Thank you. Welcome everybody to Pacific Edge's Annual Shareholder Meeting today. My name is Chris Gallaher and I'm the Chairman of Pacific Edge. Hopefully the slides are following me, but there should be a slide now that says here is very important. We have a notice of disclaimer that will live up there for a second. Our directors are here mostly. We have Bryan Williams online from Melbourne. Tony Barclay is an apology today. His dad passed away on Monday. Tony's down in Dunedin. On my left, we have Anatole Masfen. Next to Anatole, we have Anna Stove. We have Dr. Peter Meintjes, our CEO. On my right, we have Sarah Park. Online is Bryan Williams. As it's now 3:00 P.M. and we have reached the quorum, I declare the meeting open. Today's meeting has been conducted both in person and online.
We're very pleased to welcome you here today on behalf of the Board, as well as those of you participating online through the virtual meeting platform provided by our share registrar, MUFG Corporate Markets. I'll provide you with further instructions as we progress through the meeting. If you do encounter any issues, please refer to the virtual meeting online portal guide or you can phone the helpline. For those of you in attendance here physically, can I ask that you please put your mobile phones to silent? Restroom facilities are located near to the door where you came in. If a fire alarm does go off, follow the directions from staff. We also, as well as directors, have, I neglected to welcome Grant Gibson, our Chief Financial Officer, who's down in the back. Our auditors, PricewaterhouseCoopers, are here and represented by audit partner John Dickson.
Our lawyers, Harmos Horton Lusk, are represented by Nathaniel Sterenberg. Welcome. The agenda will follow the notice of meeting that was sent out to shareholders on the 17th of July. Peter and I will both give short presentations, and then we'll take your questions as a panel before moving on to the formal resolutions of the meeting. After that, I hope you'll join us for some refreshments out in the foyer. The minutes of previous meetings held in this very room last year are available for inspection on request. I believe now we're at slide six. The financial year just ended has seen some significant strategic gains, one in particular that I will speak about, that have been overshadowed by the notification of our non-coverage by Medicare.
The year, the FY 25 year, was a year in which we achieved one of our most strategically important milestones with far-reaching implications for both the clinical adoption of our tests and long-term shareholder value creation. First of the milestones was the inclusion of Cxbladder Triage in the American Urological Association's microhematuria guidelines with the highest possible Grade A evidence rating. This has come at the end of a very long journey and has been on our to-do list now for the 10 years that I've been involved in the company. It's a fantastic milestone to have achieved. It's not only a major clinical endorsement, it's also a powerful validation of Pacific Edge's evidence generation, which has long been a core pillar of our approach to market development.
The AUA's decision to assign the Grade A evidence rating reflects the depth and rigor of the data that we have provided, particularly the Strata randomized controlled trial, which demonstrated compelling real-world utility for Cxbladder. This milestone serves as a reminder that our commitment to robust scientific validation of our intellectual property is a critical enabler of test adoption, payer recognition, and ultimately sustainable commercial growth. This guideline also reinforces our position as a leading provider of non-invasive bladder cancer diagnostics, establishes Cxbladder as a clinically preferred urine biomarker test for evaluating hematuria in the U.S., and strengthens the commercial moat around our business. Our second and also very important milestone was the receipt of draft pricing from the Centers for Medicare & Medicaid Services for Triage-Plus of $1,018 per test, which is up from the $760 of our current pricing for our current test.
This pricing reflects the enhanced performance of the test, the novel benefit for patients that arises from genomic risk stratification without the use of clinical risk factors, and stands to strengthen the commercial foundation for growth once coverage is secured. Of course, the year also saw a major setback. After a three-year process, the loss of Medicare coverage in April 2025 arrived on our doorstep, this injured reimbursement that accounted for around 56% of our FY 25 revenues. We were bitterly disappointed by this decision, particularly because Novitas did not evaluate the most current clinical evidence, including both the Strata trial and the newly updated AUA guideline. I'm very proud of the way that the Pacific Edge team navigated the uncertainty that preceded this decision, which hung over us for approximately three years, then the decision itself.
We delivered a residual financial performance, demonstrating the strength of our business model and the commitment of our team. Operating revenue of NZD 21.8 million was down 8.6% year -on -year. Total laboratory throughput was 28,894 tests, down 11.5% on the year before, but stable in the second half. Our average U.S. sales price increased to $594 from $584 the year before and improved cash collections. Throughput per sales full-time equivalent and tests per ordering clinician both increased over the year, reflecting greater focus and productivity in the field. This resilience has continued into the first three months of the new financial year, our first quarter without Medicare coverage since 2020. After taking into account the loss of one salesperson and the disruption of the strategic decision to discontinue Cxbladder Detect in the U.S., volumes were relatively stable.
We believe that the ease with which clinicians have accepted the transition to Triage in the place of Detect demonstrates the shift in sentiment among the early adopters of our tests and an understanding of the AUA guidelines. In summary, in FY 25 and into the new financial year, we have continued to demonstrate the strengths of our business model and our ability to adapt to changing conditions. Now, with the tailwind of AUA guidelines inclusion, we see significant opportunities to accelerate test adoption and deepen engagement with clinicians. Slide seven, raising NZD 21 million in new capital to continue our momentum. Our success with guidelines inclusion has allowed us now to look upon the Medicare non-coverage determination that came into effect in April 2025 a little differently and build on the momentum already established rather than cutting costs sharply while we pursued recoverage for our tests.
That's why we launched the capital raise alongside the announcement of our FY 25 results. The option of cutting costs harshly and dramatically was always an option that we had in front of us, but the board considered that to be a counterproductive action at this point and could have also put our continuing inclusion in the AUA guidelines at risk if there were no sales of Cxbladder in the U.S. We have secured NZD 16.1 million via placement to our institutional shareholders and a further $4.7 million through the share purchase plan, which closed at the end of July. Both of those tranches are subject to shareholder approval, which will be put to the meeting today.
This capital will extend our cash runway for more than 12 months, even without Medicare coverage, advance the commercialization of Triage and Triage -Plus, and maintain the critical investment in clinical research and evidence development that underpins our go-forward strategy. Your support for today's resolutions will give Pacific Edge the financial flexibility and strategic stability needed to deliver on our strategy and assist the return to sustained growth. Before I close, I do want to speak briefly about my continued leadership of the company. In March 2024, which seems like a long time ago, I informed the board of my intention to retire, and the last AGM was a little bit of a valedictory session. However, we have faced significant challenges in recruiting my successor.
In particular, the uncertainty over Medicare coverage and the challenges this has presented, the commitments of our existing board, which have prevented any of them being able to commit to taking over the chair role. Considering these challenges and the importance of continued stability, I accepted the board's invitation to carry on and remain as Chair for the time being. I will therefore be standing for reelection later in today's meeting. It does remain my intention to step down once we have greater clarity on the company's outlook and we are able to recruit a director who's also willing to take the Chair. That said, I continue to lead the company with complete confidence in our science, our people, and our prospects.
I believe two of the barriers that were in the road of recruiting last time around, firstly, no inclusion in guidelines, and secondly, a diminishing cash runway, have now been overcome. We will go back to the market and see if we can identify another suitable Chairman. Peter will speak to you shortly about the year ahead and provide detail in our strategy to achieve the broad aims of the capital raise. Before he does, let me finish with a simple thank you. Your continued support has enabled us to navigate an exceptionally challenging year, and your belief in our mission has kept us focused, motivated, and optimistic for what lies ahead. With that, now I'd like to hand over to Dr. Peter Meintjes, our Chief Executive Officer.
Thank you very much, Chris. Chris mentioned that, you know, we've been able to stick to our mission. For the last three and a half years, we've been deeply focused on that mission and building value for investors through three pillars of adoption, retention, revenue generation, evidence coverage and guidelines, and research development and innovation. We continue to create value for investors through this framework. Chris highlighted the importance of AUA guideline inclusion. It is a company-defining moment and was achieved earlier in this calendar year at the tail end, of course, of the last financial year in February 2025. Importantly, the guideline supports the use of urine-based biomarkers for intermediate risk patients as an alternative to cystoscopy. This is a significant change from the prior guideline inclusion language. The primary driver for that change was the Strata randomized controlled trial that we developed.
Cxbladder Triage was then specifically mentioned as the only urine-based biomarker that has Grade A evidence. As Chris mentioned, this cements our first mover advantage and builds a moat versus our competitors. The change was significant. The 2020 guidelines prohibited the use of urine-based biomarkers in lieu of a cystoscopy in hematuria patients. However, in 2025, and off the back of the evidence that we developed and some others, they established a policy that brings in line genomic testing to the same levels in hematuria evaluation as there are for other forms of cancer, for example, prostate, breast, colon, and others. The intermediate risk cohort is a large cohort within the context of microhematuria patients, and this is a significant market opportunity. It should also not be thought of as limiting on our market opportunity.
