Pacific Edge to raise $21.3m in deeply discounted offer

Chairman Chris Gallaher says the company is focused on gaining traction in the US

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.

(BusinessDesk)


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Page 4 of the Investor Presentation -

Pacific Edge is providing guidance for the first time as it moves to bring the company to a financial breakeven position and is raising $21.3m to allow the company to focus entirely on its future growth

The small print further on -
FY19 estimates include an estimate of throughput for both Kaiser Permanente and the CMS

My assumption is this guidance is based on hope....I'd like this company to succeed but they have no credibility left with me. If I was a shareholder I would be asking serious questions of the MD including whether it is appropriate he stay on.

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So much for the 'several tens of thousands' of tests in 2014 utterances from the then Chairman Swann in December 2013.

And so much for the $100m sales by 2019. (edited)

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Just behind Allied Farmers. No one tops them.

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More easy money for the company. If I was a current shareholder I would be worried about the value of my shares going down, and staying there. This sort of money raising is now becoming increasingly common these days. Shareholders, who gives a stuff about them?

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Ah, the 2nd down-round cap raise since the utterances of "we won't need any more cash because we'll be profitable soon"!

I see that FNZC is a very reluctant underwriter and is only doing so at a heavily discounted rate.

If PEB wants to ever be taken seriously ever again, they need to come clean about past (massive) mistakes, absolutely clean out the entire boardroom, put in some REALISTIC forecasts and then start walking the talk!

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I wonder what the terms of the cash issue are...how much does the share price need to fall by before the underwriting agreement lapses???

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The underwriters and subunderwriters to the last 3 capital raise are stuck like the proverbial - they have absolutely no choice but to support this issue or else, see the company go under.

And institutions like Devon, Harbour and Salt are supposed to really know how to invest!

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Shades of WYN and IQE? Some institutions held on till the end and some quit but far far too late. Harbour are certainly knee deep in this share and have liked them to a long time ( and I note their links to Firsts)

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Pacific Edge has got to make their products relevant to clinicians and their practice (the actual customer. The patient is NOT the customer).

They may have convinced themselves, they may have convinced a lot of investors that their products offer great clinical benefits and improvements to doctors and their patients in the diagnosing and monitoring of bladder cancers, but it's the clinicians that they have to convince of those benefits. And given the poor sales of their products, particularly in the litigious US, it is quite clear that they have failed to do that to date. A change in strategy and personal is needed methinks.

Or, it could simply be a case that the urologists just don't think that these products solve a problem that they have and therefore are unnesccary, in which case the future I think is bleak.

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Promises promises !! As a shareholder my patience and support is wearing very thin.

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Urologists don't like a test costing a few hundred $ that is more accurate than the one they charge several thousand $ for. PEB need to get this test in the hands of GPs and insurance companies NOT urologists.
I have some knowledge of this market, believe me.

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I am sick of the the euphemistic dishonest comments that have emanated from Pacific Edge over the years. I have followed them down down, down ..., but enough is enough. The US must be the hardest nut to crack as they are so very protective of their own pharmaceutical and medical diagnostic industry even if it means using their own second best options. I am also doubtful of the accuracy of the recent international report that put NZ second best country in the honesty stakes, especially in the investment arena. The performance of a number of companies who talk the talk which retrospectively leaves one to ponder the honesty and fantasy of their statements.

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What is most disturbing about how this company has kept the market and investors 'up to date' is how prospects were bullishly talked up over 2013 to 2015 - $100m sales target in 2014, the talk of several tens of thousands of tests in 2014 and how the company was always on the verge of becoming profitable after each successive capital raise.

Even more disturbing is that when the share price rocketed to the stratosphere in 2014, the then Chairman, CEO and one of the biggest shareholders who had board representation sold shares. Coincidental?

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Where are the NZX and FMA? Good questions. I suppose the people at the FMA are very happy little campers at the moment, after their nice big fat pay-risers. What they were for is beyond me.

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Could have been easily avoided, years not wasted and millions of investor $'s saved by simply admitting they couldn't crack the USA alone and actively sought out a JV with a large entity like Johnson & Johnson. Give up 15% of the company for a stake and PEB could have been a wunder investment worth multiples of what it is now.

That was the first red flag in the long, long list of very big, very bright, angrily waving red flags!

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So what's next? Company goes belly up. The bosses just walk away. The shareholders lose everything. The FMA say sorry. The bosses then get the usual wet bus ticket smack on the hand, and then go off to live happily ever after on all the money hidden away in their trust accounts, and business practice in NZ just carries on as usual.

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*Sigh*

Unfortunately, this is the scenario which will, more than likely, play out. Seen it happen many times before, and if it does go this way then it certainly won't be the last.

CAVEAT EMPTOR - For your own wealth protection and sanity, because no one else in NZ is going to do it!

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Market cap of $145 mil, share price flat-lined for years, cash flow negative, irregular reporting by the CFO which is inexcusable also for the board to not pick it up from management reports (cash sales, cash in, cash out - working capital - this is how you report to your board), share price now $0.36. I have followed this company for some time and surprised why the stock analysts aren't lifting the veil and taking a VC's approach which is this company is propped up by Callaghan grants, has not delivered, its cash losses are extraordinary and require fresh capital every 6=9 months, so it needs a radical shakeup, new management, maybe new board , take the costs out, re-size and deliver on a robust strategy...or this will not be the last down round. The company behaves like a pampered R&D lab not like a balls to the wall competitive business.

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Well put.

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PEB will fall or rise on obtaining LCD approval for CxBladder. It is THAT issue that requires sorting.

But the prospect of an underwrite was not a main focus of the recent AGM. Must be a lot of pissed off investors now - underwrites don't happen overnight!

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