Good day, and welcome to the Pacific Edge Half-Year Financial Results Announcement Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. David Darling, Chief Executive Officer. Please go ahead, sir.
Thank you very much. Good morning to all of you and to our new shareholders in Australia. This will be an early morning start for you to make the call, so thank you all for joining the call this morning. With me this morning, I have Chris Gallagher, the Chairman of the Board of Directors, Sarah Park, the Chairman of the Audit and Risk Committee, and Grant Gibson, our Chief Financial Officer. Over the last few months, you have heard from us many times as we have concluded our dual listing on the ASX and our capital raise for growth. I propose to keep today's results presentation quite focused and then answer any questions you have at the end. Please see our disclaimer on slide two that applies to today's presentation. Can we please start on slide three?
In particular, this has been a very busy six months for the Pacific Edge team, with some big structural milestones under our belt and good growth in a world challenged by COVID-19. We dual-listed on the ASX in September, which provides us with access to a wider pool of investors and the opportunity for further analyst coverage. We successfully concluded a two-phase capital raise that netted us NZD 103 million of growth capital. The first phase totaled NZD 80 million, was completed in September, and is included in the half year results. The second phase was the retail offer to existing shareholders, which totaled NZD 23.5 million and will be included in the FY 2022 full year results. The capital raise was strongly supported by both new and existing shareholders, and we were pleased to welcome several international reputable funds to our register.
The proceeds will enable us to leverage the commercial milestones that we have achieved to date, particularly those achieved in 2020, and to accelerate our growth strategy in all markets. Our goal is to push hard in the United States and to open up commercially in Australia and Southeast Asia. Our strategy is well considered, has been validated, and is locked in. We are delivering on it and making good progress, although at times not necessarily as fast as we would like in this pandemic world. The U.S. remains our biggest market opportunity. However, we are excited by the opportunity that exists in front of us with both Australia and Southeast Asia. The recent changes to the EAU guideline wording for bladder cancer biomarker tests opens the door and may make some parts of Europe an exciting opportunity as well.
We derive approximately 95% of our revenue from the U.S. at present, and we have been pushing hard to grow our revenue. To that end, and as promised, we have grown our sales force by 75% compared to the same time last year. We have staffed two new sales territories, up from 19 to 21, and we have added a number of support roles to support our growth. While our direct sales force delivers most of our revenue, we are also focused on gaining institutional adoption of Cxbladder by large healthcare organizations. Kaiser Permanente is the first of these to be concluded, and we were pleasantly surprised by the earlier than planned commercial adoption of a second Cxbladder product. This is testament to the clinical utility of our products and is very positive validation from one of America's largest integrated healthcare provider and payer organizations.
In New Zealand, we have been very successful in targeting the institutional healthcare providers with more than 70% of New Zealand's population now being covered. We continue our drive to gain 100% population coverage for Cxbladder and contemporaneously to shift each public healthcare provider onto multiple Cxbladder products. Over 1H 2022, we have added another two public healthcare providers using Cxbladder in their mainstream commercial use. One of the big outcomes over the last six months has been the publication of two further clinical papers in the U.S.'s premier journal, The Journal of Urology, both highlighting the increase in clinical utility gained from the use of Cxbladder. The first paper outlines the significant increase in clinical resolution that can be achieved from the combined use of multiple Cxbladder products and the evaluation of a patient presenting to the clinic with hematuria.
This is the first time that the clinical benefits of this novel integration of Cxbladder products has been validated. The second paper was a real-world look back in the United States of the use of Cxbladder's patient in-home sampling system, highlighting the benefit of this, particularly in the COVID-19 setting. Currently under analysis is the Singapore study. We have integrated the five large public healthcare providers in Singapore into a single study to provide the Southeast Asian specific Cxbladder performance. The publication of this evidence is on track for publication in early 2022 and will be the trigger for our Southeast Asian commercial launch.
Globally, we have seen progressive resurgence of COVID-19, creating restrictions to our access to hospitals, clinics, and physicians as the Delta variant spreads. Healthcare organizations are also moving resources to priority areas to respond to COVID-19, and we have seen this with Kaiser Permanente. This has led us to become creative in how we engage with these customers and how we provide Cxbladder to them. Their needs have changed, and with the pandemic has come a growing awareness of Cxbladder's ability to help them manage their patients at home. Our patient in-home sampling system, virtual selling to the physicians, and the quick adaptation of our people to remote working have proven successful in this constantly evolving environment. While our momentum has been hampered by the COVID environment, our teams have continued to deliver positive progress on key commercial initiatives.
