All right, good morning, everybody, and welcome to the Pacific Edge 1H Financial Results presentation. I'm Pacific Edge's CEO, Dr. Peter Meintjes, and with me today is Grant Gibson, our CFO, and available online for questions is our Chairman, Chris Gallaher. Just an important notice to take notice of when considering the information in today's presentation. Our financial results for this half are below our expectations. We ran fewer tests than we had desired. We ran fewer commercial tests than desired, and our operating revenue is down. However, we maintain that we are in the strongest strategic position yet, and despite a net loss of $19.1 million and cash of $22.1 million in the bank, we want to highlight for investors the importance of the strategic milestones that we have managed to achieve through this half.
We have managed to do this maintaining a U.S. market presence to position ourselves to successfully appeal Medicare tests and commercial tests. While there have been some challenges associated with non-coverage determination being the predominant feature of operating in the market, and we have had to migrate our customers from Triage to Detect, our U.S. sales per FTE has maintained, our sales force efficiency has been maintained, and we are operating as well as we can under the circumstances. Most importantly, though, we have an expert Contractor Advisory Committee, a CAC or a CAC, that has been convened by Novitas for February 19 in 2026. This acknowledges the weight of the evidence behind urine-based biomarkers for hematuria evaluation in general, of course, driven by the evidence portfolio of Cxbladder.
We also in the half achieved an absolutely critical milestone with longer-term economics for Triage Plus being locked in at $1,328 per test, a significant uplift from our previous $760 per test for the prior generation. Given this market position, though, we are considering capital alternatives to meet longer-than-expected Medicare recovery timeline. We wanted to remind all our investors of how Pacific Edge creates value, and specifically with adoption, retention, and revenue generation, evidence coverage and guidelines, and research and development. Because while our adoption, revenue, and retention, and revenue generation is somewhat down, we continue to be market-leading in the performance of our evidence coverage and guidelines, and we maintain our strength in development of new products within our research, development, and innovation.
In fact, we have the strongest position we have ever had, and we are in the strongest position we have ever been in to drive Medicare policy change. The importance of the Contractor Advisory Committee cannot be understated. Since 2020, or between 2020 and April 2025, Pacific Edge had reliable reimbursement from Medicare, but no coverage policy with coverage policy language explicitly documented at Novitas. While that was good for revenue growth in our business, and the subsequent non-coverage determination has obviously been a challenging headwind for us to navigate, it will become a defining change for Pacific Edge to have positive coverage language and actual positive Medicare policy change as a consequence of the Contractor Advisory Committee. These Contractor Advisory Committees are generally convened ahead of developing new or substantially revised medical policy, an LCD.
It is worth noting, given that our current status is non-covered, we expect that a substantially revised medical policy would lead to a coverage policy after considering all of the evidence. Of course, this has been precipitated by two things. One, the strength of our evidence from our strata study, and two, that the strata study has already been recognized as something sufficient to drive policy change with the AUA guidelines. That allowed for the biomarkers for the first time to be used for microhematuria evaluation. The purpose of a CAC is to discuss evidence for the use of urine-based biomarkers in patients with microhematuria. Given the recent published evidence for Triage Plus, we expect that Triage Plus will also be considered as part of that Contractor Advisory Committee in February.
The people who make up the Contractor Advisory Committee, and I look forward to questions on this later, are healthcare professionals, beneficiary representatives, and representatives of medical organizations. Pacific Edge has been given the opportunity by engaging with Novitas to nominate urologists that we believe are familiar with the latest evidence for urine-based biomarker testing for patients with hematuria. Among those are many of our clinical advisors who are familiar with Cxbladder specifically. The meeting date is set for the 19th of February at 6:00 P.M. East Coast Time, which will be noon on Friday, February the 20th in New Zealand. As we look to our evidence roadmap, evidence generation roadmap, the top four studies have been highlighted. That highlight represents that these are all new publications that have not previously been considered by Novitas.
We expect that all of these can be considered firstly by the CAC and then in the creation of or in the creation of draft policy, but ultimately in the final policy as it is developed. One thing that has changed is we have historically reported in this view the study from Kaiser Permanente, but we have separated out the publication timelines for our core evidence that is internally developed and independent studies like the Kaiser study. You will see that on a later slide in this presentation. Looking at the following slide, this is one of key significance to many investors. This is management's best understanding of the timelines that Novitas is operating under, given the information that we have. Of course, acknowledging first that we have had a Medicare non-coverage determination for triage, monitor, detect, and Triage Plus since April 24 this year.