Our tests work in all patients of all risk, all hematuria patients of all risk, but it's just that the guidelines expressly recommend them in intermediate risk patients. This offers significant benefits to patients, reduces the burden of unnecessary cystoscopies, and improves access to care at a lower cost and reduces legal liability for using biomarker alternatives, a common pushback from various physicians. We have already noticed a shift in the mindset of the physicians that we speak to, and we continue to build on that. Our evidence generation program specifically seeks to change clinical practice, and that's one of the reasons why what we do is difficult. We get paid to do challenging things, but there is a defined way in which we do it. When you follow this formula, we believe we will be successful.
We start with clinical evidence generated in an analytical validation, clinical validation, and clinical utility framework. There are multiple audiences who ultimately need to review that clinical evidence. Importantly, healthcare payers, the insurance landscape, for example, Medicare, Kaiser , Veterans Administration, and the myriad of 6,600-odd commercial health insurers in the United States all review this evidence in one way, shape, or form. We provide that same evidence to the professional societies, and the professional societies make guidelines: AUA, European Association of Urology, EAU, and NCCN, the National Comprehensive Cancer Network. We provide that evidence directly to our customers, the urologists that we serve. What do they use that evidence for? Each of them use it slightly differently. The healthcare payers use it to change medical policy. You'll notice an emphasis here, my repeated use of the word change, right?
They then need to change not just the medical policy, but also they need to change the reimbursement policies or the contracts with which they pay for our services. The professional societies change the standard of care guidelines, and urologists are the ones who actually have to change the way that they behave and the way that they treat patients, changing clinical practice. All of that requires extraordinary quality of evidence, and that is what our evidence generation program is all about. We have seen some guidelines change. Our process is working. We have seen healthcare payers adopt. Our process is working. Regarding the Medicare non-coverage, it is unfortunately inconsistent with the AUA guideline, and we are in a unique situation that we have to navigate as a consequence of this.
As in Chris 's note, we have had the opportunity to lean into this challenge with AUA guidelines at our back. Medicare accounted for a significant volume of our tests and was reimbursed very reliably for very many years. Even though there was a negative proposal in 2022, we spent a while challenging it, and we are now in a non-covered position. Our response, though, is what's really important here. Roughly 47% of our U.S. volumes are from other contracted payers, predominantly Kaiser Permanente, but also an increasing volume from the U.S. Veterans Administration and from patients who have Blue Cross Blue Shield, BCBS as their insurer, and other non-contracted private payers. We monitor this as a shift in payer mix towards more commercial use. Our commercial team will continue to promote and supply tests to existing U.S. users and drive demand to maintain the momentum building from this guideline.
Through this process, we continue to seek reimbursement through the Medicare appeals process and external review. One of the challenges we did face is that with the non-coverage of Cxbladder Detect and with Cxbladder Detect not having new evidence published for it over the last several years, we're unable to take Cxbladder Detect through the reconsideration request process. However, this was anticipated. In the longer term, our goal was always to move both Triage and Detect users over to Triage-Plus in the long term. We've taken the intermediate step of moving all of our hematuria evaluation over to Triage in the United States because we believe we can be paid on those tests through the appeals process. What else are we doing? It's on our mind every day that we are seeking recoverage via LCD reconsideration and Medicare appeals.
We have had two meetings with Novitas, one in June and one in July. I wrote about it in the recent quarterly update. We've seen a very different engagement in 2025 with Novitas, positive engagement, and one where we believe they are a better understanding of the issues, asking the questions where they don't understand either the urology practice or the science behind our tests, and giving us the opportunity to explain that more clearly to them. A reconsideration request for Triage was submitted in March. We had a private, formal meeting with them in June. Cxbladder Monitor was submitted in May, and we had a private, formal meeting with them in July. We are also attempting to get reimbursed on all of the Triage tests that have been submitted since the AUA guideline through the Medicare appeals process on the grounds that the tests are medically reasonable and necessary.
That is a process that requires more effort on our part, but it is also something that applies pressure on Novitas to act quickly to open an LCD for the reconsideration requests that we have already put out there. Looking further towards the future and not just our current products, but towards Triage-Plus, the analytical validation for Triage-Plus is complete and it is published. We wrote about that also in the quarterly update. The clinical validation has been submitted and is in peer review, and we should hopefully see that soon. Pacific Edge expects to submit a reconsideration request for Triage-Plus when the CV is published, but we could also choose to, if the LCD has already opened, we could choose to submit it as part of the comments for that.
Inclusion of Triage in the AUA guideline establishes medical policy to which Triage-Plus can be added, meaning that if we already have a medical policy that demonstrates the utility of one test, just showing performance equivalence or performance superiority with analytical validation and clinical validation may be sufficient to have coverage for that same indication. We do not always have to wait for clinical utility to get coverage when the benefit has already been established in policy. Further evidence for Triage-Plus by Kaiser Permanente, sorry, for Triage published by Kaiser Permanente has already been presented at the AUA. What is fantastic about this evidence is that there were 3,353 patients that were risk matched to another 3,353 patients in the study, which blows out of the water any concerns that one might have over the size of our studies being small.
Some of our other studies, the internally run ones, are small, but that study is very large and shows that Triage works as we expect it should in clinical practice. We hope that that publication has now been submitted for review as well, and we are tracking that closely. We do not control the timelines for that. That is at rest with Kaiser Permanente. One of the things that is, of course, on everyone's mind is when will we be recovered? Everything we have on these slides are our best estimates, but they also include some worst-case scenarios. Importantly, we have made two of the reconsideration requests already, the ones for Triage and the one for Monitor, and I have listed here the catalyst or the evidence that is behind those requests.
What we expect Novitas to do, though they have not directly indicated that this is the case, it makes sense from a workload management perspective for them, and it is something that is available in the program integrity manual, is to open the LCD once for all of the products. We also know that Castle Biosciences has submitted a reconsideration request for their test that has been similarly affected by the LCD, increasing the probability that this LCD becomes open. As per the first bullet there on my slide, Novitas has the discretion to combine reconsideration requests, and from a workflow management standpoint, that makes sense for them to do. That is why we expect this is the most likely approach. We have the discretion to submit Triage-Plus as part of the comments. If it is already open, we can submit it as part of the comments.
Importantly, Novitas controls the timing of the LCD opening, but once opened, the LCD must finalize within 12 months of opening. Looking more broadly across our evidence generation portfolio, there are a number that have been now published and some that have been submitted. We are now working towards a second publication from Strata. Importantly, what this establishes is the concordance between Triage and Triage-Plus, showing that Triage-Plus has the same utility as Triage in exactly the same patients. We run the same test on the same patients, and it shows non-inferiority. In fact, it'll show superiority. We're confident of that. As mentioned, the Kaiser Permanente one has been submitted, and we're anticipating a publishing date in Q3, calendar 2025.
The Aussie and Microdrive speak to the Triage-Plus validation, as do the pooled analysis for microhematuria and gross hematuria, while the Monitor Plus analytical validation comes from a separate study and shows, you know, while we've prioritized hematuria evaluation and the Triage-Plus products, we have not forgotten our Monitor Plus product, and there will be more information coming on that as and when available. The Lobster clinical validation, which includes multiple years of follow-up, is progressing very, very well from a clinical study standpoint. U.S. contracted payer demand supports the volume growth in the second half of last year. The U.S. commercial volumes increased 2.7% against the first half, supported by contracted payer volumes. Our non-Medicare volumes represented 47% of U.S. commercial volumes in financial 2025 versus 40% in the prior half.
The trend that we are outlining for you is that there is a trend in the direction of an increasing percentage of our tests that are for patients who have commercial insurance. That is a decreasing reliability or reliance on Medicare. Q1 2026 volumes are resilient in the face of the Medicare non-coverage determination and the transition from Detect to Triage. Chris already mentioned this as well. It is a very difficult thing when customers have been used to, for multiple years, ordering one test, the Detect test, to say, "Hey, next week you won't be able to order this test. We'll process it for you for a week, but if you order it two weeks from now, we're going to ask you to change your order to Triage-Plus." That's the process we asked our field force to navigate through.
By and large, we were able to retain the majority of those orders, even though it is quite a challenging exercise. The volumes were aided by strong performance through the Southern California Permanente Medical Group, and the sustained salesforce efficiency gains have mitigated the impact of the Medicare uncertainty. The volume drop that we've observed is primarily due to the physician switch from Triage to Detect. As I mentioned, that is a challenging process, and it could have been more impactful. I'm very grateful to how hard the team have worked to make sure that it was not more impacted. We are still yet to see the real benefit of the AUA guidelines as a tailwind to our organization, something that our sales team continues to be hard at work on. I wanted to highlight another element here of progress that we're making in the commercial insurance landscape.