This has resulted in a strong uplift in key metrics. Looking at some key elements of our commercial progress in the last six months, the inclusion in the CMS's LCD last July enabled reinvestment from the Centers for Medicare and Medicaid Services, driving a steep change in our revenue and cash receipts. CMS reimbursed tests accounting for 65% of total U.S. commercial test volume during the period. Cxbladder Detect and Cxbladder Monitor, the two Cxbladder tests included in the LCD, accounted for 95% of the total U.S. commercial test volume. The U.S. remains our primary market and accounted for 81% of our total lab throughput, 81% of commercial test volumes, and 93% of operating revenue.
We can expect the U.S. to continue to be the most significant portion of our total group performance as U.S. operations and sales are scaled up and as we begin our commercial growth into Australia and Southeast Asia. At the end of the six months of 1H 2022, we had 28 sales reps, up from the 16 that have been employed for most of FY 2021. As planned, we will add a further two sales reps to join the team by the end of this month. A key part of enabling our growth plans for Kaiser Permanente is the integration of Cxbladder into their patient referral system and electronic medical records. However, this has yet to be concluded and continues to constrain the growth rate expected from this important customer.
One of the reasons for this is the reallocation of internal resources due to COVID-19, which I mentioned previously. Despite this, Kaiser have adopted the second Cxbladder product, and commercial test numbers from Kaiser continue to grow. The recent Cxbladder clinical publications supporting the combined use of multiple Cxbladder products will further evolve how urothelial carcinoma is diagnosed and managed, and Cxbladder once again delivering a greatly enriched clinical proposition for urologists. These papers also provide additional support in favor of inclusion in guidelines and national standards, which remains the key component that will drive widespread adoption of Cxbladder. Looking at our financial results, we have been pleased to see that the momentum in the second half of the last financial year has continued with good growth in test volumes, resulting in increased sales and cash receipts.
This is particularly pleasing given the resurgence in COVID-19 restrictions. As this eases and access improves, we expect to see a further positive impact on our business. For the first six-month period, Pacific Edge reported an uplift in revenue of 66% compared to the first half FY 2021, offset by increased costs led by investment into sales and marketing, resulting in a net loss after tax of NZD 9 million, an increase of 27% on the prior comparative period. The recent capital raise of NZD 103.5 million has significantly strengthened the company's balance sheet. As at 30 September 2021, net cash equivalents, and short-term deposits were NZD 91.6 million. This excludes the NZD 23.5 million raised in the retail offer that was completed post-period in October 2021.
We saw strong growth in test numbers compared to the preceding half years. Total laboratory throughput increased 62% on the first half year and 24% on the prior six months period to total 11,136 tests. Commercial test volumes increased 64% on PCP and 24% on the prior six-month period to 9,192 tests. Our commercial test volumes accounted for 83% of total laboratory throughput, up from 82% in FY 2021. The U.S. continues to maintain its importance in our commercial success, accounting for 81% of both lab throughput and commercial tests. If we look at lab throughput by test type, Cxbladder Detect continues to be the most popular test in the U.S.
This is to be expected, with Detect being the first test launched in the United States and also one of the two tests included in the LCD. As we grow with Kaiser Permanente, we expect to see a similar test use pattern as is being seen in New Zealand with a dominance for both Cxbladder Triage and Cxbladder Monitor, the two products that they have adopted. I'll now pass you across to Grant Gibson, our CFO, to discuss revenue growth and expenditure.
Great. Thanks, David. Total revenue for the half year increased 66% to NZD 6.7 million, and this includes grant income. Operating revenue from Cxbladder sales increased by 62% on the first prior comparative period to NZD 5.4 million. This record result reflects the increased continued positive impact from the commercial milestones achieved in the first half of 2021, particularly the LCD inclusion for Cxbladder Monitor and Cxbladder Triage from July 1, 2020, as well as growing adoption and use by urologists and healthcare organizations. The cash receipts from customers increased 110% to NZD 5.4 million, reflecting the positive impact of cash reimbursement from CMS and increased volumes. Operating expenses increased 41% as we invested for growth, and especially into sales and marketing efforts in the U.S.
Our laboratory costs are a variable cost that have increased in line with our test throughput growth. Research and development costs have been lower than budgeted, with patient recruitment for our clinical studies hampered by COVID-19. Again, we would expect normal levels to recommence as COVID-19 restrictions are eased. The biggest increase in expenses have been from the investments in the sales team, with an additional 12 sales reps, as well as marketing and support costs. Finally, our general costs are up, mainly as a result of investment into people capability and costs relating to our ASX listing. I now hand you back to Dave.
