that GDT should defer the LCD filing with CFI and the MolDx technical assessment submission to RAS until the final CLARITY-LUNG clinical validation data is available and meets or exceeds the pre-specified performance benchmarks. Based on the enrollment status and projected timeline provided by Dr. Priya Sundaram, the memorandum estimated that final data readout would occur in Q2 2025.
The memorandum discussed in detail the risks associated with premature filing, including:
(a) The precedent within the MolDx program and the broader Medicare coverage landscape of non-coverage determinations for tests that present incomplete clinical validation data, and the significant challenges associated with reversing such determinations through the reconsideration process;
(b) The potential for a negative technical assessment from RAS to be disseminated to other MACs and to influence commercial payer coverage decisions nationwide;
(c) The reputational impact on OncoPrecise GXP-47 and on GDT in the diagnostic and payer communities of a premature or unsuccessful coverage application;
(d) The alternative strategy of continuing to build the evidentiary record during the interim period while reserving the LCD filing for a time when the strongest possible case can be presented.
The memorandum also addressed alternative timeline scenarios, including the possibility of filing based on interim data supplemented by additional retrospective analyses, and the scenario in which the final trial data falls short of the pre-specified benchmarks. For each scenario, the memorandum assessed the likelihood of a favorable coverage outcome and recommended appropriate strategic responses.
4. Draft MolDx Technical Assessment Dossier — Version 1.0 (April 30, 2024). The Draft MolDx Technical Assessment Dossier (Version 1.0) was the most substantial single work product delivered during the engagement. This comprehensive dossier was prepared by the Calderwood & Harkness team for submission to RAS as part of the MolDx program's technical assessment process, which is a prerequisite to LCD issuance by CFI. The dossier was delivered to GDT in draft form on April 30, 2024.
The dossier was organized into the following sections, consistent with MolDx program submission requirements:
(1) Test Description and Intended Use. A detailed description of OncoPrecise GXP-47, including its intended use for Stage IIIB/IV NSCLC, the 47-gene RNA expression panel, the proprietary TRI algorithm, the clinical decision points addressed by the test, and the patient population for whom the test is indicated.
(2) Analytical Validation Data Summary. A summary of the analytical validation data for OncoPrecise GXP-47, drawn primarily from the peer-reviewed publication in the Journal of Molecular Oncology Diagnostics (Vol. 18, Issue 4, pp. 412–429, December 2022), including data on analytical sensitivity, analytical specificity, precision, reproducibility, and interference testing.
(3) Clinical Validation Data. A presentation of the clinical validation evidence, including the CLARITY-LUNG interim analysis data and results from prior retrospective studies. This section was drafted with full transparency regarding the interim nature of the CLARITY-LUNG data and the shortfall relative to pre-specified performance benchmarks, while presenting the data in the most constructive light and noting the DSMB's recommendation to continue enrollment.
(4) Clinical Utility Evidence. A discussion of the clinical utility of OncoPrecise GXP-47, including its potential to improve patient management decisions, reduce exposure to ineffective ICI therapies and associated toxicities, and guide selection of alternative treatment strategies for patients with low TRI scores. This section acknowledged the limited published evidence of clinical utility available at the time of drafting and highlighted the planned prospective clinical utility studies.
(5) Health Economic Analysis. This section incorporated the health economic analysis prepared by Larkfield Health Economics, LLC (Dr. Nathan Ostroff), as reviewed by Calderwood & Harkness per the internal review memorandum described in Section III.B.7 below. The section presented a cost-effectiveness analysis, budget impact model, and comparative value assessment for OncoPrecise GXP-47 relative to empirical ICI therapy selection.
(6) Annotated Bibliography. A comprehensive annotated bibliography of 43 peer-reviewed publications supporting the dossier, organized by evidence category.
Status: Draft (Version 1.0); not submitted to RAS. As noted in the Revised LCD/MolDx Strategy Memorandum, Calderwood & Harkness recommended deferral of the dossier submission until final CLARITY-LUNG data is available. Finalization of the dossier to Version 2.0 will require significant updates as described in Section IV.C below.