The AUA guideline recommends Triage for intermediate risk hematuria patients, and male patients that are intermediate risk are actually defined by the clinical factor criteria as being between 40- 59 years, while females in the intermediate risk category can be greater than 60 years. What you'll notice is that the vast majority of Medicare-insured patients are over 65 years. The AUA have essentially recommended this test for non-Medicare patients when they are male. What is this expected to do? It is expected to drive a shift in payer mix away from Medicare and towards commercial insurance. What do we need to be good at as a business? We need to be good at selling to patients who have commercial insurance, which is subtly different because sometimes they may have a patient obligation when the insurance company doesn't pay. Sometimes we need to appeal that multiple times before we get there.
Where have we had some recent successes? We've recently, we already have established pricing. We've talked about it probably for over a year now in our investor updates with the Blue Cross Blue Shield GPO, the group purchasing organization, which helps drive contracting and policy and adoption in the Blue Cross Blue Shield network. We've got individual contracts off the back of that GPO contract with Texas, Illinois, and Walmart, which represents two states. Separately, we've gained a favorable four out of five score from ECRI. This is featured in some of my CEO letters and other correspondence. ECRI are a data curator to which multiple commercial payers subscribe so that they don't have to go and do evidence reviews all themselves.
This is a big deal. It is one that we are yet to see flow through fully into the way that we bill and get paid for our tests, but it is progress in the right direction. Avalon Healthcare Solutions is a similar type of entity. While we don't have a formal policy at this time, we have received acknowledgement from them that they expect to follow the guidelines, which we see as positive. We've secured in-network status with the Optum Veterans Affairs Community Care Network. Overall, commercial payers have increased 5% since before May 2025 to 37% of the payer mix. This is when you exclude Kaiser Permanente. I'm highlighting that our payer mix is shifting more towards commercial, shifting to have less reliance on Medicare, despite the continued importance of Medicare. We're also expanding access to Triage-Plus.
Triage-Plus has been available by early access, and even under early access, we're able to bill those patients. We're just not able to chase patients for payment if the insurance company doesn't pay. At the VA, we don't have the same limitations. We actually meet all our criteria for providing Triage-Plus in that environment, in that system. We have offered a few VAs to join the pilot program and check that everything is working because the VA does have slightly different operational details. Sales performance improvements that we have seen embedded throughout financial year 2025. The salesforce efficiency speaks for itself. This has largely been driven, we know, by the denominator rather than the numerator. We have noticed our salesforce being able to maintain a larger relative number of tests over the course of the last two to three years.
The sales FTE have dropped, but we've managed to continue to demonstrate a stable clinical commitment from our customers, which we demonstrate through our U.S., the number of tests, unique tests per ordering clinician, which has remained roughly stable between six and seven most of the year, most of the last two years. Our foundations for growth as U.S. cash collections improve. Despite a dip in 2H in our average sales price, which is largely due to timing variances related to accruals and increased provisions against revenue, our ASP actually has increased substantially between the first half and the second half. Our enhanced patient responsibility, that is, patients with non-contracted private insurance, i.e. non-Kaiser, pay a fixed dollar amount, which we term, or U.S.
terms, a maximum out of pocket, which allows sales teams a very clear message for what the patient responsibility will be when they are discussing it with the physician. We've got increased utilization of appropriate patient types from Kaiser Permanente after the EMR integration and showing nice growth there. We have a historical milestone of having reimbursement of Triage since January 2023 and improved medical necessity documentation to improve our ability to appeal and collect cash from Medicare Advantage claims as well. The AUA guideline offers new opportunities for client billing. We have attempted the client billing approach under early access. We're yet to make sufficient progress here, but we are considering that as a potential option as we go forward. It can, when it works, provide a revenue incentive to hospitals and LUGPAs that have the, and therefore have an incentive as well.
This slide contains a little more detail than some of you might be prepared for. Hopefully, you can follow along. The pricing for Triage-Plus is very, very important. Every extra dollar that we are actually able to get in the final determined price for Triage-Plus is something that adds to our margin and margin percentage. In April, we got a draft gapfill price of $1,018, which is a meaningful improvement over where we currently stand with $760 per test after adding the DNA markers into our assay and after redoing all the bioinformatics and all the extra work that we're going to have to do to validate the test. We regard this as a flaw in our current negotiations with Medicare, but it does materially lift the floor, the prior floor of $760. Why does this matter? It improves the overall unit economics.
It improves our ability to operate sales resources profitably and gives us as a business a faster path to profitability. One of the things that we're doing since the draft pricing is that we have challenged that gapfill price by reaching out to MolDx and asking them, and they don't tell us, right? We've asked them, how did you calculate this price? Have you considered X? Have you considered Y? Have you considered Z? They are experts at what they do, but they are not experts in our product. The opportunity for dialogue there has allowed us to show them a couple of things that are unique to the way that we run our Triage-Plus test. We're optimistic that they may, well, they have agreed to take that under advisement. They've obviously not agreed to anything beyond that.
If they are amenable to our arguments, a new final gapfill price would be published in September and recommended to CMS. If they're not, we expect that the $1,018 would continue to remain as a gapfill. Secondly, last year when they sent us to gapfill in the first place, we had proposed a crosswalking strategy, and we have asked for a reconsideration request based on the fact that they sent us to gapfill in the first place. We have proposed also a new crosswalking strategy that is at a lower amount than what we were previously targeting with logic that is supported by the coding descriptors. It's a little bit technical. I won't bore you with the details. The process from here is that the panel who have reviewed the codes are expected to make a recommendation to CMS in September.
If they are amenable to any of our arguments, our crosswalking price would be $1,390, which we consider, if it happens, to be quite an important event for the company. A final decision from CMS would only be due in November 2025. It's important that CMS, as a general rule, maintains some level of skepticism over crosswalks that involve adding codes and fractional multipliers. Ours has both. If a crosswalk price is agreed, the Gantt fill price becomes irrelevant under the Social Securities Act. The crosswalk price would become our price. Driving growth in Asia -Pacific and consolidating our presence in New Zealand, we continue to seek a national hematuria evaluation pathway in New Zealand. Conversations are ongoing with that group. We do not have progress to report at this time.
Strata and the AUA guidelines do help in all of these situations, although the New Zealand market, as a general rule, has a lot of experience with our products to date and have kind of made up their own mind, which is obviously quite good. There's still plenty of health inequity. You can't get a Cxbladder test everywhere. This is largely due to funding, and there are some Te Whatu Ora regions that no longer have funding for Cxbladder, all of which we intend to manage as part of normal business operations. Southeast Asia continues to be in business development, and we're extending our reach into the market through our distributor network.
While our primary near-term focus remains on the U.S., Southeast Asia does have large population centers that, if we can establish a base in those markets through private healthcare systems and wealthy individuals that are often interested in preventative care, and with favorable cultural and demographic considerations, this could also be something where we ultimately bring an IVD product to market when that is available at larger volumes. Importantly, we think about ourselves as much more than a diagnostic test manufacturer. We think about the end-to-end customer experience. Digital technologies are commonplace in every part of our lives, and we have invested in making sure that it is easy to order a Cxbladder test. If we're perfectly honest, it's not easy enough yet, and this is an area where we need to continue to invest. What are we doing about it?
We give customers a range of different options as to how they can integrate with us that are better than fax or email. These digital channels are either a one-to-one direct EMR interface that we have with Kaiser Permanente or a one-to-many integration that we actually have with Lumeira Digital Pathology. We've got a partial interface with Awanui in New Zealand. We have created our own customer portal in case it is difficult to either work with partners or if there are other types of restrictions. The portal is really just a website that they can log into that is secure, PHI compliant. They can send test orders and receive test results and even load in historical test results so that they can view them that way. That portal itself can be linked to an EMR separately. This improves the end-to-end experience for physicians, creating easier ordering in the clinic.
It can also be directly linked to our in-home sampling capabilities. We've got optimized test kit management. Ordering visibility and tracking is easier for our customers and for ourselves, and there is streamlined access to results. There are obviously operational benefits for us where there are fewer errors when we receive test orders in the digital form and it allows us to more quickly turn around samples and improve our customer service. One of the next phases of the company involves continuing to improve our existing products. We have proposed as part of the capital raise to put more effort into developing an IVD for the international markets. For our existing products, it's all about readying for the launch of Triage-Plus. Our product development investments in digital systems ensure that the lab is scalable for any volume that we can come in.