Thank you, Grant. The U.S. market remains our primary focus, and looking forward and beyond FY 2022, we expect continued growth despite COVID-19, driven by our beefed up sales team, our push into institutional and large national accounts, and the start of our commercial journey into Australia and Southeast Asia. Our rest of world markets, being New Zealand, Australia and Southeast Asia, are markets of strategic importance, and we have commercial plans tailored for execution in each market depending on its commercial maturity. New Zealand has led the world with the adoption of multiple Cxbladder products and is being seen by the global urology community as a new way to improve patient outcomes while lowering the cost of detection and management.
The results from the clinical trials in Singapore are on track for publication in early 2022, and will form the basis of our planned commercial rollout in Southeast Asia, which is expected to become a market of scale for Cxbladder over time, with an accessible population base similar to that of the United States. In Australia, customers have continued their user programs during FY 2021, with the expectation that on successful conclusion, they will progress to commercial customers. We have a positive outlook for FY 2022 and beyond, and are well-positioned to capitalize on the opportunities available to our company. The objective for us over FY 2022 is to continue the growth of our revenue and increase the relevance of Cxbladder products by putting our products into the hands of physicians to make a difference to patients' outcomes.
Our challenge has been to adapt to the new operating environment dictated to us by the global pandemic. Our focus in the U.S. is to scale the use of Cxbladder by Kaiser Permanente and other large healthcare organizations, and to grow our direct sales force to drive sales. We will be actively seeking to increase reimbursement coverage for all of our Cxbladder suite of products and achieve a positive shift in guideline inclusion language following the publication of new clinical utility units for Cxbladder. Our growth momentum over the last six months, despite the ongoing headwinds from COVID-19, confirms the validity of our global growth strategy and our market tactics. We have a committed and experienced team with significant funding in place to allow us to scale and to continue to deliver revenue growth and value creation.
We are confident in our future and the actions we are taking now are positioning us to accelerate our growth trajectory once COVID-19 restrictions ease. Thank you for your time this morning. I'm going to hand now over to Chris Gallagher, the Chairman of the Board, who'd like to say a few words. Thank you, Chris.
Thanks, Dave. Before we do take questions, I can't let the opportunity go by without acknowledging the contribution of David Darling over 19 years in the development of Pacific Edge. This will be David's last results presentation, and I'm sure he'll miss these as he goes forward into retirement. He's leaving the business on a very strong platform to accelerate the growth of the business, particularly in the U.S.A.. A particular welcome as Dave heads off into retirement next year to Peter Meintjes, Dr. Peter Meintjes, our newly appointed CEO. We've secured a place for Peter and his family in MIQ, and he will be starting in Dunedin as the Chief Executive Officer in mid-January.
Dave, on behalf of the Board and on behalf of investors, I'm sure there'll be more farewells to come, but we couldn't let this opportunity going by without saying thank you for 19 years of commitment, passion and leaving a business in a great place to really drive forward now, particularly into the U.S.
With that, I will hand over to the moderator to pick up questions.
Thank you. If you'd like to ask a
Thanks, Dave.
If you'd like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure that your mute function is turned off to allow your signal to reach our equipment. A voice prompt on your phone line will indicate once your line has been opened. Once again, that is star one if you'd like to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal. We'll take our first question from Chris.
Yep.
Go ahead.
That's fine. In the meantime, while we're waiting for people to come online, there's a couple of typed questions that have come through. I'll ask the first one. This one's from Kevin. Thank you. Can you provide an update on the current status of getting the second and possible third large healthcare provider in the U.S. in addition to Kaiser Permanente?
Thanks, Grant. Kevin, thank you for the question. I guess as you all know, we have a large number of institutional and national accounts on our priority list, and we're working with those accounts progressively. We're squeezing them through the pipe towards a greater commercial traction. Some are already using Cxbladder, and we're looking to get that widely instituted in the organization. Some are concluding their user programs. It's an ongoing process. Yes, it's a significant priority for us. While the current sales reps provide us with the revenue, institutional accounts provide us with the hearts and souls and minds of an institution that will commit to the technology. Those accounts require less maintenance from our sales reps on the ground.
I hope that answers your question.
Excellent. Thanks, Dave. Another question has just come in from Ming Yang. How much growth are we seeing from Kaiser Permanente despite the delay on the integration?