5. MolDx Dossier Bibliography — 43 Publications. The annotated bibliography was compiled by Morrissey and Aiken as a component of the MolDx Technical Assessment Dossier. The bibliography encompasses 43 peer-reviewed publications organized into the following categories:
• Analytical Validation (7 publications): Including the GDT analytical validation study (Journal of Molecular Oncology Diagnostics, Vol. 18, Issue 4, pp. 412–429, December 2022) and related platform validation studies;
• Clinical Validation (12 publications): Including CLARITY-LUNG interim results, retrospective validation studies, and publications from comparable RNA expression-based assay validation programs;
• Clinical Utility (8 publications): Including published evidence on the clinical utility of companion diagnostics and predictive biomarkers in NSCLC ICI therapy selection;
• Health Economics (6 publications): Including cost-effectiveness analyses and budget impact studies for molecular diagnostic tests in oncology;
• Background Literature on ICI Therapy in NSCLC (10 publications): Including foundational publications on checkpoint inhibitor therapy in NSCLC, biomarker-guided treatment selection, and the clinical need for predictive response biomarkers.
The bibliography was designed to provide a comprehensive evidentiary foundation for the dossier and to demonstrate GDT's awareness of and engagement with the broader scientific literature relevant to the coverage application.
6. Draft LCD Request Letter to CFI. A draft letter requesting initiation of an LCD for OncoPrecise GXP-47 was prepared for GDT's use. The letter was addressed to CFI at its principal office at 2800 SW Moody Avenue, Suite 500, Portland, OR 97201, for the attention of Dr. William Hargrove, Medical Director, and Sandra Phu, LCD Analyst. The letter was formatted for execution by Dr. Anisha Raval, Chief Executive Officer of GDT.
The draft letter presented a formal request to CFI to initiate an LCD review for OncoPrecise GXP-47 under the MolDx program, referenced the accompanying MolDx technical assessment dossier, summarized the clinical need for the test, and requested a meeting with CFI and RAS to discuss the submission. The target filing date for this letter and the accompanying dossier was August 2024, following the anticipated PLA code assignment at the September 2024 AMA meeting, although the revised strategy recommended deferral of this filing.
Status: Drafted; not sent. No communication was initiated with CFI or RAS regarding OncoPrecise GXP-47 during the engagement.
7. Review Memorandum — Larkfield HEOR Analysis. This internal Calderwood & Harkness memorandum was prepared by Sean Morrissey with review by Miriam Calloway. The memorandum documented Calderwood & Harkness's review of the HEOR analysis prepared by Larkfield Health Economics, LLC (Dr. Nathan Ostroff) for incorporation into Section 5 of the MolDx Technical Assessment Dossier.
The review memorandum identified several areas where the Larkfield HEOR analysis required revision or supplementation, including:
(a) Certain assumptions in the cost-effectiveness model that required additional documentation and sensitivity analyses to withstand MolDx program scrutiny;
(b) Regulatory compliance considerations relating to the presentation of comparative value claims and the alignment of economic projections with the available clinical evidence base;
(c) Specific mark-up recommendations for the clinical utility and cost-effectiveness sections of the Larkfield report, to ensure consistency with the evidentiary framework presented elsewhere in the MolDx dossier.
This memorandum was prepared as attorney work product and was not transmitted to Larkfield directly. Calderwood & Harkness's review comments were intended to be provided to Larkfield, through GDT, upon reactivation of the engagement for incorporation into the revised HEOR analysis.
C. Reimbursement Rate Workstream
The reimbursement rate workstream focused on establishing an optimal Medicare reimbursement rate for OncoPrecise GXP-47 through the crosswalk and gapfill pricing mechanisms administered by CMS. Although the formal pricing submission to CMS was contingent on downstream milestones (PLA code assignment and LCD issuance), Calderwood & Harkness developed the analytical framework and supporting models in advance to ensure that GDT would be prepared to engage the pricing process promptly upon reaching those milestones.