Simplifying Cxbladder means to reduce the turnaround time, lower cost of goods, lower turnaround time, increase the throughput, and increase the level of automation in our labs. Similarly, we also aim to automate lab operations from end to end, from both the DNA and the RNA component as part of our lab testing services. We have continued engagement with industry and academic research development collaborations to address the unmet needs in bladder cancer and diagnosis and management. Advancing the IVD development and talking about that for international markets, we intend to use some of the capital towards accelerating the development of a kitted IVD, which is an in vitro diagnostic product from our existing lab service called Triage-Plus IVD.
This is essentially a little box that will take everything that we do in the lab, distill it down into the key components, and we can sell a box of reagents to another lab so that they can reproduce it. We've got to put a lot of work into the simplification of the assay before it's easy to do that because this is a highly complex assay. When we can, we can partner with labs overseas, and they will be able to deploy it in a decentralized way. Importantly, we need to establish a quality management system and a regulatory framework within Pacific Edge that meets those objectives, which is IVDR for Europe, FDA for the U.S., and ISO 13485 for the rest of the world. This has been one of the barriers in the context of Pacific Edge historically.
This has been one of the barriers for our ability to sell in Australia because we need to be able to sell. The test itself needs to be run in Australia for us to be able to get federal reimbursement. This is the same kind of thing that applies in other countries. By simplifying down to an IVD product in a box that can be sold to any other lab, we can enable more markets. Achieving an IVD-approved status may make it more difficult for competitors as well to develop a parity with our level of evidence. Because we are starting from a product or testing service that already has a large body of evidence behind it, when we have a kitted version of that product, we can leverage the entire body of evidence that we've already developed in support of seeking that product's regulatory approval.
To my last slide, I want you to take away from this that the AUA guidelines are a really big deal, and it's allowed us to operate differently as a company and to lean into the challenges that we face because there are many of them. The AUA microhematuria guidelines enable sales, marketing, and reimbursement activities, and we're determined to maximize this milestone through existing and new initiatives. Triage-Plus draft pricing at $10,018 supports stronger unit economics, margins, margin percentage for a faster path to cash flow breakeven if successful in establishing Medicare coverage. As noted on an earlier slide, we're continuing to try to increase the price of that test as well.
Our growth strategy, that is to be assisted with new capital, entrench our first mover advantage and moat for Triage, given the AUA guidelines inclusion, continue our evidence generation in an analytical validation, clinical validation, and clinical utility framework for coverage guidelines and medical policy for Triage-Plus and Monitor Plus to increase the triage throughput and throughput per sales headcount and throughput per clinician. These are the key metrics we report to you on every quarter. To seek reimbursement through the Medicare appeals process, relying on the AUA guidelines ahead of the resolution of multiple consideration requests to advance medical policy with commercial payers as the market for triage on microhematuria patients shifts the payer mix towards commercial payers.
To increase the percentage of electronically ordered tests in patients with commercial insurance and to focus on the clinical value of Cxbladder and to invest in continued innovation as our capital allows. We continue to work with Te Whatu Ora as we're being considered for a national pathway in New Zealand. Thank you very much for your time. Happy to take questions as part of the panel. Next section is yours, Chris.
Thanks, Pete. We now move to the business end of the meeting where we have matters that are requiring resolution, which were outlined in the notice of meeting. I'll take the notice of meeting as read, and I'll provide a short summary of the reason for each of the resolutions as we progress through them. For the sake of good order, shareholder questions raised should relate directly to the resolution in front of us.
When I call for questions, can shareholders present in the room please raise your hand and wait for a microphone to be provided to you before clearly stating your name and whether or not you are a shareholder or a proxy holder. Online voting and question instructions. Online attendees can submit questions by clicking the Ask a Question button in the virtual meeting platform. Now moving to the resolutions, a poll will be held on each of these resolutions. Shareholders joining us here today will have already received your shareholder voting card. If you are a shareholder and have not registered on arrival and wish to vote, please make your way to the registration desk outside the room, and staff from MUFG will assist you. Please mark your voting intention for each resolution on your voting card, which will be collected at the conclusion of the meeting.
Shareholders joining online will be able to cast their vote using the electronic voting card received when online registration is validated. To vote, you will need to click Get Voting Card within the online meeting platform, and you will be asked to enter your shareholder or proxy number to validate. Please then mark your voting card in the way you wish by clicking For, Against, or Abstain on the voting card. Once you have made your selection, please click Submit Vote on the bottom of the card to lodge your vote. Please refer to the virtual meeting online guide portal or use the helpline specified if you require assistance. Voting will remain open until five minutes after the conclusion of the meeting. Results of the votes will be announced via the NZX later today.
Each resolution set out in the notice of meeting is to be considered as an ordinary resolution and as such must be approved by a simple majority of the votes cast by shareholders who are entitled to vote and voting on the resolution. The outcome of proxy votes will be displayed for your information after voting on all of the resolutions is completed. That was quite a mouthful. The first of the resolutions is the reappointment of our auditors, PricewaterhouseCoopers. I now propose that shareholders record the reappointment of PricewaterhouseCoopers as auditor of the company and to authorize directors to fix the auditor's remuneration for the ensuing year. Are there any questions from shareholders about this resolution? Anything online? Nope.
Chris, I have a question.
Where is the question? Oh, sorry. Right in front of me. I'm looking for online. Yes.
Sorry. Yeah.
Hi.
I went through the annual report and I found.
Sorry. Your name?
My name is [Zagat Dawe]. I bought Pacific Edge shares through Sharesies.
You're a shareholder?
Yeah.
Okay, thank you.
I myself am an accountant and I'm a finance guy also. This is the first company, a science-based company, scientific company that I've attended as AGM. I'm very surprised how auditors would come to know whether the management, whatever the management is talking, is possible or like how the audit is different. It's like sometimes the worry is that these science companies, what do they do? We don't know as an accountant, as an investor. How are auditors making sure?
If I think, without putting words in your mouth, I think how do our auditors enable themselves to audit the financial materials in front of them when they're not scientists? Is that essentially what I think you're saying? Yeah.
How do you make sure there's not something wrong?
Oh, okay. Okay. Whether it's a science company or a manufacturer of widgets, the audit and financial reporting procedures are pretty much the same. They have their audit procedures that they follow, inventories, validation, revenues, costs. I could ask, perhaps as John might want to speak to this, but the fact that we're a scientific company, I don't think changes what the auditors do to validate the financial statements of the company. John, you might want to add, being a non-scientist. Microphone for John. This is John Dixon from PricewaterhouseCoopers, our audit.
Good afternoon, everyone. I actually think you covered it pretty well, Chris. You might get another job as an auditor once you step down. We do a number of procedures to obviously understand the company, and we don't just talk to the finance people. We go out into the business. I've visited the site in the United States, and I've also visited a number of other things that impact and are used by the company. Chris is right. We don't try and get into the science in a lot of detail because in a lot of cases, we're talking about, is a test performed, is it being paid for, and how does that ultimately end up in the financial statements? Hopefully that answers your question.
You're happy with that answer? A little bit. Okay. Thank you. Are there any other questions on the reappointment of our auditors? No? Thank you. Please mark your voting cards in the way you wish to vote by ticking or clicking for, against, or abstain in the appropriate place on the voting card. The next resolution concerns my reelection to the Board, and I'd now like to hand over the meeting to Sarah, given I can't talk about myself.
Thank you, Chris. In accordance with the NZX listing rules, Chris Gallaher retires by rotation, and being eligible has offered himself for reelection. Chris's biography was listed in the notice of meeting, which I hope you've all had time to review. In summary, Chris was elected to the Pacific Edge Board in 2016, and he brings to this company extensive financial and governance experience, an in-depth understanding of Pacific Edge, its strategy, and the market in which we operate, both in New Zealand and overseas. As previously discussed this afternoon, in March 2024, Chris notified the board of his intention to step down. However, directors extended an invitation to Chris for him to remain in this role because they believe shareholders' best interests are served with the continuity and stability of his leadership while this company continues to navigate the loss of Medicare coverage for our products.
We were delighted when Chris accepted this invitation. The board has determined that Chris Gallaher is an independent director for the purposes of the listing rules, and the board unanimously supports his reelection. On that basis, I now propose that Chris Gallaher, who retires by rotation and is eligible for reelection, be reelected as director of the company, and I now invite him to address the meeting.
Thank you, Sarah. Thank you for those nice words. I have the same commitment and beliefs that I had when I joined Pacific Edge 10 years ago. We have a world-leading product in a market that will afford us great financial opportunity as we go forward. We've got a terrific team, committed management and board, and very supportive shareholders who have supported this company for a very long time, as it's been a very long journey. Despite wanting to retire, I'm very happy to continue until we can find the right person to lead this company into the next stage of its life cycle. I remain energetic and committed, and I'm very grateful for the team, both management and board, that I have around me. With that, can I please ask you to mark your voting cards? Questions? Any questions? Yes, hi.