Thanks, Grant. Kaiser Permanente launched their commercial process in December last year and have been progressively rolling out across the organization. The key thing for the organization is to ensure that the user experience from the physicians is top-notch, and that will really only occur when they are able to go into their systems and queue patients straight through to referral for treatment and management, which includes the use of Cxbladder. When they go back into that system, they expect to see the results all laid out for them. Until they see that, you know, and if they don't see that detracts from their user experience.
While they're growing, we don't expect to see, you know, rampant growth from Kaiser until they've finished the commitment of the resources to integrate the coding to make that happen. It's promised to us, it's on track, but it's taking its time to get done. Despite that, Kaiser Permanente launched their commercial use of Cxbladder Triage, which came well ahead of our expectations. They're loving the products and they're going well. Thank you.
Great. Thanks, David. The last one just before we open to questions from the floor. It's not a question, it's just a thank you from Andrew Otto, and he just wishes to pass on his thanks from him, thousands standing for your work over the past 19 years. Thank you, Andrew.
Thanks, Andrew.
Thank you. At this time, we'll take our first question from over the phone from Christian Bell.
Yeah. Hi, Dave, and team. I'd just like to firstly echo, you know, and acknowledge, this is your last call, Dave, as CEO, so congratulations, and, I'm sure you'll continue to be close by. I hope you enjoy that long-awaited hunting and fishing trip. I've just got a-
Thanks.
I've just got a few questions. Just noting, while your quarterly volumes have been increasing, so have the number of sales reps, obviously. Just trying to untangle that, are you able to please give us a sense of the monthly sales rate for your established base of 16 reps over the past two quarters? Even just the-
Thanks, Christian. We don't have those numbers with us here on this call, but obviously when we recruit a new sales rep, they can take usually between six and nine months before they hit the ground and generate any significant sales. Over that period of time, we've had people coming on from July right through to today. We're picking up another 12 people. They're progressively adding to that pile. You get an increase. You gain some sales from a new person, but you lose some sales from an existing sales rep because one of their key accounts has just closed and they can't get in the door.
You have a lot of to-ing and fro-ing, pros and cons on the numbers. We can talk to you in a follow-up discussion and give you a little bit more color on that if that's helpful.
Oh, yeah, that'd be great. I mean, like, I mean, just at a high level, though, would you say that, you know, your sort of established core of sales reps is probably more responsible for the uplift to date?
Yes. The core guys are the guys that carry the can, so to speak. They're the guys that have got the skill set. They also have the urologists that have adopted the technology, and they're the ones they go back to when times are tough. It makes it an easy sell, because those urologists continue to place orders, and you can manage them virtually. It's a lot easier for those existing sales reps to do that. We're buying ourselves some time for our new sales reps to get their feet underneath them, to get their accounts up and running and start contributing to the bottom line. We look forward to a strong last quarter of the year.
Okay, cool. Next question. Just, volumes for October and obviously November hasn't finished yet, but I mean, are you still continuing to see sort of monthly, month-on-month growth or?
Yes. You know, pretty much the same pattern. You know, the ups and downs of COVID and the integration of these people as previously described. We're with a fair wind from COVID, we're tracking quite well. We're very comfortable with where we're tracking things, Christian.
Okay, cool. Next one. So for the payers that are already paying for Cxbladder, just noting you've got some of the other big names that are paying, but they haven't given a reimbursement coverage decision yet. Whereabouts are they in the process? And do you have any idea why some of the other big ones haven't followed United Healthcare? Yeah. Are you able to sort of talk to that?
Sure. Yeah, that's a tricky one. These healthcare providers and the payers generally have their hands full during this COVID window. We have no visibility on how they're progressing. Internally, they have their own internal evaluation teams that carry out their evaluation and provide an outcome that they usually pass on to the market as soon as they have concluded that decision. We'll just expect to see them when they turn up, Christian. They'll continue to travel through the pipe. It's a very contestable area. A lot of competition out there for an individual person's insurance dollar. If you can gain an advantage in your insurance plan by having access to better, that's a marketable opportunity.
That provides quite a positive pressure to get these guys to conclude positively in our way.
Cool. Just, are you able to sort of say who would be the most progressed next client that you've been working with? Like, who's the most, the next sort of closest in healthcare provider, who's the most progressed?
