2019

Pacific Edge Ltd Announces FY20 Results and Capital Raising

Pacific Edge Ltd Announces FY20 Results and Capital Raising

Pacific Edge has announced half year performance and capital raising to assist the company to progress its commercial objectives.

 

(NZ$'000)

1H20[1]

1H19[1]

% Change

Operating Revenue[2] (test sales)

2,285

2,033

12%

Total Revenue

2,701

2,639

2%

Operating Expenses

12,090

11,358

6%

Total Comprehensive Loss

9,406

8,718

8%

Cash Receipts from Customers

2,350

2,026

16%

Net Operating Cash Outflow

7,405

8,612

(14%)

Cash on hand as at 30 September

(cash, cash equivalents and short term deposits)

4,737

10,060

(53%)

Lift in laboratory throughput, commercial test revenue and cash receipts:

  • Cash receipts from customers grew to $2.4m, a 16% increase on pcp and a 37% increase on 2H19.
  • Operating revenue from test sales increased 12% to $2.3m, with total revenue for the period of $2.7m.
  • Total laboratory throughput (which includes commercial sales as well as tests from User Programmes) grew to 8,147 tests, a 10% increase.
  • Total laboratory throughput for the PEDNZ business (New Zealand, Australia and Singapore), grew to 1,896 tests, a 50% increase, driven by continued strong demand from public healthcare providers in New Zealand and User Programmes in South East Asia.
  • Total billable tests grew to 6,573 tests, an 8% increase.
  • Total operating expenses were $(12.1m), a 6% increase.
  • Net operating cash outflow reduced to $(7.4m), a 14% decrease.
  • Overall, the Company reported a net loss of $9.4m for the half year period, an 8% increase on pcp.
  • Pacific Edge had cash, cash equivalents and short term deposits of $4.7m as at 30 September 2019.
  • Pacific Edge has today announced a fully underwritten capital raising of approximately $20 million via an initial placement and subsequent 1 for 4.25 pro-rata renounceable rights offer, to assist the Company to progress its commercial objectives and become cash flow positive as soon as possible. The capital raise is fully underwritten by Forsyth Barr Group Limited and Jarden Partners Limited.

Summary of Key Commercial Milestones in the Half Year Period: 

  • Cxbladder inclusion in USA’s National Comprehensive Cancer Network (NCCN)[3] guidelines as an approved intervention for patients being monitored for recurrence of urothelial cancer (UC), further validating Cxbladder and enabling increased use by clinicians.
  • Continuing adoption and increasing test use by New Zealand public healthcare providers (DHBs), with increasing commercial use expected to continue to positively impact commercial test throughput growth in 2H20.
  • Publication of two further papers in peer-reviewed journals, including the world’s number one urology journal, adding significant additional clinical utility evidence in support of Cxbladder.
  • Updated dossier of clinical evidence accepted for formal review by the Centers for Medicare and Medicaid Services (CMS) in the USA, as part of process for inclusion in the Local Coverage Determination (LCD) for the USA market. A successful inclusion in the LCD, combined with the recently announced inclusion in the NCCN guidelines, is expected to be transformational to test adoption, revenue growth and operating cashflow.
  • Growing recognition and adoption by large healthcare institutions in the USA, with a growing number of very large and reputable healthcare providers and academic centres growing their commercial use of Cxbladder or currently evaluating Cxbladder for commercial use.
  • Continuing progress in South East Asia with clinical trials with the five largest public hospitals in Singapore nearing completion. Published results from these will form the basis for a proposed Singapore-wide commercial programme.

Commercial Progress:

Cancer diagnostics company, Pacific Edge Limited (NZX: PEB) (Pacific Edge or the Company) is reporting increased cash receipts, revenue and laboratory throughput for the first half of the 2020 financial year (1H20) as its Cxbladder diagnostic tests are adopted into guidelines in the USA and New Zealand, with further endorsement of performance in published clinical papers.

The Company is making good progress in its target markets of the USA, New Zealand, Australia and South East Asia, with a number of important commercial achievements in the six-month period. The focus remains on gaining inclusion in the LCD for CMS patients in the USA and accelerating the commercial adoption of the suite of Cxbladder tests in all of the Company’s target markets. A successful LCD inclusion decision, in combination with the recent inclusion in guidelines in New Zealand and the USA, is expected to result in strong increases in test adoption, revenue growth and operating cash flow.