Richard Solomon, as a shareholder from almost the beginning and as a shareholder from the public sector, I would just like to say thank you, Chris, for your decision to stay with the company through the final stretch of this difficulty. I'm quite sure your decision to retire reflected your personal wish to have some time to yourself, and I really appreciate that you're seeing it through. Thank you.
Thank you very much. My decision, as I said last year when we had a little bit of a valedictory, was when I turned 70, it was time to wind it back. I'm 71 next week and still going, so that's all good. Thank you very much for your kind comments. Anyone else have a comment? With that, can you mark your voting cards for, against, or abstain? Next, we have the reelection of Sarah Park to the board.
In accordance with NZ listing rule 2.7.1, Sarah Park retires by rotation and being eligible has offered herself for reelection. Sarah's biography was included in the notice of meeting, and she was first appointed to the board in 2018. Her financial capital markets audit and risk and governance experience across a range of sectors, combined with a strong focus on diversity, is a strong value to Pacific Edge as the company continues its growth strategy while remaining always conscious of risks that we encounter. The board has determined that Sarah Park is an independent director for the purposes of the listing rules, and the board unanimously supports her reelection. I will now ask Sarah to say a few words.
Thank you, Chris. Good afternoon, fellow shareholders and other stakeholders in Pacific Edge. As outlined in your meeting materials, I bring over 25 years of international corporate finance and capital markets experience, and more recently, 10 years of professional governance experience. My background includes investing in personally and on behalf of a venture capital fund and supporting high-growth companies, particularly in healthcare. I believe that experience continues to serve me well on this board. More specifically, in terms of what I've contributed to the board, since 2019, I've chaired the Audit and Risk Committee, and I've focused during that time on strengthening our governance framework, our financial reporting, and our oversight of risk. Under my leadership, we introduced a structured approach to enterprise risk governance. We've established a clear linkage between risk appetite and strategic objectives.
We've clearly defined our risk appetite and tolerance levels, albeit they have been challenged somewhat at times in recent times. We've implemented a more robust risk assessment process and established a regular cadence of risk review, assessment, and importantly, action. I've worked collaboratively across the board and with our management team, in particular our CEO, CFO, and most recently the Sustainability Committee, to modernize our risk framework further. We've integrated emerging risk scanning in areas like cyber, climate, and supply chain resilience. Together, I believe we've fostered a risk-aware culture that's rooted in proactivity, open dialogue, and competence. These improvements have become especially evident, or the benefit of these improvements has become especially evident over the last, what I realize is nearly 36 months since the first proposal of our Medicare reimbursement being withdrawn.
During that time, our strategy remained firmly anchored in clinical evidence generation and pursuit of AUA guidelines inclusion, and that has allowed us to remain focused and resilient amid significant disruption. Another area of contribution which I continue to make and will continue if I'm reelected.
A member of the Capital Committee, and I've also, during that time, I've been a voice at the table requesting and ensuring that we have a disciplined capital management plan. We've also been able to, hopefully, with results today, have had two successful capital raises. Looking ahead, I'm all about value creation, and I see three critical challenges that Pacific Edge must address. First, it has been said many times today, we need to secure Medicare reimbursement. We need to navigate that journey successfully over the next period while managing our cash runway. We need to really fully unlock our market potential.
The recent AUA guidelines inclusion is a really great step, but we mustn't forget we have a very large addressable market, and we must strengthen our foundations and work smarter to maximize the effectiveness of our clinical data generation, our market access, and our commercial sales strategies so that we not only deliver financial returns to you, our shareholders, but we also deliver improved healthcare outcomes to those patients, patient populations, and who we serve. Finally, I think one of our challenges as well is we need to leverage our advantages more. Our Cxbladder suite of tests offer high sensitivity, high specificity, and non-invasive collection. These advantages position us very well in the next generation of innovation and diagnostics. For example, the IVD test kits that Pete has talked about today, as well as more point-of-care testing or precision medication.
With my experience governing Pacific Edge, chairing the Audit and Risk Committee, and personally investing in medtech and diagnostics across Australasia and the U.S., I believe I'm well equipped to help us navigate these challenges while maintaining commercial agility and managing cash reserves. Overall, my commitment to you is based on my values, which center on intellectual integrity, accountability, and transparency. I ask the tough questions. Grant's got the scars to prove it. I request data and reason analysis to support major decisions. I have an independent mind, and I'm not constrained by how things have been done in the past. Most importantly, I believe boards should support and challenge management to ensure value creation while protecting stakeholder interests.
As we move forward, we all agree that we must execute on our commitments, and I will continue to advocate for focused discipline and the highest standards of execution of our strategic plan. By doing those three things well, I believe we will firmly deliver on our commitments and maximize the return on your investment. Thank you for your trust and support. I respectfully ask for your vote and look forward to continuing to serve you with, I guess, authenticity and independence. Thank you.
Thank you, Sarah. Any questions from the room on Sarah's reelection? Any questions online? No? That being so, could people please cast their votes for, against, or abstain? The next resolution is the reelection of Tony Barclay to the board. In accordance with NZX Listing Rule 2.7.1, Tony Barclay retires by rotation and, being eligible, has offered himself for reelection. Tony's biography is listed in the notice of meeting, and he was first appointed to the board in 2022. He brings to the company significant leadership experience in the healthcare sector, including nearly 18 years as the Chief Financial Officer for Fisher & Paykel Healthcare. The board has determined that Tony is an independent director for the purposes of the listing rules and unanimously supports his reelection. Tony is in Dunedin, as I mentioned earlier, dealing with the death of his dad.
On his behalf, Anna will now say a few words.
Thank you, Chris. It's a pleasure to present this on behalf of Tony and our thoughts with him and his family at this sad time. Tony's background is set out in the notice of meeting, so I will not repeat it here, except to say that he spent most of his career at Fisher & Paykel Healthcare from its demerger in 2001 through to his retirement from the company in 2018. He is now a professional director sitting on the boards of a variety of medtech companies. Tony has seen firsthand what it takes to guide a medtech business through complexity, international expansion, and the specific challenges faced in the public company environment. That experience has helped shape how Tony contributes to the Pacific Edge board, particularly around financial oversight, governance, and setting a clear strategy through periods of uncertainty.
You have heard today, and you know well, it's been a challenging time for the company, but we now have something that we have not had for some time, and that's clarity. The inclusion of Cxbladder Triage in the AUA clinical guidelines is a pivotal moment. It provides a foundation of confidence for clinicians, investors, and our team. This positions us well to accelerate uptake in the U.S. market and beyond. Tony is looking forward to working with the team to make the most of this opportunity. A key change for Tony this year has been to step up into the role of Chair of Audit and Risk Committee, following on from Sarah Park's very capable leadership. Like Sarah, Tony takes very seriously the responsibility to ensure that we maintain the trust of our shareholders and meet the high standards expected of a company at this stage of its growth.
Beyond governance and financials, Tony is here because he's excited by what this business stands for: increasing access to care, reducing unnecessary costs and procedures, and delivering better outcomes for patients and health systems. Pacific Edge has the science, the products, the team, and the market position, and he's looking forward to assisting the company to fulfill its potential. Tony thanks you for your continuing support.
Thank you, Anna, on behalf of Tony. Are there any questions from anybody in the room on the resolution? No? Anything online, Grant? If there are no questions, could shareholders please vote for, against, or abstain? The next resolution, Resolution 5, concerns the NZD 16.1 million share placement made last month to our institutional shareholders. The reasons for this resolution now on the screen are set out in detail in the notice of meeting, but broadly, shareholder approval is required because the number of new shares issued in the placement exceeds the 15% limit allowed without shareholder approval under the listing rules. The issue of shares in the placement is a material transaction as defined in the listing rules, and some of the placement participants are related parties of Pacific Edge.
Because of the related party involvement in the transaction, the listing rules required the preparation of an independent appraisal report prepared for the benefit of shareholders not associated with the related parties. Simmons Corporate Finance was appointed to prepare the report for this resolution, and this we will discuss shortly. The report was included in the notice of meeting, and it concluded that the placement was fair to non-associated shareholders because the benefits of the increased capital secured through the placement outweighed the disadvantages of any potential dilution of non-associated parties. Finally, it is important to note the consequences should Resolution 5 not be passed. The placement is conditional on shareholder approval, and the retail offer is conditional on the placement proceeding. If Resolution 5 is not approved, neither the placement nor the retail offer will take place.
In that case, Pacific Edge will not receive the additional funding to fund the initiatives that Pete and I have set out in our addresses at the start of the meeting. Additionally, a no vote in this resolution would precipitate a significant restructuring of the company to substantially reduce its costs. The board, excluding Anatole Masfen, supports this resolution. Anatole has abstained from the recommendation as he is a related party to Masfen Securities, which is a placement participant. Are there any questions from shareholders about this resolution? Yes, sir.