That was on an evidence review that was limited to evidence published prior to the 9th of September 2023, which at this stage is very stale evidence on which to have based a decision. Pacific Edge has submitted reconsideration requests of what's known as genetic testing for oncology-specific tests, L39365, for triage and for monitor. Pacific Edge has submitted a new LCD request for hematuria evaluation for triage and Triage Plus. This is important regardless of whether Novitas elects to make a change to 39365 or establish a new LCD. The critical distinction between prior reliable reimbursement with the absence of any positive policy and what we are trying to achieve through a CAC and draft LCD language is the establishment of a clearly articulated language that supports the appropriate use of non-invasive urine-based biomarkers, for example, triage and Triage Plus in the evaluation of hematuria patients.
No prior policy exists for that, and that is one of the reasons that Novitas is following this robust approach in using a Contractor Advisory Committee. Novitas controls all the timings of these events. While from our perspective, announcing a CAC to convene on the 19th of February is a delay from our prior expectations, given the robustness of the process, this is something that we see as tremendously positive because of the increased certainty in medical policy change that we expect to come from convening a CAC. Furthermore, evidence published after the Contractor Advisory Committee can also be submitted during the comment period. Those studies highlighted in yellow, that's not the limit of what can be considered for the coverage policy. That's just the limit of what can be considered during the Contractor Advisory Committee.
Our independent studies also supplement our primary evidence generation portfolio, the most important of which is the real-world utility study of triage and microhematuria patients at Kaiser Permanente. We also wanted to highlight that some of our investigator-initiated trials have been part of a program of work for the last two or three years. The first one of those is reaching maturity. It's going through peer review at the moment, and we are optimistic that it will publish in Q1 2026. This is evidence that is not necessarily—actually, I'll retract that. The first of these, the one from Kaiser Permanente, is extremely relevant in the changing of medical policy for an organization like Novitas.
The patient preference, for example, is less likely to sway organizations like Novitas that are extremely influential in helping physicians adopt our test for our sales force because we are able to make it very, very clear that patients actually prefer to use our test when offered the alternative. That is somewhat of a no-brainer. The difference between an invasive procedure and a non-invasive procedure, patients typically prefer non-invasive. To actually show that with data will be a first-of-kind study, and that has been developed under the banner of our investigator-initiated trials. What you can see in the bullet points below, 74.2% preferred Monitor versus cystoscopy. Comparable diagnostic performance was shown. We expect this research to be published as an abstract for AUA 2026, and possibly before that will even come out in print.
Importantly, our budget impact models continue to demonstrate the economic value for Cxbladder. We've updated this slide to highlight the value proposition when performing this, when running a budget impact model using Triage Plus. Where with Triage, you were able to rule out, I believe, 78% of microhematuria patients. With Triage Plus, we're able to rule out 85% of hematuria patients. The greater number of patients that you can rule out, the greater value you are creating for hospital systems that deploy this kind of testing across the patient population that they serve. Again, importantly, this is not the end of the road for Pacific Edge in terms of developing budget impact models. We are targeting a publication for Triage Plus in FY 2027. We are targeting commencing work for a budget impact model for Surveillance Plus in FY 2028.
Also along the general theme of health economics and sustainability, there is a publication that we are working on with collaborators at the Canterbury Health System in New Zealand about the carbon footprint impact of implementing Cxbladder at primary care. Draft presentations at conferences have already been communicated. Talking about some of the numbers explicitly here, global commercial test volumes of 13,191 for 1H 2026 were down 10% on the 2H figures amid the challenges of selling a test that is not covered by Medicare. The reduced reach of our sales force as our sales force continues to shrink has been partially offset by a 5.4% uplift in Asia-Pacific. Our response to the Medicare non-coverage has been a very important focus for us in this half.
