Pacific Edge: Preliminary Full Year Disclosure

Pacific Edge: Preliminary Full Year Disclosure

FY2013 Results Summary

  • Sales and marketing of Cxbladder launched in the USA - the world's largest healthcare market
  • Regulatory approval for USA laboratory facilities in March 2013
  • Four laboratories - in Europe, USA, Australia and NZ - now certified by Pacific Edge to commercially run Cxbladder tests
  • Patent granted in China for gastric cancer diagnostic tool

The 2012-13 financial year has been a landmark year for the Company with major milestones being achieved in the commercialisation of the Company's intellectual property portfolio.

Significant resources have been invested in the last 12 months in infrastructure and people to achieve regulatory approval and begin the roll-out of the Company¾_s lead product, Cxbladder, in the United States, the world¾_s largest healthcare market. This has required the completion and regulatory approval of a purpose built laboratory facility in Pennsylvania and the appointment of highly skilled senior executives, technical and sales staff to gain traction for Cxbladder with medical practitioners across the USA.

A significant proportion of the Company's expenditure for the 2013 financial year has been on the commercial process development and commercial rollout of the bladder cancer product Cxbladder to the new US business, our commercial laboratory in New Zealand and those of our licensed partners. As a result, the Company has recorded an unaudited net loss of $6,949,878 for the year ended 31 March 2013, compared to a budgeted loss of $7,148,661. This compares to a recorded net loss of $4,079,234 for the year ended 31 March 2012.

As a matter of policy, the Company continues to write off all research and development expenditure until the point at which products or projects provide reasonable certainty of cost recovery. The Cxbladder detection test is now commercially available and any further expenditure on this product is expected to be capitalised. The Company over this period has made further significant investment in intellectual property protection and product development of Cxbladder and its new follow-on products targeted on other clinical needs for urologists.

Update on Commercialisation of Cxbladder

The Company's subsidiary, Pacific Edge Diagnostics USA Limited, PEDUSA has been created specifically to build the business to service the world's largest healthcare market, the USA. Its complexity is challenging but the Company is confident that in PEDUSA it has the people at Board, executive and technical levels with the right depth of experience in launching biomedical products in the United States. During the year Jackie Walker was appointed as CEO and Bruce Nogales to the Board of Directors of PEDUSA. Both are outstanding professionals experienced in biomedical commercialisation in the USA. Key appointments have also been made to the roles of Laboratory Director, Medical Director and Technical Supervisor, in particular to meet the regulatory requirements. Recruitment of key sales and marketing staff is now underway.

The build and fit-out of the new laboratory infrastructure in Hershey, Pennsylvania has also been completed, to enable the Company to begin the sales and marketing phase of this new product. This facility was completed on time, to specification and within budget and provides the Company with a dedicated, state-of-the-art laboratory facility for Cxbladder.

The regulatory approval process was completed as planned in March 2013 with registration by the USA
regulatory agency CLIA. The capability to build this business opportunity in the USA off the back of the
New Zealand business has been a significant factor in enabling this market channel to be delivered
quickly and very cost-effectively.

The USA market has a comprehensive understanding of the clinical applications and advantages that can be, and are being, achieved from new molecular diagnostic and prognostic tests. Clinicians and healthcare providers understand that significant cost savings and enhanced patient wellbeing, from changes to clinical procedures, will come as a direct result of the adoption of these technologies. Management retains the expectation that Pacific Edge will reach the 200,000 tests per annum throughput target for the laboratory by the end of the 5th year of trading.

Update on the US market

A recent trend in the US is for urologists to cluster into Large Urology Group practices (LUGs) to enable specialisation and to leverage buying power. PEDUSA is actively targeting LUGs, as well as the large managed healthcare organisations to provide a focused start to the Company's USA based sales and marketing program. There are approximately 10,500 practising urologists in the USA and approximately 10% are aggregated into LUG's.

Significant change is underway within the USA healthcare system under the much-publicised "Obamacare"(Affordable Care Act) and there is renewed focus on shifting healthcare from a cost plus mentality to a value based approach. This change is heralded by many as an exciting opportunity for new technologies to be able to be recognised for their ability to increase efficacy and lower overall costs. Where this is the case, greater value could otherwise be expected to flow from these technologies. Treatment of bladder cancer incurs the highest total medical costs of any cancer. In the United States this figure is approaching US$200,000 per patient from detection until death. In the USA there are expected to be in excess of 1,000,000 people presenting to their healthcare provider this year with blood in their urine (haematuria). It is anticipated that the USA healthcare system could invest in excess of $1 billion this year in investigating haematuria.

