Pacific Edge to raise $21.3m in deeply discounted offer

The Dunedin-based company wants to break even on a cash flow basis by March 2019.

Pacific Edge wants to raise $21.3 million in a deeply discounted rights issue, which it says will fund the cancer diagnostics firm's goal of breaking even on a cash flow basis in the March 2019 year.

The Dunedin-based company will sell 66.6 million shares at 32 cents apiece in a one-for-six pro-rata rights offer, a 27 percent discount to the theoretical ex-rights price of 44 cents, it said in a statement. The deal is fully underwritten by lead manager First NZ Capital Securities.

The funds will give Pacific Edge room to cover the cost of operations until it breaks even on a cash flow basis, and it's projecting a $3.5 million inflow in the year ending March 31, 2019. The company anticipates lab throughput rising to some 23,100 tests in the 2019 year from 11,246 in 2017, helping drive an increase in revenue to $27.9 million from $8.1 million.

"We are making strong commercial progress and continue to focus on gaining traction in the US and our other targeted markets," chair Chris Gallaher said. "We are expecting a step-up in the number of tests processed and revenue once we get underway with Kaiser Permanente and as our other targeted large-scale organisations gain momentum."

The company's 2017 loss widened to $21 million as revenue lagged behind expectations after it took longer to close deals with large US health administrators. When reporting those results in May, Pacific Edge said it had the Veterans Administration and TRICARE Health Plan Network under contract, which provides cover to 20 million US military personnel, was in commercial talks with Kaiser Permanente, and was still chasing regulatory approval for patients to get reimbursed under the Centers for Medicare and Medicaid (CMS).

Today it said the US is still the primary market opportunity and that it wants to wrap up commercial talks with Kaiser and is seeking a local coverage determination to let it get reimbursed under CMS. The Kaiser and CMS deals underpin the company's 2019 forecast.

Pacific Edge also said it will review its business to see where it can lift operations, reporting and communications to support the drive to positive cash flow.

The rights offered won't be tradable on the NZX and new shares not taken up will be offered to eligible investors through a bookbuild run by the lead manager. The bookbuild price will be set by the lead manager with the 32 cents subscription price a minimum. The offer opens on Oct. 20 and closes on Nov. 8, with the bookbuild scheduled for Nov. 10.


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