$ 111.6m $ 16.0m $ 94.5m
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.
Pictured in 2013 are ( L to R) Pacific Edge CEO David Darling, senior scientist Justin Harvey and then- chairman Chris Swann.