Cxbladder's sales in the USA have made a minimal impact on Pacific Edge revenues in this current financial year as we bring the sales and marketing resources to bear and invest strongly in getting the message, clinical value proposition and product out to the clinicians. Building the market awareness of the product opportunity is a substantial process that we will continue aggressively in the coming financial year and revenue from the USA is expected to develop progressively over FY14 as our sales teams build relationships with clinicians.

Update on other markets

The launch of Cxbladder in the United States follows licensing agreements with Oryzon in Spain (Spain has the highest incidence of bladder cancer of any country in the world), and Healthscope Pathology in Australia. Taking Cxbladder to the market in New Zealand and Australia is seen by the Company as an integral part of our commercialisation strategy. Our local market provides the Company with an excellent opportunity to develop and fine-tune the commercial processes and to refine the logistics prior to launching the test in other markets and countries.

Urologists and general practitioners in New Zealand and Australia are showing keen interest in using Cxbladder, with a significant number of them undergoing in-practice evaluations of Cxbladder to determine how Cxbladder can best work in their practices. This has been a notable feature of the commercial rollout during the year and is expected by the Company to translate into a full commercial relationship with the urologists that have embarked on the "User Program". Cxbladder is expected to be widely used as an adjunct to cystoscopy for patients presenting with haematuria and returning to the clinic for on-going monitoring. Sales this year have been steady but small in number and are expected to increase steadily off the back of these "user-programs" during the coming year.

Pacific Edge is delighted to have Healthscope Pathology as our key partner in Australia, giving Cxbladder a strong market presence. Healthscope was the first of Pacific Edge¾_s targeted partners to take a license for the Company's turnkey solution for bladder cancer. Under the terms of our agreement, Healthscope Pathology will market and offer laboratory services to urologists and general practitioners (GPs) for the detection of bladder cancer using Cxbladder in Australia.

Pacific Edge has retained the commercial rights to provide services to New Zealand urologists and GPs through its subsidiary Pacific Edge Diagnostics NZ Limited, using its diagnostic laboratory based in Dunedin. As part of the progressive launch of Cxbladder, Pacific Edge has signed Labtests in Auckland for an exclusive sales and marketing agreement that will see the Labtests' sales team focus on urologists and GPs in the Auckland and Northland regions, which account for approximately 40% of the NZ market.

Pacific Edge is pleased to have Oryzon in Spain as a partner providing the initial entry point for Pacific Edge into the European market. Oryzon will market and offer laboratory services to urologists and general practitioners for the detection of bladder cancer using Cxbladder in Spain and Portugal. Oryzon has successfully completed the technical transition to enable their laboratory to process tests. The expectation is for Oryzon to start commercial activity this year. Oryzon's laboratory is the fourth laboratory globally that has the capability to process Cxbladder, including PE Diagnostics NZ Limited in Dunedin, PEDUSA in Hershey, Pennsylvania, and Healthscope's Melbourne based laboratory.

Pacific Edge's Product Pipeline

The Company continues to progress the development of the other products in the product pipeline and the Company achieved another significant milestone with a patent issued for the detection of gastric cancer in China. This now provides issued patent coverage for the Detection of Gastric Cancer in Europe, Australia, New Zealand and China. Investment in intellectual property is a significant annual investment for the Company and underpins the commercial capability of the Company¾_s products. Steady progress is being made with the expected issue of patents as they reach final examination in various geographies around the world.

Chris Swann: Chairman  

David Darling: Chief Executive Officer





Globally, bladder cancer has the 9th highest incidence and the 4th highest incidence for men. One of the early symptoms of bladder cancer is the presence of blood in the urine, haematuria. People with haematuria often present to their general practitioner before being referred on to a urologist.

There are a number of at risk occupations that have shown a much higher incidence of bladder cancer. Fire fighters and fire control officers have shown in a US study to have a 2x incidence of bladder cancer over non fire fighters. Smoking is a significant contributing factor (over 50% in males and 33% in females, approximately 1 of every 2 new incidences of bladder cancer is linked to smoking). Exposure to certain industrial chemicals or carcinogens increases risks for some occupations e.g. hairdressers, painters, printers, fire fighters and metal workers, chemical engineers. Finally, incidence increases with age so the older you are, the greater the potential for bladder cancer.

Bladder cancer has a very high recurrence rate of approximately 50%-70% with up to 30% of these recurring as later stage tumours. This is a higher recurrence than for skin cancer! However, bladder cancers are highly treatable, especially if detected in the early stages. If diagnosed early there is a much higher probability of survival for early stage tumours relative to later stage tumours. This makes timely and regular surveillance and monitoring of this cancer a key element of the clinical process and of the individual's annual healthcare plan.

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