1. Reimbursement Rate Analysis (Crosswalk/Gapfill) Memorandum (May 14, 2024). The Reimbursement Rate Analysis Memorandum was prepared by Morrissey and Aiken and was delivered to Kevin Driscoll and Raymond Ota (GDT Chief Financial Officer) on May 14, 2024. The memorandum presented a crosswalk analysis identifying three existing codes with comparable test characteristics as crosswalk comparators for OncoPrecise GXP-47:
(a) PLA Code 0250U — Elara Genomic Sciences, Inc., "GeneSight Onco-48": An NGS-based oncology panel test with a comparable gene count and indication profile. Medicare reimbursement rate: $3,742.00.
(b) CPT Code 81455 — Next-generation sequencing, solid organ neoplasm, DNA and RNA analysis when performed, 51 or more genes: The generic CPT code most closely aligned with OncoPrecise GXP-47's testing methodology. Medicare reimbursement rate: $2,919.00.
(c) PLA Code 0239U — Marlowe Asset Management Molecular Diagnostics, Inc., "TumorMap Pro": A proprietary RNA expression-based oncology diagnostic with algorithm-derived reporting comparable to the TRI score. Medicare reimbursement rate: $4,206.00.
The weighted average of these three comparators was calculated at $3,622.33. Calderwood & Harkness's recommended target reimbursement rate for OncoPrecise GXP-47 was $3,850.00 per test, representing a premium of approximately 6.28% over the weighted average of the crosswalk comparators. The premium was justified on the basis of the proprietary TRI algorithm, which provides a differentiated and clinically actionable output not replicated by any of the comparator tests, and by the additional clinical utility evidence associated with the ICI therapy response prediction indication.
The memorandum also included a gapfill alternative analysis, evaluating the potential outcome if CMS were to determine that no adequate crosswalk comparator existed and instead set the reimbursement rate through the gapfill process. Under the gapfill scenario, the memorandum assessed the potential rate range based on the cost inputs and pricing methodology applicable under CMS gapfill procedures.
2. Reimbursement Rate Crosswalk Model (Excel Workbook). An accompanying Excel workbook was prepared to support the Reimbursement Rate Analysis Memorandum. The workbook contained the following analytical tabs:
(1) Crosswalk Comparator Analysis. Detailed data on each of the three crosswalk comparators, including test descriptions, clinical indications, methodology comparisons, and current Medicare reimbursement rates. The analysis applied weighting factors based on the degree of clinical and methodological similarity to OncoPrecise GXP-47.
(2) Premium Justification Analysis. A structured analysis supporting the recommended 6.28% premium, with documentation of the proprietary features of OncoPrecise GXP-47 that justify a rate above the weighted average of comparators.
(3) Revenue Projection Sensitivity Analysis. Revenue projections prepared using GDT and Verdant Life Sciences Capital's assumptions, including:
• Year 1: 8,500 tests projected; Medicare payer mix of 62%; at a Medicare rate of $3,850/test, Year 1 Medicare revenue of $20,290,500; commercial payer mix of 38% at a blended average commercial reimbursement rate of $4,400/test, Year 1 commercial revenue of $14,212,000; Year 1 total projected revenue of $34,502,500.
• Year 3: 22,000 tests projected; at a Medicare rate of $3,850/test and 62% Medicare mix, Year 3 Medicare revenue of $52,514,000.
The sensitivity analysis modeled multiple scenarios with variations in test volume, payer mix, and reimbursement rate assumptions.
(4) Gapfill Pricing Scenario. An alternative analysis modeling the potential reimbursement rate outcome under the CMS gapfill pricing methodology, including estimated direct and indirect costs of performing the test and the applicable CMS gapfill rate-setting methodology.