CX Bladder Detect is something that has not had new evidence generated for it for some time and is not included in the guidelines. Consequently, all Detect customers were migrated over to Triage, accelerating a plan we had hoped to implement at the time of launching Triage Plus with coverage. That has created some operational challenges as we do that. Nonetheless, that allows us to collect revenue on the Triage tests through the appeals process. The sales force continues to be focused on patients that are suitable for CX Bladder Triage, which are younger patients with commercial insurance and typically with microhematuria presentations. Our sales performance has been sustained from an efficiency standpoint in 1H2026.
The clinical commitment that we measure as tests per ordering clinician has fallen, reflecting the disruption of transition from triage—sorry, disruption to triage from detect and challenges of selling a test not covered by Medicare. We are well ahead of the low point we had in Q3 2022 of 160, and we've largely been able to maintain our sales force efficiency at 403 for this quarter. Our sales FTE are down to an average of 12 in Q2 2026 from greater than 30 as we continue to focus on cash conservation where prudent. Importantly, foundations for growth. We have U.S. cash collections processes continue to improve, although some loss of Medicare coverage has impacted our testing volumes. Denied triage tests will be appealed to an Administrative Law Judge, ALJ.
Given the guideline inclusion, we expect we can successfully make the case that Triage has been used in a medically reasonable and necessary fashion. Unfortunately, appealing takes time, but we are appealing over 2,000 tests to Medicare and commercial providers through external review. For Medicare, it takes six to nine months. For commercial payers, it can take longer than that, in excess of a year. Medicare tests completed in 1H that have been denied for payment have had no revenue recognized in this half, but we expect to recognize some revenue in the second half when we have successfully appealed them. There are measures in place to mitigate the loss of Medicare coverage, including enhanced patient responsibility, increased utilization of appropriate patient types through EMR integration, and improving the medical necessity documentation to improve the payment success that we have during billing and appeals processes.
Improved cash collections are typically permanent improvements, although we are in a situation with a non-coverage determination. Some of those things are challenging for the current half, but we expect a resumption of those improvements after we reestablish coverage. Consolidating New Zealand and developing Australia and APAC, we continue to seek a national hematuria evaluation pathway in New Zealand. We are working with local urologists and with Te Whatu Ora to affect that. In Australia and the Asia-Pacific regions, Southeast Asia is still in business development. We are planting early green shoots there. We are also working on a number of contracting arrangements with Australian hospitals, and we hope to have some non-material announcements about progress in that area in the coming months. We also continue to drive value through product innovation.
Our next generation of tests is our major focus of the research, development, and innovation pillar, and specifically the development part of that. We've been working very hard on Triage Plus and Surveillance Plus. Triage Plus has been analytically validated and clinically validated for all hematuria patients, micro and gross hematuria patients. That's a broader indication than for Triage and a broader indication than what the guidelines currently support. This bodes well for an expanded patient population as and when Triage Plus—well, as and when we complete our credible study for the utility of Triage Plus. It also has a higher price. That price is still in draft, but is expected to become final within the next few days and effective on, sorry, January 1 next year.
It is currently being run in early access with a select few customers, and we are leveraging the AUA guideline for triage in appealing Triage Plus tests as well. With Surveillance Plus, we are looking at recurrent disease in non-muscle invasive bladder cancer patients. The product is still in development and is the improvement over the Monitor product that we currently have. Surveillance Plus has deviated from Triage Plus through the development process. This is, of course, expected as they serve a different patient population, and different markers are informative. The work that we've done internally has demonstrated to us that the DNA markers from the ddPCR are more informative than the RNA markers that we historically used in Cxbladder Monitor, to the point that we can actually exclude the RNA markers from the final product.
We have taken that product through a freedom to operate, which has been completed satisfactorily and gives us the freedom to operate. We are taking it through a provisional patenting process. We are also seeking a technology crosswalk for Surveillance Plus to a test that has a $1,800 price point in the Medicare fee schedule and are hopeful for a claim-by-claim reimbursement because there is no coverage, there's no non-coverage determination for Surveillance Plus. Our expected path is to get it coded, get it priced by crosswalk to the candidate mentioned here, and then to initiate claim-by-claim reimbursement until a local coverage determination incorporating Surveillance Plus is developed. That we expect to take a number of years.