Here, Jeremy Thomas, shareholder. Just reading the resolution here, it seems to me there's one number and two expressions of units. You've got NZD 0.1, and then the cents after the number. It seems to me inconsistent. Are there any view on that?
No, what are you referring to?
Resolution 5 says participants at an issue price of NZD 0.10.
Yeah, NZD 0.10.
NZD 0.1 .
Yeah,
Yeah.
Just from a scientific point of view, I'd only put one set of units for one number.
Oh, you're taking me into territory that I'm, so the alternative was to write 0.10 instead of writing a dollar sign, NZD 0.10. We take that as a comment or a question? It is NZD 0.10 per share. Okay. I think that was well.
Thank you.
Any further questions on the resolution? That being so, no, anything online, Grant?
No.
No. Could I ask then shareholders vote for, against, or abstain? We move to Resolution 6, which is the Director's Remuneration Pool. This resolution, as set out on the screen, is to approve an increase in the total remuneration pool to, it had a Director's remuneration pool to NZD 628,000 per annum, effective from the start of the FY 26 financial year. Pacific Edge is committed to attracting and retaining directors of the highest caliber, individuals with the skills, the experience, and the judgment required to guide the company through its current challenges and future opportunities. However, the current director fee structure has not been reviewed since 2021. In late 2024, we undertook a comprehensive remuneration review, and this confirmed that our fees have fallen significantly behind market benchmarks. The review found that average base fees for NZ-listed companies are approximately 33% higher than those currently offered by Pacific Edge.
For chair roles, the gap widens to around 40%. Additionally, committee chairs and members are not currently compensated appropriately for the additional time and responsibilities that those roles entail. The directors believe that this represents a material risk to the company's ability to recruit and retain suitably qualified directors with the skills to assist the company as it seeks Medicare recovery and pursues its numerous global commercial opportunities that it has identified. Accordingly, the board is recommending an increase in the total pool available for non-executive director fees to NZD 628,000 per annum. This will bring remuneration in line with market expectations, ensure fair and reasonable compensation, and will strengthen our ability to attract and retain directors with the capabilities that we require. The allocation of the pool will be conducted in a fair and transparent manner, as outlined in the notice of meeting.
The proposed increase will be from the 1st of April 2025, which was the beginning of our FY 26 financial year. However, the board is acutely aware of our current financial position and the rationale for our recent capital raise. For that reason, the board has resolved that any increase in director's fees for the financial year 2026 will be paid in shares rather than cash, at the same price as the placement and retail offer. This ensures alignment with shareholder interests and conserves cash during this important phase in the company's development. Are there any questions on this resolution? Anything online, Grant?
No.
Thank you. Could I then ask that shareholders vote yes, no, or abstain? The next resolution covers the issuance of shares to directors in lieu of the increase in directors' fees. Shareholder approval is required under the listing rules for the issue of shares related to the fee increase, as the resolution on the screen states. The details and terms of the share issue are covered in the notice of meeting. Meanwhile, Simmons Corporate Finance's independent appraisal of the issue of shares to the directors has concluded that the proposal is fair to non-associated shareholders. This resolution follows on from Resolution 6. If that resolution is passed, shareholders will approve an increase in directors' fees. If Resolution 6 is not passed, this resolution will not take effect. Are there any questions from shareholders on this resolution? No, nothing in the room, Grant? Nothing online.
That having been said, shareholders, please vote yes, no, or abstain. That completes the voting on resolutions. At this time, I'd like to advise the meeting of the outcome of proxy votes that were lodged in respect of each of the resolutions. I will not read the proxy results for each resolution, but they are shown on the screen now. As I mentioned earlier, these resolutions were ordinary resolutions that required 50.001% shareholding approval to pass, and there's an overwhelming for vote for each of the resolutions. Final votes will go up on the NZX when the votes cast today, both online and in the room, are accounted for. We're now into the general business section of the meeting, and I'm very happy to open the meeting up to questions of the board or management, Pete and Grant, who are here.
I intend not to answer all these, but to spread them around to willing directors. Any questions? Yes, Aaron.
Thank you, Mr. Chairman. I have a couple of questions, if that's all right with you. Firstly, a very quick compliment. I'd like to pay a compliment to the Board and also to Cameron Partners, who I thought ran quite an effective and efficient capital raise process. The shareholder placement that was done via the web portal, I thought, was very easy to use, efficient, and I thought that it went very well. Just a very quick compliment on that.
Thank you. Ross Christie is here.
Yeah, it worked well. The second thing that I would, the first question I have is, I don't want to be a cherry picker of just one line, but there was a line, I think, in one of the earlier presentations that we have already noticed clinician interest on the basis of the AUA guidelines. Could you perhaps just provide a little bit more color about how that clinician interest is taking place?
Pete, that's yours. One for you.
Yeah, sure. There was a very particular example in mind when we wrote that particular bullet. There was a story, and it's actually been mirrored in our social media LinkedIn feeds. Dr. Zachary Classen, someone who about 18 months ago was unaware of any Cxbladder products, sits within the broader AUA sphere and became aware of Cxbladder as we were trying to work it through into the guidelines. He started using it, and he has become a speaker for us in a very short amount of time. He was part of some of the videos that were produced and posted on our social media channels. He was also one of the people who spoke about the update to the guidelines at the AUA.
That bullet point was really channeling the enthusiasm that we felt at the AUA, because the most significant change to the microhematuria guidelines was the change around biomarkers. That was the enthusiasm that we felt from physicians learning about this for the first time, that now, wow, biomarkers are no longer prohibited in appropriately counseled with intermediate risk patients. Yeah, we felt very positively about that. Does that answer the question?
It does. Thank you. The second question I had was, as you migrate people from Detect to Triage-Plus, am I correct in understanding that the economics are that Detect would have been charged at an average sale price of approximately $580-something , and you're now migrating them over to something which is on a gap fill, I think, of $1,018, but potentially could be higher if you're successful with your negotiations with CMS?
Maybe I'll walk it through. Our original intent was to move all Triage users and all Detect users over to Triage-Plus at the same time as we launched Triage-Plus. Triage-Plus is currently in early access and is not commercially launched outside of early access. With the AUA guidelines coming into effect at the end of February and with Medicare making a non-coverage determination, we were able to leverage that. Sorry, I've forgotten the thrust of your question, Aaron.
Sorry.
At a higher price?
Yeah.
The answer's yes.
What I've understood is that we're getting approximately $580 a test averaged out across the.
Yes, yeah.
Go to change by migrating the old Detect to the Triage. We've had to do a two-step migration. That was where I lost myself. We're going from Detect to Triage first because of the non-coverage determination and the inability to get paid on Detect tests. We still believe we can be paid on Triage tests, but through an appeals process. We wanted everybody to be using Triage. We've basically done it in two steps. Instead of taking all Triage and all Detect users at a later stage commensurate with Triage-Plus launch and moving them to Triage-Plus, we're now moving Detect to Triage. We're going to move all of those users to Triage-Plus when launched. Triage-Plus is not yet launched.
At the higher price and better economics, as you figured, yeah.
Correct. We won't enjoy the higher price and the higher economics until it's Triage-Plus.
Yep. An informational question on Kaiser Permanente. It must have been a comfort to have Kaiser Permanente there while working through all of this with Medicare and Novitas. Of course, it's only Southern California, Kaiser Permanente. I'm interested in the past. It's been information that the rest of Kaiser Permanente group is moving towards, I think, largely on technical things. Where has that got to? Is the AUA guideline having an impact on the speed with which they might come forward?
I'll have a first crack, Pete, if you might. Then we can follow on. Northern California was always the next major target. Our champions were in Southern California, Ron Liu and Eugene Rhee. The publication of the Kaiser paper, which is due sometime this year, later this year?
Yeah, ideally this quarter.
This quarter will be a significant flag in the ground for the whole of Kaiser Permanente when they see this paper published in the leading urology journal. We know where Kaiser Permanente operates. We know their geographies. We know they've just taken over Geisinger. Kaiser Permanente continues to get bigger and more substantial and more important for us. Pete can elaborate on this. Northern California has been slow to, despite the urgings of their colleagues in Southern California. We would have liked to have engaged them. We've certainly engaged them. We would like to have them contracted a lot faster, but it's just, it's slow, Pete. You might want to add.
Yeah, at a high level, it is really just the fact that the individual hospital systems within Kaiser, so they have one health plan, but I think it is nine different Permanente medical groups that make up the different hospital systems, the largest of which is Northern California, the second largest of which is Southern California. Combined, those two are about 70% of all of Kaiser. As Chris said, the logical place to go for Southern California is Northern California. We have identified clinical champions who are interested in moving it through. Kaiser is a very large organization. What I think is important to understand is that operationalizing the implementation is something that's extremely challenging. Within the Southern California group, the people we were working with were very closely linked to the implementation group.
