PEB - Pacific Edge Ltd

[calledone]

Not a bad result I think but can anyone actually find the test numbers from KP in any of the reports? Though test through put was down it is picking up quite significantly lately(+37% for March 2021) which if it's to follow through with rest of the year and with 50%+ US population vaccinated 2022 might be a bumper year.

[psychic]

I was right. The tests are not as "medically necessary" as Pacific Edge make out. Test throughput is down despite claims of adoption by CMS and KP.
(i just love the way they say "medically neccessary tests" instead of "tests if considered medically necessary"

Gawd, they have even created a provision now for possible refunds where CMS or Insurers find claimed tests were not medically necessary.

Market still duped.

[jridler]

Not a bad result I think but can anyone actually find the test numbers from KP in any of the reports? Though test through put was down it is picking up quite significantly lately(+37% for March 2021) which if it's to follow through with rest of the year and with 50%+ US population vaccinated 2022 might be a bumper year.

As per the investor call, the KP split will be included in financial reports going forward. It is too early to split this out, as per DD.

[calledone]

As per the investor call, the KP split will be included in financial reports going forward. It is too early to split this out, as per DD.

Thanks, I could not attend the call as I was in a meeting. How was the general feel from management?

[jridler]

Thanks, I could not attend the call as I was in a meeting. How was the general feel from management?

Positive, as you would expect. Questions were largely forward-looking and focused on opportunities (and conversion of these) rather than concentrated on cash position, revenue, etc. Here is what I can recall from the session.

• Growth is continuing. TLT for March 2021 was 69% higher than previous 11-month avg according to results presentation. A question was raised regarding April throughput, and it was mentioned that this was higher than March. So growth has accelerated of recent, which is line with the overall narrative.
• COVID has had an impact to sales efforts in the US, with virtual sales being the current standard practice. The expectation is that once the US opens up more, sales efforts will be improved.
• Negotiations still in progress for CMS reimbursement. DD initially said "we expect" to see a positive outcome, but quickly changed this to "hope". This may be for some or all of the tests.
• Singapore does not feel like a strong opportunity, as the premise for this was based on medical tourists. With COVID, there is not much of this at all. It felt like this was intentionally downplayed during the session but I could be misreading this. A white paper on the completed user programs is expected in the near future.
• Commercial negotiations with remaining NZ DHBs are in progress, and the centralised model is expected to be beneficial.

All going accordingly, it will be a strong first half to FY22, even with COVID impact continuing.

[Leftfield]

Thanks for posting. Very helpful.

[tim23]

I was right. The tests are not as "medically necessary" as Pacific Edge make out. Test throughput is down despite claims of adoption by CMS and KP.
(i just love the way they say "medically neccessary tests" instead of "tests if considered medically necessary"

Gawd, they have even created a provision now for possible refunds where CMS or Insurers find claimed tests were not medically necessary.

Market still duped.

You would always be right with a name like psychic!

[calledone]

Positive, as you would expect. Questions were largely forward-looking and focused on opportunities (and conversion of these) rather than concentrated on cash position, revenue, etc. Here is what I can recall from the session.

• Growth is continuing. TLT for March 2021 was 69% higher than previous 11-month avg according to results presentation. A question was raised regarding April throughput, and it was mentioned that this was higher than March. So growth has accelerated of recent, which is line with the overall narrative.
• COVID has had an impact to sales efforts in the US, with virtual sales being the current standard practice. The expectation is that once the US opens up more, sales efforts will be improved.
• Negotiations still in progress for CMS reimbursement. DD initially said "we expect" to see a positive outcome, but quickly changed this to "hope". This may be for some or all of the tests.
• Singapore does not feel like a strong opportunity, as the premise for this was based on medical tourists. With COVID, there is not much of this at all. It felt like this was intentionally downplayed during the session but I could be misreading this. A white paper on the completed user programs is expected in the near future.
• Commercial negotiations with remaining NZ DHBs are in progress, and the centralised model is expected to be beneficial.

All going accordingly, it will be a strong first half to FY22, even with COVID impact continuing.

Thanks for the input. I’ve listened to the recording and was pleased with their calm confidence in responses.

I’ll add that medical tourism is big business in Singapore (~1million every year) but the real opportunity is the larger southeast asian market which will be similar or bigger than US. DD was certain we will hear about Singapore outcome this financial year so that is something big to look forward to.

The slower uptake from KP was attributed to logistical issues rather than clinicians not using the tests. User experience from urologist is good so we’ll have to wait and see.

Overall the momentum looks stable and plenty of growth opportunities ahead.

[Snow Leopard]

I was a little disappointed with todays result
But not disappointed enough to sell any
Going to continue you believe that it is onwards and upwards now

[Greekwatchdog]

For Bar update
OUTPERFORM
Pacific Edge (PEB) reported strong FY21 revenue growth and an improved NPAT loss, however, COVID-19 was a much
larger handbrake to revenue growth momentum than we had forecast. The March exit-run rate was encouraging, which
bodes well for a step-change in revenue from FY22. There was nothing in the result to change our view of the opportunity
or PEB’s ability to capitalise on this. COVID-19 has clouded the short-term upside, however, the prize is substantial and
headwinds are showing some signs of easing. With the range of justifiable long-term outcomes wide, we expect the share
price to continue to be driven by newsflow — which is likely to be positively skewed. OUTPERFORM.
What's changed?
COVID-19 a significant handbrake through FY21
PEB reported FY21 product sales of NZ$7.7m, up +76% on the prior year albeit materially below our expectations (-NZ$2.1m) — with
larger than anticipated COVID-19 headwinds weighing on overall test volumes. Recent data points to a meaningful recovery, with
indications March 2021 volumes were ~2,100 (+69% on the 11-month average through FY21). Extrapolating this, we estimate a baselevel exit run-rate for revenue of ~NZ$18m. Consistent with recent results, costs were well controlled, and cash receipts have
materially improved since coverage was secured from key US public health insurer, CMS (Centre for Medicare & Medicaid Services).
Cash position remains healthy
PEB reported net cash of NZ$23m at FY21, enough for c. 23 months operations using 2H21 cash burn rates and significantly longer
using our forecast burn rates. There is also upside risk given it excludes tests for CMS patients prior to commercial coverage (22,634
tests; or ~US$17m at US$760/test) where partial reimbursement is feasible, albeit the quantum and timing unknown. This is not
included in our forecasts.
Where to from here? We forecast a strong near-term revenue growth profile & operating leverage; quantum the key unknown
The FY21 result includes c. 8 months of contribution from CMS, albeit very little contribution from large US healthcare provider,
Kaiser Permanente with COVID-19 delaying progress. Both of these should be more material contributors from FY22E. Commentary
suggests FY22 has started well, albeit we expect COVID-19 disruption will linger at least into 1H22E. The range of reasonable and
justifiable outcomes remain very wide, particularly for revenue. We expect strong operating leverage as revenue grows even with a
step-up in SG&A costs, aided by highly attractive gross margins (>~85%). Potential near-term newsflow includes: new commercial
agreement(s), stronger mention/inclusion in clinical guidelines, back payment from CMS, additional clinical evidence.