We have not put specific timings on that, but that is the future state that we imagine for our business with Triage Plus for the risk stratification of hematuria patients and Surveillance Plus for the surveillance of non-muscle invasive bladder cancer patients for recurrence. I wanted to also highlight the importance of the DRIVE study. The DRIVE study has been referred to for a number of years. It was started as far back as 2019. It began enrolling and enrolled largely, well, entirely from veterans' population. The study confirmed the superior performance characteristics in both gross hematuria and microhematuria for Triage Plus over our existing tests. It also works on a broader range of hematuria patients as established in the clinical validity.
Hopefully, we make clear in the diagram on the left that while the AUA guidelines recommend triage for a narrow patient population, and that's based on the STRATA evidence, the STRATA evidence itself actually covers patients that were in the low-risk group, the intermediate risk group, and the high-risk group. The STRATA study can be used to justify using triage in any of those risk categories for microhematuria. The DRIVE study has validated Cxbladder Triage Plus for all of the risk categories of microhematuria and the gross hematuria patients. The broadest range of patients in hematuria evaluation. We remind our investors of the opportunity that we are chasing here. With the increase of our test price to $1,328, we've increased our estimate of the TAM in the U.S. while maintaining the TAMs for APAC and Europe constant.
It is a substantial TAM at full volume of $10.8 billion. Specifically, we are targeting the patients that are referred for clinical workup. That is how we determine our TAM. Using Triage Plus for the intended use at the point of being referred for clinical workup gets us the largest possible TAM. The evidence we are generating is for that. We are also looking to expand our market opportunities with innovation at the product level. For this, we have made clear for investors that we are pursuing an IVD product that is a simplified version of the assay that we currently run as a service. Over time, we will be able to simplify the product, simplify the service to the point of being able to put it in a kit and allow labs other than Pacific Edge in appropriate jurisdictions where we have sought.
We've completed all the product registration and market access initiatives to be able to run that test in clinical routine. The benefits of this approach are that IVDs can be run by any accredited lab partner in any geography. The customer-side logistics are easier, faster, and customer service is local. Lab partners make a margin by running the IVD test, which increases their enthusiasm and motivation for sales and marketing efforts in their territory. It is a decentralized deployment, which allows faster scalability, and we need to focus on scaling our logistics. The clinical operations can be scaled very dramatically by working with established partners in the region as they focus on customer acquisition.
The work that we're doing, Pacific Edge is simplifying the tests and accelerating the development of an IVD called Triage Plus IVD for decentralized lab deployment and international market expansion with the key objectives of, one, establishing an IVD regulatory framework for our next generation tests that include Europe, FDA, and ISO 3485 for the rest of the world. We are targeting prototypes by the end of fiscal year 2026, manufacture and commencement of clinical and analytical validation commencing in fiscal year 2027. We'll now turn to Grant for our financial performance for the half.
Great. Thanks, Peter. The first half, our operating revenue was down to NZD 5.9 million from NZD 10.9 million in the second half of 2025. All that reduction is actually from the U.S. market.
As Peter mentioned, the loss of the Medicare coverage has meant that tests post-24th of April have not been accrued or included in revenue. We will only recognize revenue if we are successful at the ALJ appeal level, which, as Peter noted, is going to take six to nine months for us to be able to recognize those tests if we are successful. Volumes have also been impacted by the disruption caused by the loss of coverage and transitioning clinicians from the previously dominant test in the U.S. market to triage. We have also had reduced sales FTE as we have looked to manage our costs through this time. With the drop in the U.S. revenue, APAC has contributed 15% of the revenue for the half, up from 8% in the second half of FY 2025. We continue to maintain a U.S. presence that positions us for an affirmation of Medicare coverage.
We're reducing operating expenses where possible. In the second half of 2025, we actually dropped our cost base by $5.9 million in the first half of this year. As we continue to focus on expenses where we can reduce them where possible. Our operating cash flows of $19 million were higher than the $12.3 million in the second half of 2025. We do note that cash outflow in the first half of the year is generally higher than the second half, with payments covering a 12-month period weighted towards the first half. As noted, we've also been impacted by the loss of Medicare coverage, and we expect to receive revenue for tests that we performed in the first half six to nine months after as we're taking through the ALJ appeal level.