There are just a lot of connections inside Kaiser that we need to bring together on a particular project. It would now appear that Northern California is unlikely to be next because we have a greater level of interest from one of the others. We'd prefer to sort of keep that to ourselves until we've actually made the milestones rather than getting everybody's hopes up about it. It continues to be a priority for us to expand within the Kaiser network. As Chris mentioned, the Kaiser network itself is expanding.
Yes. Just wondering, given that we're a New Zealand company and yet we have an American lab and a lot of American customers, have we pondered any danger of tariffs impacting the business?
Tariffs are impacting us already on some of the reagents that we bring in from Europe. I think we're paying Grant 10% on those.
It will move to 15%.
It'll move to 15% just on the reagent piece. There is a financial impact around NZD 100,000- NZD 200,000 a year, Grant?
Yeah, on 10%, it was calculated around NZD 100,000 a year. It is a nuisance factor, but not overly material to our financial results.
Yeah.
That we don't charge for, that they will be considered American produced by virtue of being in the American lab, or is there a danger that the sales could be impacted as well?
We're paying tariffs on the materials that we import to the U.S. to do the test. If they go wider, and we'd argue that this is a New Zealand test, what's the tariff here now, Grant? 25%?
It's moving to NZD 15.
NZD 15, wow.
Yeah.
We ride the horse that we have. We are paying tariffs at the moment on reagents in particular.
Just as a side.
I won't make any political comments. I'll leave that for others.
We are trying to work with suppliers to generate the reagents, et cetera, within the U.S. A number of our suppliers have factories in various locations around the world. We are looking to try and limit the impact of tariffs.
We are not kind of treaty shopping, but we are country shopping to find the lowest tariff in way of the U.S. A really productive use of our time. Any other questions?
We have a number online.
Okay.
Let's start moving through those. I'll try and summarize them. We've got an investor that invested at NZD 0.90. The share offer at NZD 0.10 would dilute our investment. Did the directors consider alternative financing?
We did. I've got shares that I paid NZD 1.24. We've all been in that boat. The other principal source of funding would be debt. The board has no interest in raising debt at this point in time until we're showing signs of being cash flow neutral. To lay a debt onto a company like ours at the moment would just be another, just too difficult to manage.
Great. Thanks, Chris. Another question is, the U.S. no longer appears to be accepting scientific facts. Will Pacific Edge rapidly move away from the U.S. market and expand into Europe and Asia? I think that was covered in part with the IVD, but do you want to stress?
Yeah, look, it was. It remains the biggest, most lucrative market for healthcare in the world. To move away from it, we know what we generate in Australasia per test. We know what we could generate in other parts of the world per test. Without getting political, the U.S. market remains the single biggest opportunity for Pacific Edge. That doesn't mean that we are not looking elsewhere, and we are. I think Pete outlined some of the green shoots we're now seeing coming out of some of the Asian markets. As we move to develop our IVD capability, other markets will open up to us. We're not sitting back complacently with all our eggs in one basket. We are looking at other baskets, and this capital raise will help to fund some of that, in particular the IVD capability development.
Thank you.
I'm answering all these, by the way. We're about to spin a few rounds.
Andrew has decided to put Anatole on the spot. He's asked, Anatole's been the Director of Pacific Edge for 17 years. He's a related party of Masfen Securities. He's invested NZD 5 million in the placement. I'd be interested to hear Anatole address the meeting and talk about his involvement with Pacific Edge to date and how he views the company now and how he sees the outlook.
What a great question. Anatole, for you.
Yeah, thank you. Look, I have been involved for a very long time, and I know that's not, you're not meant to be a director for more than about 10 years. I've enjoyed and still really enjoy working with all the directors and with a lot of the staff, Pete and Grant and some of the Kiwi staff and some of the staff that I don't know so well in the U.S. People are everything. The great thing about this business is everyone in this room associated with the business has still got full confidence in where we're going and that we're going to get there.
I mean, the key thing for me, and I've invested over time, or we invest in quite a few sort of aged care healthcare things, including Mabel and some aged care businesses and Pure Foods, which is some food to health stuff for elderly people. As populations get older, we're getting to a situation where living to 100 years is not going to be unusual, and living to 120 years is not going to be unusual if you can get through your 50s and 60s and you can get diagnosed with things that are actually going to kill you earlier. Bladder cancer and prostate cancer and some of these sort of not super, well, cancers that you usually die with rather than die of, early detection is going to be everything.
If economies and governments are going to be able to afford to have people living into their old age, then they're going to have to do a hell of a lot better job at spending their dollars widely. This is, you know, it's a disruptive technology which changes the whole economics of it. It's a bit like disintermediation in the financial business. There's only going to be a few winners, and there's going to be a lot of losers. If you can detect 95% of people early with bladder cancer, then they're not going to die of bladder cancer. You're not going to need nearly as many urologists, and you're not going to need nearly as many surgeries and the rest of it. We went into the U.S. very early on, which I very quickly learned was a healthcare industry, not a healthcare system.
The Americans, the United States of America, Americans, pay dearly for that. They have very poor coverage. They have very expensive healthcare. They have a lot of squabbling parties from all different directions fighting against each other. One thing that was very clear to me pretty early on is if you can get to a situation where you're sort of getting pulled through the system rather than pushing your way into the system, which is getting into guidelines in my mind, then you really, you know, that is the key, the absolute gold standard for developing a, you know, for continuing to sell a product. Pete, to my right, denies the significance of this. With a litigious society like that, using a test that's not in guidelines puts the urologist at risk of getting sued for not doing something else.
Now that we're in guidelines and certain things, not using the test, they're at risk of getting sued for not using the test. It's a massive swing. How do I think the prospects are going forward? I think we're in a far better place than we've ever been. As far as box ticking, I think when we were, the share price was NZD 1.30 or whatever, that was probably a bit of a disadvantage because a lot of the future earnings had been baked into the share price already. I think where we are now is we're one step away from really getting some real traction. That is getting back into reimbursement in the U.S. and getting our sales team really supercharged to be selling things. The other thing you've got to remember is that it's very hard with a territory like the U.S.
to cover it all off with 10 or 15 or 20 or even 100 salespeople selling one product. We've always known that no one's going to want to swallow you up, another big pharma, and incorporate you into their product suite until you've proven that you can survive on your own. Yet surviving on your own with your own sales team is near impossible from a pure economics point of view. Someone else said before, do you think, with the way the U.S. is going, do you think that's the future? Personally, absolutely not. When people say Americans, I sort of say Canadians, Mexicans, Puerto Ricans, Argentinians, all that sliver of dictatorship that lies in the middle there that's run by that nasty orange person. If we can make it in the U.S.
and we've been able to do testing in other labs, the real market is at a lower price like it is in New Zealand, where we deal with one client, which is the New Zealand government, or we're in one of these, or we're in the UK, or we're in some of those Nordic countries or Canada. There are a lot of very good, very well-run democracies around the world that have Medicare healthcare systems that will absolutely adopt this product if it's proven out in the U.S. Maybe the future is that we sell off the U.S. and we run the rest of the world because they're not very interested in the rest of the world over there. In answer to the question, I think we're in a better position than we've ever been.
We're very happy to put more money in, although I understand a side on that decision. The key thing is, at the end of the day, it's all about the people. You've got a whole lot of dedicated people that are 100% behind making this work.
Thanks very much, Anatole. That was terrific.
Another question, which I can probably answer, speed it along. Your report disclosed that the Singapore Entity has been dissolved in the last year. Is this a reflection on the Singapore market? No, that is not. The Singapore Entity was actually expensive to maintain, and we received little benefit out of maintaining that company, particularly as we expanded to other countries in Southeast Asia. For structural purposes and cost saving, we dissolved the Singapore Entity, and we're selling to all Southeast Asian countries out of the New Zealand Entity. That's not a reflection on the Singapore market.
Thanks, Grant.
Ken's asked a question around the business model. He says you've had knockback after knockback with little financial progress in the U.S. Do we see a different model, for example, licensing IP to one of the big pharma companies who can take it global?
Who was that? Peter, do you have a crack at that?
I'm probably not saying anything terribly different from things in Anatole Masfen's and Chris Gallaher's prior answers. We've faced some knockbacks, but the framework within which we generate evidence is what will ultimately get us over the line. It's analytical validation, clinical validation, and clinical utility of our tests that is going to make us successful. I don't believe that having a pharmaceutical company, either we partner with them so that we can leverage their sales force, or we sell to them in some capacity, is a meaningful way to drive success in the U.S.
Great. Thank you.
