$ 111.6m $ 16.0m $ 94.5m

Weekend Herald - - BRIAN GAYNOR -

To­tal com­mer­cial rev­enue since 2001 Clin­i­cal Lab­o­ra­to­ries Im­prove­ment Act cer­ti­fied lab­o­ra­tory in the United States; $ 7.5m for lab­o­ra­tory staff re­cruit­ment, salaries, di­rec­tor fees and costs as­so­ci­ated with the com­pany’s US sub­sidiary; and $ 8m for op­er­a­tional costs, mainly in re­la­tion to Cxblad­der.

A com­pany pre­sen­ta­tion re­leased in con­junc­tion with the rights is­sue said Cxblad­der “pro­vides gen­eral prac­ti­tion­ers and urol­o­gists with a quick, cost ef­fec­tive and ac­cu­rate mea­sure of the pres­ence of can­cer”.

Pa­cific Edge be­lieved that the US was the best mar­ket for Cxblad­der be­cause 1 mil­lion pa­tients had po­ten­tial can­cer blad­der symp­toms ev­ery year and 68,800 were di­ag­nosed with the dis­ease. The com­pany an­tic­i­pated that if it could gain a 5 per cent mar­ket share, it would gen­er­ate an­nual rev­enue of US$ 50.2m and a gross profit mar­gin of US$ 41.1m.

Pa­cific Edge, which changed its name from Pa­cific Edge Biotech­nolo­gies in April 2010, has not achieved this mar­ket pen­e­tra­tion ob­jec­tive as demon­strated by the fol­low­ing fig­ures: It has gen­er­ated com­mer­cial rev­enue of only NZ$ 15.1m in the five years since March 2012 It has re­ported to­tal losses of $ 66.0m in the past five years com­pared with losses of $ 28.5m for its first 10 years The com­pany has raised $ 65.4m of new eq­uity since March 2012, com­pared with $ 46.2m of new eq­uity in the 2002 to 2012 pe­riod It has re­ceived $ 4.5m in grants and re­search re­bates in the past five years, com­pared with $ 2.6m in the decade ended March 2012.

In other words, Pa­cific Edge has been churn­ing through the money since it ex­panded into the US, although there are re­cent signs that its US busi­ness is be­gin­ning to gain trac­tion.

One of the is­sues with Pa­cific Edge is the reli­a­bil­ity of its stock ex­change an­nounce­ments, as 11 of these have had to be amended over the past decade, in­clud­ing the com­pany’s 2017 an­nual re­port.

At the end of Septem­ber, Dar­ling re­vealed that the com­pany’s cash­flow rev­enue from cus­tomers and grant providers was over­stated by $ 3.2m in the lat­est an­nual re­port; the fig­ure should have been $ 4.6m, not $ 7.9m.

A com­pany pre­sen­ta­tion re­leased this week partly ex­plained this is­sue with the com­ment that there “is con­sid­er­able de­lay be­tween Pa­cific Edge com­plet­ing the anal­y­sis of a pa­tient’s sam­ple and pay­ment by the rel­e­vant US payer ( in­surer)”. How­ever, it went on to say that “time to cash re­ceipt will im­prove sig­nif­i­cantly with the award of the Lo­cal Cov­er­age De­ter­mi­na­tion”.

The pre­sen­ta­tion also dis­closed: Only $ 3.2m of Cxblad­der’s ac­crued rev­enue of $ 8.1m in the March 2017 year was re­ceived dur­ing the year The com­pany ex­pects to re­ceive just $ 4.0m of the $ 12.6m it ex­pects to bill for Cxblad­der in the cur­rent year Pa­cific Edge is ex­pect­ing a huge im­prove­ment in the March 2019 year, with es­ti­mated Cxblad­der rev­enue of $ 27.9m and cash re­ceipts of $ 25.7m

Pa­cific Edge has de­vel­oped a very im­por­tant prod­uct but Dar­ling and his man­age­ment team have yet to prove that they can gen­er­ate suf­fi­cient sales, and col­lect the cash from these sales, to jus­tify the huge in­vest­ment in the com­pany by eq­uity and grant providers.

Brian Gaynor is an ex­ec­u­tive di­rec­tor of Mil­ford As­set Man­age­ment.

Eq­uity raised Pic­ture / ODT

Pic­tured in 2013 are ( L to R) Pa­cific Edge CEO David Dar­ling, se­nior sci­en­tist Justin Har­vey and then- chair­man Chris Swann.

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