Cash at the end of the half was NZD 22.1 million, and we did a capital raise of NZD 20.7 million in August 2025. As Peter has noted, though, with the delay of the recovery, we expect that we will need to complete capital initiatives and/or reduce cash burden, and we're in the process of considering options. Our operating expenses were down 5.9% in the second half. Of those, the lab costs were down approximately 10% based on lower test volumes. Our research costs were also down 4.5% as some of the clinical studies come to an end and the costs related to those start to reduce. Our sales and marketing were down 9% as we managed our FTE in the U.S. market to ensure that we were approved with our operating expenses. General and admin costs were up 3.4%.
We had some late legal fees relating to efforts to overturn the Medicare loss of coverage in late fiscal year 2025 that come into this first half. I'll pass you back to Peter.
Thanks very much, Grant. As we look forward, from my perspective, it's extremely important for investors to understand that Pacific Edge is in the strongest strategic position that we ever have been. My conviction is underpinned by a number of long-term value creation notes here, medium-term value creation, and near-term. In the long term, the price increase that we have for Triage Plus provides us with extraordinarily improved economics. As that test becomes our dominant test, when it has successfully achieved coverage, we are in a vastly different operating position than we are today and than we were when we had a $760 price with increased margin and margin percentage.
Surveillance Plus, while in development, is also seeking a direct technology crosswalk to a $1,800 price point based on its final product configuration. That, we think, is a very important long-term consideration for generating value for investors. Our continued investment in innovation and product development for IVD kits supports our ambitions to enter international markets and to adopt a decentralized deployment model. That remains a focus of us in a smaller capacity, but is something we continue to try to activate. In the medium term, the drive publication provides the clinical validation of Triage Plus that we believe is sufficient for inclusion alongside other tests in the AUA guidelines and is sufficient for Novitas to make a positive coverage determination. We are delighted that that has been published in time to be considered firstly by NACAC and secondly when Novitas begin to draft policy.
Our clinical evidence generation program is scheduled out for over four years to deliver strategic milestones that will deliver sustained value creation for shareholders with multiple catalyzing events. AUA guideline inclusion demonstrates that the success of this strategy can be repeated to expand the indications for existing products and establish new indications for new products. In short, we know what it takes to get a product included in guidelines, and we expect of ourselves to be able to do it again. Commercial headwinds, acknowledging that there remain some commercial headwinds, is important. There remains a non-coverage determination for Triage, Detect, Monitor, and Triage Plus, and it creates challenges for our sales and marketing teams in their operating environment and additional challenges for reimbursement.
We are doing everything that we can from an appeals standpoint and doing everything that we can to convince customers of the value of the test despite the Medicare non-coverage determination given the AUA guideline inclusion. The convening of the Contractor Advisory Committee is a major catalyst for forward-looking policy. Specifically, as I mentioned before, it'll be the first time that there will be coverage policy language that would be proposed by Novitas, not just paying for our tests on a claim-by-claim basis. That provides us with the greatest certainty of enduring coverage from Novitas, but also the greatest ability to improve the success percentage of being paid on Medicare Advantage tests and for commercial payers. The commercial catalysts for near-term value creation, the AUA microhematuria guidelines are an enabler of sales, marketing, and reimbursement activities.
Because of the language associated with triage and the language associated with intermediate risk patients, we have to re-educate our customer base, and that has proved to be challenging, at least initially. We are continuing to work on that. We are continuing to seek payment from Medicare for all triage tests performed on Medicare patients through the Medicare appeals process relying on the AUA guideline. We are doing the same through the external review process for commercial insurers. We also expect through the efforts that we've made in digital development to increase the percentage of electronically ordered tests. That, of course, is expected to lead to stickier customers and more reliable payment over time. As mentioned earlier, Cxbladder is under consideration by Te Whatu Ora for a national pathway in New Zealand.
We're optimistic that we will learn something in FY 2027 about the status of implementing Cxbladder in that national pathway. We thank you for your time, and we look forward to taking your questions.
Thank you. At this time, I would like to remind everyone on the phones, in order to ask a question, please press Star, then the number one on your telephone keypad. To remove your question, press the Star one again. If you are called upon to ask a question, please pick up your handset and remember to unmute your device. Today, we do ask you please limit yourself to two questions and then rejoin the queue to accommodate as many questioners as possible. Your first question comes from the line of Rob Morrison of Craigs Investment Partners. Please go ahead.