D. NCD Feasibility Assessment Workstream
1. NCD Feasibility Assessment Memorandum (May 10, 2024). The NCD Feasibility Assessment Memorandum was prepared by Miriam Calloway and Joel Strauss and was delivered to Theresa Nakamura, Kevin Driscoll, and Dr. Anisha Raval on May 10, 2024. This memorandum assessed the feasibility, strategic advisability, and anticipated timeline for pursuing a national coverage determination for OncoPrecise GXP-47 through CMS.
The memorandum analyzed the two principal NCD pathways:
(a) Traditional NCD Pathway. Under this pathway, CMS conducts a comprehensive evidence review and issues a national coverage policy. The memorandum assessed the strength of the evidentiary case for OncoPrecise GXP-47 under the traditional NCD framework and concluded that the test would not be a strong candidate for a traditional NCD until substantial prospective clinical validation and clinical utility data are available.
(b) Coverage with Evidence Development (CED) Framework. Under CED, CMS may provide Medicare coverage for a test contingent on the test being furnished in the context of an approved clinical study designed to generate additional evidence. The memorandum evaluated CED as a potential intermediate pathway, noting both its advantages (earlier national coverage) and limitations (burdensome compliance requirements, uncertainty regarding study design requirements, and the risk of a narrow CED scope that could limit commercial adoption).
The memorandum's principal conclusions and recommendations were as follows:
• The estimated timeline for an NCD, following successful LCD issuance, was 18 to 24 months;
• Calderwood & Harkness recommended that GDT pursue an LCD first through the MolDx program before initiating the NCD process, as a successful LCD would establish a favorable coverage precedent, generate real-world claims data, and strengthen the evidentiary record for a subsequent NCD application;
• The memorandum discussed strategic considerations regarding parallel LCD/NCD tracks, including the risk that premature NCD pursuit could complicate the LCD process or result in an unfavorable national determination that would supersede a favorable local determination;
• The memorandum recommended that GDT revisit the NCD pathway assessment upon successful LCD issuance and accumulation of initial post-coverage claims data and clinical experience.
E. Board and Stakeholder Presentations
1. GDT Board Presentation (April 9, 2024). A Northgate Services Inc. presentation was prepared by Miriam Calloway and Sean Morrissey for delivery at the GDT Board of Directors meeting on April 9, 2024. The presentation summarized the status of the Medicare coverage and coding strategy and addressed the impact of the CLARITY-LUNG interim results on the strategic timeline.
The presentation covered the following topics:
• Overview of the OncoPrecise GXP-47 reimbursement strategy, including the PLA coding approach, LCD/MolDx pathway, and NCD considerations;
• Summary of the CLARITY-LUNG interim results and their implications for the coverage strategy;
• The projected Medicare reimbursement rate of $3,850 per test and the analytical basis for that recommendation;
• Revenue projections based on the crosswalk analysis and GDT/Verdant assumptions;
• Recommended next steps, including the reassessment of the LCD filing timeline in light of the interim data;
• Risk analysis addressing the potential consequences of proceeding with versus deferring the LCD filing.
The presentation formed the basis for the Board's discussion and subsequent instruction to Calderwood & Harkness to prepare the Revised LCD/MolDx Strategy Memorandum.
F. Covenant Analysis
1. Analysis of Pacific Coast National Bank Milestone Covenant (May 28, 2024). The Analysis of Pacific Coast National Bank Milestone Covenant Memorandum (the "PCNB Covenant Analysis") was prepared by Miriam Calloway and Sean Morrissey and is being delivered concurrently with this Wind-Down Memorandum to Theresa Nakamura and Raymond Ota. A copy is attached hereto as Attachment B.
This memorandum analyzed the impact of the OncoPrecise GXP-47 Launch Deferral on the milestone covenant contained in Section 7.14 of the Revolving Facility Credit Agreement between GDT (as Borrower) and Pacific Coast National Bank ("PCNB") (as Lender), Reference No. PCNB-GDT-RF-2023-0922 (the "Credit Agreement"), dated September 22, 2023.
Section 7.14 of the Credit Agreement requires GDT to:
"obtain a final Medicare coverage determination (whether by LCD, NCD, or equivalent published coverage policy) for at least one proprietary laboratory-developed test developed by Borrower"
on or before December 31, 2024.
