UPDATED: Pacific Edge shares soar to new record on optimism about potential US growth
Pacific Edge [NZX:PEB] wants to raise as much as $20.5 million from shareholders to fund its growing push into the US, having grabbed a beach-head with two healthcare network providers in the world's biggest economy.
The Dunedin-based company will offer a 2 for 15 renounceable rights issue to investors at 55 cents apiece, a 16 percent discount to the volume-weighted average over the past month, and 57 percent below the recent trading price of $1.29. The capital raising is expected to ease short- to medium-term risks around Pacific Edge's liquidity, and as at April 1, it held $10.7 million in cash and equivalent assets.
Of the funds raised, some $10.2 million will go to building the company's sales team in the US over the next three years, $6.6 million will be spend on operational expenditure at the US and New Zealand commercial labs, and $3.7 million will go towards new product development, launch and roll-out.
Chief executive David Darling told BusinessDesk the company aims to beef up its US sales team from four to 20 as it targets large commercial players, where it sees greater scale in rolling out its CXbladder on its mission to reach annual revenue of $100 million within the next five years.
"It's a very doable target, and could come sooner," Darling said. "We're looking to bring the company to a place where it's cashflow positive as soon as possible" though it's too early to determine when it will reach profitability, he said.
The capital raising comes after Pacific Edge announced two agreements with US healthcare network providers, giving it access to sell its CXbladder test to 44 million Americans, and announced its first commercial sale to US clinicians.
That's seen the share price climb as high as a $1.75, a record, and Darling said there had been quite a lot of interest from Asian US investors after the company received coverage in the Wall Street Journal.
The offer was "carefully priced for our shareholders to make sure they get upside," Darling said.
Any rights not taken up will be sold into a back-end shortfall bookbuild to eligible investors on Nov. 29 and shareholders will be able to participate in an oversubscription facility of up to 100 percent, though Darling said the company isn't planning on raising extra funds.
Trading in the rights begins on Nov. 5 and closes on Nov. 21, with a Nov. 7 record date for eligibility. The offer closes on Nov. 27, and allotment for shares under entitlement is scheduled for Dec. 4.
First NZ Capital was appointed organising participant for the capital raising.
Shares in Pacific Edge [NZX:PEB] soared, making the stock the best performer on the stock exchange today, as investors are buoyed by signs the bladder cancer diagnostic company is gaining traction in the US, the world's largest healthcare market.
Shares in Pacific Edge touched a record $1.75, and were recently up 36 percent to $1.44, valuing the company at $403 million.
Pacific Edge yesterday announced its second deal in a week to provide its diagnostic test to healthcare providers in the US. The latest agreement with America's Choice Provider network gives 14 million people in the US access to the Cxbladder test to diagnose bladder tumours, adding to the 40 million who gained access through a deal with healthcare provider FedMed last week.
"Hopefully they will be able to sell plenty of their packages, that's what the company wants," said Grant Williamson, a director at sharebroker Hamilton Hindin Greene in Christchurch. "The US is a huge market for them. It's one of the biggest medical markets in the world and that's got investors pretty excited."
The company aims to generate $100 million from Cxbladder sales in the US within five years. Pacific Edge gained registration for its own US diagnostic laboratory in March and is targeting large commercial provider networks and insurers and integrated health systems Medicare and Medicaid, which provide healthcare insurance for 100 million people, about a third of the US population.