Hey, morning, guys. Congratulations on getting Novitas to open that committee. Looking forward to a positive result from that. On the call and in the documentation, you speak about the options available to you include raising capital and/or burn reduction. Have you reduced your burn so far in the second half?
We have made modest reductions to our burn. I think, as Grant highlighted, we actually do expect that there are a number of expenses that are front-loaded for the year, and we expect the second half to have a lower burn rate than the first half, yes.
Okay. It will not be something like, so the cost base in the first half was NZD 26 million. You would not expect that to half. It might be down, I know, like low tens of percentages.
We would not expect it to half, yes.
Okay. Cool. You have given best and worst-case scenarios for recovery, which look to be between June and September quarter 2027. Could you give us a bit of a flavor for the assumptions behind that?
Yeah, absolutely. From our perspective, it always feels like Novitas is acting very slowly. The reality is, in March 2025, they had a change in personnel. A new person joined in May, which was a month after we lost coverage. Since being newly appointed in the role, it has been less than six months of non-coverage and less than six months of a new medical director at Novitas to actually get Novitas to initiate a CAC. It would have been great if they could have scheduled that CAC for November, but they did not. They scheduled it for February.
While that is a prima facie delay in timelines, that's the greatest level of confidence that we have ever had in forward-looking policy. I think from Novitas's perspective, they would consider how quickly they're acting to be very quick, whereas from our perspective, it feels very slow, particularly since we have a high burn rate. Past the CAC, there is no commitment to the timeline. We are clear that these are management estimates. The assumptions in why we think it might be on the shorter side are that they have restricted the Contractor Advisory Committee to the microhematuria guideline and tests that fit into that, which is very narrow. Consequently, the policy that they could develop would also be narrow, and the number of products that they would have to consider would be relatively narrow.
The AUA research team have already done the research and created the guidelines, so they have a step up. From the 20th of February, we estimate it would be around three months for them to develop draft policy and publish it because of the narrow scope. If it was a broader scope, we think they would take longer. That is one of the main assumptions. We also believe that there is a lot of pressure from the AUA, and that pressure from the AUA will also encourage Novitas to act quickly, but within the bounds of the process they are obligated to follow as outlined by the program integrity manual. Once draft policy is published, it would then be 60 days of notice and comment. Anytime after they have successfully considered all of the comments, they could then publish with 45 days of becoming effective.
We think that they are motivated because of the aforementioned factors, the narrow scope, the pressure from the AUA, and ongoing dialogue that we have with them in formal situations that we think that they could act quickly. Nonetheless, we paint the worst-case scenario for our investors out of an abundance of caution and acknowledge also that even after the CAC, there is a non-zero chance that they do not develop policy at all. We consider that to be extremely unlikely, but Novitas does control that.
Okay. Just to read that back to you. The committee will happen in February, three months to draft the policy and publish it. Then there is kind of a year in there for various other processes that need to occur based on your conversations with Novitas.
Yeah. I would point you to slide seven of our deck, the Medicare Recovery and Estimated Timelines. We are estimating Q3 to Q4 of 2026. We are highlighting that, and that's based on those assumptions that Novitas is under pressure to act quickly and has the information they need to act quickly given the CAC formation and the narrow scope. We also note for investors that it could be between Q2 and Q3 that they, given that it is 12 months after when they open.
Okay. Thanks, guys. I'll jump back in the queue.
Before we move on to the next question, a reminder, if you would like to join the queue, please press Star one now. Your next question comes from the line of Matt Montgomery of Forsyth Barr. Your line is open.
Hi, guys. Good morning. Just on your language, Pete, in terms of the CAC meeting, it's coming across extremely positive in terms of the likelihood that you think there'll be a recovery decision. I'm keen to double-click on that a little bit around, is that extreme positivity coming from precedent around CAC meetings, or is it coming from direct conversations that are being had between you and others in the industry?
Oh, look, it's coming from multiple sources, but probably the most relevant one is just the facts that are specific to this situation. The facts in this situation are that there is a guideline that recommends the use of our products and others for hematuria evaluation, and there is no policy at Novitas for hematuria evaluation.