The memorandum addressed the following key issues:
(a) Covenant Compliance Analysis. The memorandum analyzed whether GDT's existing LCD for OncoPrecise GXP-12 (LCD L38472, effective August 15, 2021, issued by CFI) may satisfy the covenant language. OncoPrecise GXP-12 is a proprietary laboratory-developed test developed by GDT for which a final Medicare local coverage determination was obtained prior to the execution of the Credit Agreement.
(b) Interpretive Questions. The memorandum identified a significant interpretive question arising from the covenant language: whether the covenant's use of the word "obtain" (future tense) requires GDT to secure a new Medicare coverage determination after the execution of the Credit Agreement (September 22, 2023), or whether an existing determination obtained prior to execution satisfies the requirement. Calderwood & Harkness noted that the text could support either interpretation, and that the covenant drafting history and course of dealing between the parties may be relevant to resolving this ambiguity.
(c) Financial Exposure. The memorandum noted that GDT has an outstanding draw of $9,200,000 under the $15,000,000 Revolving Facility, at an interest rate of SOFR + 3.75%. The facility matures on September 22, 2026.
(d) Cure Period. The covenant testing date is December 31, 2024. The Credit Agreement provides a 90-day cure period, which would expire on March 31, 2025.
(e) Recommended Actions. The memorandum recommended that GDT coordinate with Whitford & Sable LLP (Harrison Whitford, Partner) and GDT's CFO (Raymond Ota) regarding engagement with PCNB. Specifically, the memorandum recommended that GDT evaluate whether to engage proactively with PCNB's Relationship Manager (Thomas Becerra) to seek a covenant waiver or amendment in advance of the testing date, rather than waiting for the covenant testing date to pass and relying on the cure period or the GXP-12 LCD argument.
Given the sensitivity of this analysis and its potential implications for GDT's banking relationship and financial position, the memorandum was designated as privileged and confidential, and GDT was advised not to share the analysis with PCNB or its counsel without prior consultation with Calderwood & Harkness or Whitford & Sable LLP.
IV. PENDING DELIVERABLES NOT COMPLETED
The following deliverables and workstreams were pending at the time of the engagement wind-down and will not be completed as part of this engagement. This section describes each pending item, the status at termination, and the consequences of non-completion.
A. PLA Code Application Submission
The draft PLA code application and accompanying cover letter, as described in Sections III.A.2 and III.A.3 above, were completed in final draft form but were never submitted to the AMA CPT Editorial Panel. The submission deadline for the September 2024 AMA CPT Editorial Panel meeting was June 28, 2024. The matter was terminated effective June 3, 2024, twenty-five days prior to the submission deadline.
Consequence: OncoPrecise GXP-47 will not receive a PLA code assignment at the September 2024 AMA CPT Editorial Panel meeting. The next available submission cycle and deadline will need to be identified upon reactivation of the engagement. The AMA CPT Editorial Panel typically meets three times per year (February, May/June, and September/October), with submission deadlines approximately three months prior to each meeting. The specific deadline for the next available cycle following the September 2024 meeting should be confirmed with the AMA upon reactivation.
It should be noted that without a PLA code, GDT cannot pursue the premium reimbursement rate strategy recommended in the Coding Strategy Memorandum and the Reimbursement Rate Analysis Memorandum. Specifically, the target rate of $3,850 per test is predicated on the assignment of a unique PLA code that distinguishes OncoPrecise GXP-47 from generic CPT codes. If GDT were to pursue interim commercial launch under CPT 81455, the Medicare reimbursement rate would be limited to $2,919 per test, representing a shortfall of $931 per test relative to the recommended target and a significant adverse impact on revenue projections.
B. LCD Filing with Cascade Fiscal Intermediaries
The draft LCD request letter and MolDx Technical Assessment Dossier (Version 1.0), as described in Sections III.B.4 and III.B.6 above, were prepared but not submitted to CFI or RAS. The target filing date was August 2024, which was originally intended to follow the anticipated PLA code assignment at the September 2024 AMA meeting.
