Pacific Edge share price climbs 18%: here’s how it happened
When it comes to frightening life events, cancer is the number one killer in the world. It is indiscriminate. Unfair. And it touched my family and friends, as I’m sure it touched yours.
For some time now, I have been monitoring global pharmaceutical companies involved in oncology. Beyond prevention and treatment, diagnosis is one of the most important areas.
There is, in fact, a leading cancer diagnostics company on our doorstep: Pacific Edge Ltd. [NZX:PEB].
The company is headquartered in Dunedin, New Zealand, with offices also in Hershey, USA. It was created in 2001. It uses genetic biomarkers in urine to detect the presence of cancer. It markets this technology as being much cheaper than other diagnostics.
Since its listing, the company has carried out several capital increases and the success of its products is not guaranteed. Yet recently the tide has changed as a slew of regulatory approvals have added weight to their work.
This month of April also saw a good boost. The huge United Healthcare insurance group in the United States, with a 14.1% market share, has added coverage for Pacific Edge’s Cxbladder test.
Why the Pacific Edge [NZX:PEB] share price increased?
Since mid-2020, Pacific Edge has performed well on the stock market:
Source: Google Finance
The Company’s annual report as at March 31, 2021 shows the level of traction the Company has achieved, clearly in a growth phase following development and regulatory approvals:
- âStrong growth in operating revenue and cash refunds starting in July 2020 thanks to CMS coverage and growing commercial adoption of Cxbladder.
- âTotal revenue increased 101% to $ 10.4 million.
- âTest sales operating revenue up 76% to $ 7.7 million.
- âCustomer receipts increased 52% on pcp to reach $ 6.7 million.
- âTotal operating expenses increased 2% on PCP to $ 24.7 million.
- âSignificant reduction in net loss, down 25% to ($ 14.2) million.
- Balance sheet strengthened following a $ 22 million investment in ANZ NZ Investments in July 2020.
- “Net cash, cash equivalents and short-term deposits increased 56% to $ 23.1 million as of March 31, 2021.”
The most recent financial reports for the company were released in July for the first quarter of fiscal 22.
Laboratory throughput has increased over the past five quarters:
- 179% over the same period last year.
- 109% increase compared to the previous quarter (Q4 FY21).
Customer receipts also continue to grow:
- 242% over the same period last year.
- 121% increase compared to the previous quarter (Q4 FY21).
The Company is seeking to expand the use of Cxbladder by healthcare providers on a large scale. And to encourage customers to include multiple products from the Cxbladder test suite.
There is an addressable market in the United States of US $ 3.5 billion.
The business could also see recovery growth after the pandemic, as testing and access to cancer has been more restricted due to Covid-19 lockdown conditions.
Where could Pacific Edge go from here?
This is the big question.
It is a speculative investment based on the continued adoption of its products. Yet the company has a very focused and niche strategy. As part of this strategy, it concentrates and increases its capital resources.
This assignment was noted in the letter to shareholders of June 30, 2021:
âOur vision remains that Cxbladder becomes the most reliable and preferred diagnostic test for the detection and management of urothelial cancer. We are well positioned to capitalize on the opportunities available to the company. Growth initiatives are being rolled out in all of Pacific Edge’s target markets, with the United States remaining the primary focus. Our business priority remains the growing adoption and reimbursement of Cxbladder by Medicare, the Veterans Administration, Kaiser Permanente and other major healthcare facilities and private payers in the United States.. ‘
Along with a clear vision, we also see potential and growing market access through large organizations like Medicare.
Obviously, the Company still has some way to go to show its profitability and demonstrate strong and sustainable margins. It is a speculative choice.
But last week, Pacific Edge took an important step that could speed things up even further. On Thursday, he announced a new capital increase to “accelerate the execution of growth opportunities” and a double listing on the ASX. More information on this can be found here.
That alone can present a unique growth opportunity through access to a much larger and deeper capital market.
Pacific Edge isn’t the only New Zealand company to have done so. Xero [ASX:XRO] is a well-known Kiwi name that has also gone this route:
- In 2007, Xero was listed for the first time on the NZX.
- In 2012, he moved to the double list on the ASX.
- In 2018, he decided to end his NZX listing.
- Since then, it has only been listed on the ASX.
While many other growth factors were obviously at play, Xero had a good run as an ASX stock:
Source: Google Finance
Right now, Pacific Edge is clearly a growing business. This is a high risk, speculative investment dependent on continued growth and success with a narrow range of products.
But, in my opinion, the promise is obvious for investors with wiggle room and risk profile to make such allocations.
will I invest? To date, I have focused on larger, more diverse companies with drugs to treat cancer. Specifically, AstraZeneca plc [LSE:AZN], which has also seen strong revenue growth in recent years.
Source: Google Finance
But as a local company with growth to come and a specific opportunity, I will continue to follow developments at Pacific Edge.
Editor, Morning of wealth
(This article is a commentary and personal opinion of the author only. It is general in nature and should not be construed as financial or investment advice. For advice for your specific situation, please consult a supplier approved financial advice.)