This has practicing urologists and the entirety of the AUA quite frustrated, confused, annoyed, insert your preference there, that they are unable to use guideline-recommended testing on their Medicare patients without having to go through extra administrative procedures, etc. They basically believe that Medicare should fall in line with what urologists have recommended. When we think about it, that is one set of facts, that there is a guideline. There is also the evidence for Triage Plus as well. Then there is the non-coverage determination. If you have a non-coverage determination and the purpose of a Contractor Advisory Committee is to make changes to policy, you are going to be changing it from a non-coverage determination to something else.
While we cannot rule out that it will change, that it will just change the language and still be a non-coverage determination, the overwhelming odds are that when you have clinical utility data, guidelines, and physician opinion in a Contractor Advisory Committee saying, "We want this test. We need this test. This is how we want to practice medicine," that's what the result needs to be from Novitas.
Now, what is Novitas's job in this situation? It's not to tell urologists no. Novitas's job is to figure out the appropriate policy so that only the appropriate patients are getting the testing and insurance, and they are only paying for when appropriate patients are getting the test. It moves from an if to a how. Does that make sense? And does that answer your question, Fuller?
Yep. No, that's a good response. Thank you. Then secondly, going back to one of Rob's questions, I was wondering, Grant, if you could give us guidance for second half OpEx. Presumably, you've got pretty good foresight on it, given that the CMS changes won't be coming through in the second half. Clearly, the rope for cash is relatively limited at the present time. I assume you've got quite structured plans in place for the second half.
Yep, we do. We've got to continually balance that, though, with the expectation of reaffirmation of Medicare coverage. If we do cut too deep, it'll take a long time to get us back, and we don't believe that that's in the benefit of the long-term value of the shareholders. It is a continual balance.
You will see, though, that if you look at our FTE numbers in the U.S., we have reduced our sales presence in the U.S. We are looking at other areas where we can continue to reduce costs, but I won't actually put a figure on that, Rob. Matt, sorry.
But it'd be fair to assume that, yes, it'd be fair to assume the decline will be relatively small then on that basis.
Yeah. As Peter mentioned before, it won't be halving or anything of the expense base. We need to maintain a strong presence in the U.S. ready for recovery.
Yeah. A lot of the support that we get from the AUA is essentially contingent on maintaining a presence in the market commercially and fighting the fight together.
Yeah. Yep. And then one more on sort of the non-CMS U.S. price. It looks like it collapsed or fell quite meaningfully in the half. Could you just sort of talk through this and then what the CMS contribution was in the half in the very short period in April that you had coverage?
Yeah. I do not think your classification is actually correct. The Medicare dropped to basically zero from the 24th of April. It was like the tap got turned off when the non-coverage came through. Other reimbursement has been reasonably strong and continuing to increase. As Peter mentioned, we are focusing more on commercial payers as that patient mix moves more towards the triage intermediate risk. We are working on growing the revenue from those commercial payers as well. Medicare is the big story in our reimbursement mix that has dropped to basically zero until we go through these ALJ appeals.
That is right. The last thing that Grant said there, it's like it has dropped to zero. We cannot confidently accrue until we have developed a pattern with the ALJ, and we have yet to have an ALJ scheduled. The government shutdown, we do believe, has delayed some of the scheduling here, but we have probably half a dozen or a dozen tests that are ready for scheduling. We do not have that yet. We anticipate to have at least some success that we can point at. While we have modeled for ourselves zero success at the ALJ because we believe it is responsible to do so, we actually expect on the basis of the fact pattern that evidence up until 2023 was the only thing that was considered in policy that went into effect in 2025, when in 2024, there was a randomized control trial that was ignored.
There was an additional analytical validation that was ignored. Earlier in 2025, there was a guideline that was created on the basis of those pieces of evidence. We think that an Administrative Law Judge is going to understand that fact pattern and find in our favor. Now, is that more work for us? Yes, it is. We are up for that challenge because we think we should have that revenue. Notwithstanding, even if we are successful at that, that does not ameliorate the operating challenges that we have in driving volume when physicians have to go to extra administrative lengths to manage patients when there is a non-coverage determination. It is just more admin, basically.