Notably, per the Revised LCD/MolDx Strategy Memorandum delivered on April 22, 2024, Calderwood & Harkness had already recommended the deferral of the LCD filing until final CLARITY-LUNG data is available, with a revised target filing date of no earlier than Q2 2025. Thus, even absent the engagement wind-down, the LCD filing would not have proceeded in August 2024 under the revised strategy.
No communication was initiated with CFI (Dr. William Hargrove, Medical Director; Sandra Phu, LCD Analyst) or RAS (Dr. Catherine Embry) regarding OncoPrecise GXP-47 during the engagement period. This was a deliberate strategic decision, as premature engagement with the MAC or MolDx program before the evidentiary record is complete could create unfavorable expectations or informal precedent.
C. MolDx Technical Assessment Dossier Finalization
The MolDx Technical Assessment Dossier was delivered in draft form as Version 1.0 on April 30, 2024. Finalization to a submission-ready Version 2.0 was not completed and will require the following updates upon reactivation:
(i) Incorporation of final CLARITY-LUNG trial data. The clinical validation section of the dossier (Section 3) will need to be substantially revised to incorporate the final trial results, assuming those results meet or exceed the pre-specified performance benchmarks. If the final results demonstrate PPV ≥ 0.75 and NPV ≥ 0.80, this revision will significantly strengthen the dossier's evidentiary case.
(ii) Revision of Larkfield HEOR analysis. The health economic analysis section (Section 5) will need to be updated to incorporate the revisions recommended in Calderwood & Harkness's internal review memorandum, as described in Section III.B.7 above. Dr. Nathan Ostroff should be engaged to update the cost-effectiveness model with final clinical data inputs and to address the specific issues identified in the review memorandum.
(iii) Bibliography update. The annotated bibliography (Section 6) should be updated to include any peer-reviewed publications relevant to OncoPrecise GXP-47, ICI therapy response prediction, or the MolDx evidentiary framework that are published during the hiatus period.
(iv) Integration of assigned PLA code. Upon PLA code assignment, the dossier should be updated throughout to reference the assigned code, replacing the placeholder "PLA code pending" references in the current draft.
D. Crosswalk/Gapfill Pricing Submission
The formal crosswalk/gapfill pricing submission to CMS was not prepared. This submission is required after PLA code assignment and LCD issuance and was therefore contingent on downstream milestones that were not reached during the engagement. The Reimbursement Rate Analysis Memorandum and accompanying Excel workbook provide the analytical foundation for the future pricing submission, but the formal submission document itself will need to be prepared at the appropriate time.
E. NCD Application
The NCD Feasibility Assessment Memorandum delivered on May 10, 2024 was advisory in nature and was intended to inform GDT's strategic planning regarding the NCD pathway. Consistent with the memorandum's recommendation to pursue an LCD first, no NCD application was prepared or filed with CMS during the engagement period. The NCD pathway remains a future strategic opportunity to be revisited after successful LCD issuance.
V. WORK PRODUCT PRESERVATION AND DOCUMENT RETENTION
A. Document Inventory
A comprehensive Work Product Index and Deliverables Tracker has been prepared in Excel format and is attached to this memorandum as Attachment A. The tracker catalogs every deliverable and work product item created during the engagement, including internal memoranda, research materials, and correspondence. Each entry in the tracker is indexed by the following fields:
• Date of creation or delivery;
• Description of the deliverable;
• Workstream assignment (Coding, LCD/MolDx, Reimbursement Rate, NCD, or Other);
• Author(s) and reviewer(s);
• Status (Delivered to Client, Draft, Internal Only, Not Submitted);
• Corresponding file reference number within Calderwood & Harkness's document management system;
• Recipient(s), if transmitted to GDT.
GDT should review the Work Product Index and Deliverables Tracker to confirm that it has received and retained copies of all deliverables designated as "Delivered to Client."