The annual addressable market for the suite of Cxbladder products was estimated by EY Parthenon[4] as being US$1.2 billion. Management is focused on completing agreements for the adoption and commercial use of Cxbladder and building sales from the large institutional accounts and payers Pacific Edge is targeting in the USA, including Kaiser Permanente, Johns Hopkins Medicine, the Veterans Administration, Tricare, the CMS and other blue-chip institutions.

Demand from public healthcare providers in New Zealand is expected to continue to grow strongly and positively impact commercial test throughput volumes in the future, as remaining public healthcare providers start commercial use at scale, and those that have commenced, progress on to using more than one of the Cxbladder suite of products.

Additional peer reviewed papers are expected to be published in key urology journals over the second half of FY20, providing additional compelling evidence supporting the clinical utility of Cxbladder. The publication of these papers is also expected to support Pacific Edge’s LCD application with the CMS.

CEO of Pacific Edge, David Darling, commented: “Pacific Edge continues to move ever closer to achieving its commercial goals, particularly in the USA, and significant progress is being made.  Adoption of Cxbladder is growing and commercial sales are increasing. We remain focused on further accelerating the adoption of Cxbladder by large healthcare organisations, both in New Zealand and internationally, and growing our revenue. Gaining inclusion in the LCD for CMS patients in the USA remains our priority and we are working hard on the successful execution of this next phase of our global growth plan as we continue to progress our objective of taking Cxbladder to the world.”

Chairman Chris Gallaher said: “The Board remain committed to the Company’s strategy and to achieving the key milestone of cash flow breakeven. The management team have achieved a number of important outcomes over 1H20, maintaining our momentum and moving us closer towards attaining our commercial goals. The Board’s focus remains on cash and cash management and ensuring the resources and capital are in place for Pacific Edge to realise its potential. As such, today we have announced a capital raise consisting of a placement and renounceable rights issue to shareholders.”

Capital Raising

Pacific Edge has today announced a capital raising of $20 million via an up-front placement and subsequent 1 for 4.25 pro-rata renounceable rights offer, to assist the Company to progress its commercial objectives and become cash flow positive as soon as possible. The capital raising is fully underwritten by Forsyth Barr Group Limited and Jarden Partners Limited.

Pacific Edge intends to undertake a placement of new shares at $0.15 per share to raise up to approximately $7 million. The placement will occur today while Pacific Edge is in trading halt, with participants expected to include a range of institutional and wholesale investors from New Zealand and internationally.

Following completion of the placement, a rights offer of approximately $13.1 million will allow eligible shareholders to subscribe for 1 additional share for each 4.25 existing shares held on the record date at $0.10 per share. This represents a 34.0% discount to the theoretical ex-rights price and placement adjusted price of $0.152, based off last close of NZ$0.165 as at 20 November 2019.

The full terms and conditions of the rights issue will be contained in an offer document which will be distributed to all eligible shareholders (as defined in the offer document) after the proposed record date.

 

Rights Issue Timetable:

  • Shares quoted "ex-rights" and rights trading commence:  28 November 2019
  • Record date for rights issue: 29 November 2019
  • Offer document and entitlement and acceptance forms sent to eligible shareholders: 2 December 2019
  • Rights trading cease: 5 December 2019
  • Rights offer closes: 11 December 2019
  • Settlement and allotment of rights offer shares: 18 December 2019

All dates and times are indicative only and subject to change.

 

For more commentary on performance and achievement of key milestones, please visit the Pacific Edge hub on NZX.com

 

Footnotes

  1. Half year ended 30 September
  2. Operating revenue excludes tests sold in the U.S. for which cash payment has yet to be received, as well as tests covered by the CMS. CMS tests account for approximately 47% of total U.S. laboratory throughput and PEB will seek reimbursement for these invoiced tests on a successful inclusion in the CMS’s LCD. As at 30 September 2019, Pacific Edge has completed and invoiced a total of 19,361 tests for CMS patients in the U.S, which are yet to be reimbursed.
  3. National Comprehensive Cancer Network (NCCN) guidelines provide urology guidelines for physicians treating and managing patients with cancer and are reviewed annually. Cxbladder received inclusion in the July 2019 update to the NCCN guidelines.
  4. EY Parthenon review of Cxbladder products and commercial strategy in 2018
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