No, you can't really, you can't really determine who that's going to be because, you know, you can be actively engaged with one organization, and then in the background, an organization can be concluding their internal discussions, seeking sign off from their tech boards and their medical boards, and then all of a sudden they're through the window, so they can come at you know, completely unseen, so to speak. All we know is that we continue to work with them and address their needs and hopefully, we'll get them through, you know, as fast as we can get them there. Tough question to answer.
Do, do-
Yeah.
Do you sort of expect at least one in the next six or 12 months, or?
Look, we couldn't tell you. Sure, I mean, they could come at any time.
Okay, cool. Just one final one from me. Just in the presentation, you said you were expecting to be at 30 reps by the end of November. We're kind of near the end of November now. Is that sort of true now, those 30 reps operating?
There's a couple in the pipe right now as we speak. On track.
Okay.
On track, yeah.
Okay. Great. Okay. We can kind of assume that we will be at 30 by the end of the month.
Correct.
Cool. That's all from me. Thank you, guys.
Thanks, Christian.
Thank you. We'll take our next question from Matt Montgomerie with Forsyth Barr.
Hi there. Can you hear me, Dave?
Yeah. Thanks, Matt. I can.
Yeah, firstly, echo Christian's comments and well done on the tenure at PEB and best of luck for the future. Maybe if I start off with just backing on that last question. The expectation for sort of 30 reps at the end of November. Would you expect growth through the remainder of the year? I previously remember that was potentially 30 at the end of FY 2022, but if we're there at the end of November, just wondering if you'd expect further growth for the few months.
Yes. Matt, we do expect growth from these people, but what you can't predict is just how quickly they come online and how quickly the sales region that they're in is impacted by COVID. There's quite a big confidence interval around expectations there. Yes, the whole goal of bringing them forward was to gain more traction as quickly as possible to bring particularly with these two new sales regions. Two new sales regions take quite a lot more work to get your first urologist up and running.
That's you know a challenge that we wanted to get onto early and try and get as far down the track as we can before the final quarter, which you know we'll be clear of Thanksgiving, clear of Christmas, and that last quarter is usually quite a strong one as soon as we get clear of the Christmas window. Right now we're in the grip of three days of holiday for Thanksgiving in the U.S.
Maybe this was covered in the presentation, but just on the Kaiser systems integration. Just wondering if you could shed any light on timing, where we could get some sort of completion or clear run and if there was any sort of material contribution in the half from Kaiser.
Yes. Kaiser continued to contribute, right from the get-go in December. But we really do need their resources coming back online, and we had at one stage all four of our programmers coding for the integration of our software directly onto their platform. They use an old EMR system, and it's called Epic, but they modified it heavily. We use a third-party integrator to help us do that. We had 10 coders on the third-party integrator, and we had about 10 in Kaiser working on it. Then the Kaiser guys got pulled, and so there's one remaining step, which is to conclude the small amount of coding that's left. Then, as a separate team of people who validate the coding before they'll go live.
As you can appreciate, plugging anything into a medical record system is a challenging event for an organization. It's particularly one of the scale of Kaiser Permanente. We have been very patient. We've learned to be very patient with Kaiser. We know we'll win. We know that they love the technology. We know the technology is doing great things for them. It was great to see them move forward quickly on to Triage. Triage was always their initial goal. They wanted to get to Triage. They wanted Monitor as well because of a number of urologists felt that that was where the their particular challenges lay. They started with Monitor and have moved quickly to Triage. On an upward, we just need to get this one event sorted and we'll be all right.
You know, things are easing on in California. Hopefully, we'll get those resources reallocated to the project, and we'll conclude in terms of their timing. That's it.
Great. Maybe lastly, just on the back payment for the CMS tests, just any insight into conversations around that or any changes there, or if it's more similar to what we've seen historically?
Yeah, it's just a long squeeze, that one. You know, we've got to be cognizant that we work with both the medical contractor who manages our CMS relationships and also the national office in order to get this through. It's a technical minefield. It's taken a long time. They generally are a long burn, but you know, we don't account for this in any way other than, you know, if we get some upside there, that would be just icing on the cake. We'll let you know as we progress whether we have any success there.
Great. Thank you. That's all from me.
Thanks, Matt.
Thank you. At this time, there are no additional questions over the phone. However, once again, that's star one if you'd like to ask a question. It appears that we have no additional questions in the queue at this time.
All right. Thank you very much. I would like to conclude this presentation and discussion session on the 1H 2022 results for Pacific Edge. Thank you all for your attendance and we look forward to talking to you again soon.
Thank you. That does conclude today's conference. We do thank you all for your participation. You may now disconnect.