Just on the CMS mix, I appreciate it's gone to zero since late April. If we sort of pro-rata the revenue from the first half of last year within CMS on the 24 days that you had coverage, and then do the same for volumes, it implies that non-CMS U.S. revenue was sort of flat on the second half of last year. Strong volume growth, but I suppose the math is the math. The missing piece that I don't have is what the CMS revenue contribution was in 1H2026 to then sort of work it out. My estimate here is sort of a shade under $1 million. Yeah.
That does conclude.
Yeah. I don't think there's anything additional we can really give you on that, Matt. We don't break down. W e'll see if we can come with something. Yeah.
We can take it offline. We can take it offline. That's fine.
Okay. Thanks, Matt.
That does conclude questions by the phone. I would like to hand over for any written questions.
Great. Okay. Okay. Andrew, your first question was about the Kaiser study. I believe that's been covered in slide eight. That is going through the final stages prior to publication. That should be available for the CAC meeting. Next question from Andrew. The Novitas CAC, while it's very disappointing that the meeting pushes out the potential timeline for reinstatement of Medicare, is it reasonable to actually feel optimistic that Medicare coverage will be obtained? I believe we've answered that one. Given the clinical evidence, will the CAC meeting review the Kaiser study? Yet again, we've answered that.
Andrew, Triage Plus pricing in the U.S. At the 2025 AGM, Pete discussed that under the Protecting Access to Medicare Act, the pricing for Triage Plus will over time decline from the original technology and resources-based pricing down to the value-based pricing. Are you able to give any indication as to how long this initial technology and resource-based pricing will be in place and when the change to value-based pricing will occur? Is this change sudden or phased in over a period of time?
Great question. For Triage Plus, it is what's called a CDLT, a clinical diagnostic lab test, which means it is subject to panel review every three years. It is only subject to that review after it reaches a certain threshold. It will be a number of years before it crosses that threshold.
When it crosses that threshold, the math on this is something that I can sort of describe in general terms, but it'll be imprecise. It is available for people to go and do their own research on. You can roughly, it roughly approximates to the average of the private payers. It is also worth noting, though, it does not include zeros. If a private payer declines your test, that does not count towards your average. If a private payer pays for your test but pays you zero, it also does not count. You take the average of what private payers pay you, and then it becomes that. There is a theoretical situation in which it actually does not come down at all, particularly since our Medicare price is $1,328 and our commercial price is $3,995 a test.
What are colloquially termed Cadillac plans, they actually pay the full amount for that kind of test. So $1,328 in the context of genomic tests is not high. It is, we believe, a good price for the value that it delivers to the system based on the budget impact modeling that we have done. When we publish the budget impact model, we can be more precise. Sorry. When we publish the budget impact model for Triage Plus, we can be more precise about what value we deliver to the health system. We actually expect that it could rise as a consequence of value-based practices as well. That is totally possible and within the rules of PAMA. It only happens if private payers are paying more on average than less.
Given the low technology resources pricing we have today, compared to other genomic tests, it is also possible that that number goes up. Now, it is a long way away, and I do not think that this should be a significant part of anybody's model at this time.
Great. Thank you. Okay. Adrian, I am going to combine both your questions. You did ask on the second half cash burn, and we have provided answers that we can on that. Any capital initiative, is it likely to follow the tone of the CAC meeting in the 16th of February? How much would you be looking to raise? Is $50 million reasonable for additional equity to get you through to recovery? I do not think we can comment on any of the specifics that are noted in that question.
We do believe that the Contractor Advisory Committee, that that will be open to the public to dial in. The details will be on Novitas's website. When we have the details, we will likely make those available to our New Zealand audience because it's actually geo-blocked, their website, and you might not be able to access it. We will figure out a way to get those details through to our shareholders who would like to dial in. Again, we're anticipating an overwhelmingly positive Contractor Advisory Committee, but we will leave that to shareholders in the market to decide what they think from that language. Noting the timing, we will try to coalesce and condense everything that happens on that call and distill it down for our investors and our shareholders and provide a market update after the Contractor Advisory Committee summarizing our view of that.
But the other elements of your question, I can't comment on. Great. That's the end of the online questions. Thank you very much, everybody. That's everything for me today. Appreciate your time. Thank you, Grant. Thank you, Chris.
Thank you.
Thank you, Pete.