This might have been answered. I think this question came in before one of the slides. What proportion of patients are subject to Medicare coverage decision or also in the recommended intermediate risk group in the AUA guidelines? I think we said that we are pivoting and moving more towards commercial testing. Is there anything else anyone wanted to add on that?
Medicare is 65 years and over. We're now pivoting.
Is there anything further to add to that?
There's nothing further to add from the slides that we talked through. Intermediate risk, as defined by the AUA, for men is 40- 59 years, and for women, it is over 60 years. We expect that as Triage becomes the dominant product and as more people follow the AUA guidelines, and remember, some will follow AUA guidelines strictly and some will follow AUA guidelines loosely. It is hard to identify the perfect eligible patient. That's why the AUA guidelines change as more information comes along. We view that at a high level as something that will shift the payer mix in favor of more commercial testing. They will continue, and Medicare will continue to be a very important part of our payer mix.
Thanks, Pete.
Thank you. We're getting through them. The number of countries that Pacific Edge and Cxbladder has been sold in is still low. What is the main barrier to that? Is it regulatory or is it bureaucratic, which could be addressed through lobbying? Are we doing anything around the lobbying?
Yeah, Pete.
Yeah, so look, it is, it's largely in regulatory slash market access. Also, finding the right partners. Before you can really do business in a meaningful way, you have to go and find who the right distributor for your products are. We've got ways of doing that. We qualify them in certain ways. We look for ones who have experience with send-out testing, for example, and to run their own labs so that in the future, they could actually run an IVD product in their kits. We don't have to establish a partnership and then go, hey, actually, they can't run the test in their own lab. Now that we've got an IVD product, we need a new partner, right? There's a partner selection process. We also have to do your urologist education.
I would just point out that historically, when we ran a Singaporean study, no physician in that study actually saw a Cxbladder result because it was a clinical validation study where the physicians didn't interpret a result of the test. We were just really collecting samples and running a validation to show that it worked on Asian populations. Up until we launched our activities in, I think it was March 2023, we really weren't actually attempting to sell in any of those countries prior to that. We just were collecting some samples from a couple of clinical study sites. This is a very new initiative for us. There is, like I say, a partner selection process to find the right partners. There is a market access and regulatory process. There's import-export.
The vast majority of these countries do require some form of IVD product and would prefer that IVD product to be run locally. That's why it's a future catalyst to have an IVD kit that is available for sale in those markets.
Great. Thank you.
Thanks, Pete.
Okay. The NCCN is currently reviewing updates to the bladder cancer guidelines. They've previously shown strong interest with a 2B recommendation. With another meeting on the horizon, do you think there's a strong chance Cxbladder could receive even more encouraging use?
Yeah, Pete.
August is the month, so the questioner is right, that August is the month where bladder cancer submissions are made to the NCCN. We are submitting the latest evidence for Cxbladder Monitor, which consists of three publications, two out of Australia relating to clinical validation and clinical utility of Monitor, and one which is our own internal publication from last year, which relates to the analytical validation of Cxbladder Monitor. We have presented them with that information for consideration, specifically requesting that we be a named test. We do know that there is some level of interest from talking to KOLs who are involved in the bladder cancer part of the NCCN in updating the monitoring guidelines. We have not generated as much evidence for Monitor as we have for Triage. As a consequence, the more evidence we generate, the more likely we're to see change there.
Similarly, from our competitors, no one has generated sufficient evidence to drive change there yet.
Just for the sake of simplicity, the NWCN guidelines are for those people who have had cancer or who have cancer. That's where our Monitor product plays. Monitor, as a percentage of our business, is a fraction of Detect, isn't it?
Yep.
Very small.
10%- 15%.
15%. The Detect about to be Triage is the main game from a product and profitability point of view.
Okay. Changing tact. If the price for Triage-Plus gets too high, does the risk of Cxbladder becoming more expensive than a cystoscopy and therefore making it less compelling?
The short answer to that one is no. You've got to remember that this is a Medicare price and this is a third-party insurance price. It doesn't affect the way that hospital systems or physicians think about the care for the patient. That's basically the headline. However, when we commercially contract with organizations like Kaiser Permanente or like Geisinger, Intermountain, or anybody else that has an insurance plan, they do value-based contracting. As a consequence, there might be a reason to offer a lower price that's value-based to those hospitals. I won't bore you with the details, but then there is a subsequent process that kicks in called PAMA, Protecting Access to Medicare Act, which is specifically designed to reduce Medicare pricing over time to become value-based. Medicare pricing initially is technology and resources-based.
That's why they have the latest and greatest of everything, because you get paid for how much it costs to build and operate. Over time, you get benchmarked to the average of the value-based insurers and your price comes down.
Thank you.
Thanks, Pete.
Five questions left. Peter mentioned the European Association of Urology in the presentation. Does Cxbladder feature in the guidelines, and is this another market opportunity?
The short answer is, there has been mention of Cxbladder Triage and mention of Cxbladder Monitor at different times in the guidelines in Europe. I don't keep the current status of that in my head, and they are updated every year around March. Because they're only tangentially relevant, I don't sort of store it away. They definitely review all Cxbladder evidence, and we can and have been included by name in some of the guideline language from the EAU. In terms of what opportunity that represents, again, the critical thing is you can't send clinical samples from most European countries outside of the country. That's why we need a decentralized IVD model to provide that clinical testing in that country.
That involves simplifying our product to the point that it can be put in a little box and then sold to another lab so that lab can run the test in the market. At least in theory, we could own that lab and run it in that market. What's more likely is that we'll find appropriate partners to run that test for us with lab infrastructure.
Thank you. Next question from Richard. Despite the highly compelling evidence of the value of Cxbladder, could Novitas still say no? If that happens, what's the plan?
Yes, they can say no. Of course, they can always say no. That would lead us to some pretty major decisions about how we're structured and how our cost base is organized. Pete and the U.S. team are a lot closer to it than I, but if I've heard it once, I've heard it a number of times from key U.S. people that to be in guidelines and not covered by Medicare is very unusual. Again, that's a decision that's outside of our hands. We deal with the cards as they're dealt to us. Pete, do you want to add anything further?
It would also depend on the reason that they said no, if they said no. My immediate reaction is to mirror what Chris has said, but also to recognize that, yes, it would, depending on the reason, it may be the case that Triage-Plus still has a path to coverage. It is incredibly unusual that you can be in the guidelines and also non-covered. The only reason that has eventuated was because of the tortured process that the LCD followed, creating a timing issue. The latest evidence hasn't been considered, and that's why we're here. When they consider the latest evidence, we believe very strongly that they will. The evidence doesn't lie, so they'll interpret it the same way that everybody else has.
Thank you. What other competitors have come to the market in the time Pacific Edge has been trying to get U.S. coverage?
In the U.S. or globally?
Let's just focus on the U.S.
Okay. Sure.
I get this question a lot. I think it's important that the word competitor can be quite misleading. There are products that make competing claims to Cxbladder Triage. There are ones that make competing claims to Cxbladder Monitor. The reason we talk about ourselves as having, firstly, a first-mover advantage and secondly, a moat around our product is the clinical evidence that we have developed in favor of our products. It's not just enough to say, "Hey, I've got a new product. It can detect bladder cancer in microhematuria patients. Believe me, because I said so." Versus, "Hey, I've done a randomized clinical trial in hundreds of patients.
I've had that trial reviewed by the AUA Guidelines Committee, and they've come up with favorable language in support of it." That is the reason that we are confident in our evidence portfolio, and that is why evidence is the biggest moat around our business going forward.
Great. Thanks, Pete.
I would just add to that, Grant, the other moat around our business is time. If we look at the amount of time it's taken us to get Kaiser Permanente from zero to where they are now, the amount of time it's taken to get into guidelines with our evidence generation, time for a new competitor is a 10-year journey for anyone else coming in and competing against us.
Good point. Jonathan probably gets the question that he's paid the most attention. What's the motivation for FDA approval of an IVD, noting that IVD wasn't highlighted for use in the U.S.? In particular, will the FDA approval of an IVD help regain Medicare coverage?
That is a great question and picks up on an element of nuance. The reality is we don't need to have an FDA-approved product in the U.S. market. By making FDA requirements, which are very, very, very similar to IVDR requirements and very, very similar to ISO 13485, part of our quality management system, we prepare ourselves. I call this the defensive strategy because it means we are prepared for a future situation in which the FDA says, "Hey, we're going to regulate you now." In the case of an IVD product, which does require FDA approval, that is our defensive strategy for being able to sell a kit to a lab so that they can run it instead of the current model, which is testing services. There's another element to that, though, and that is that there are these things called state biomarker laws.
State biomarker laws are favorable for FDA-approved products, and they are favorable for products that are covered by Medicare and New York State, among other things. You can improve the % of tests you get paid on by commercial insurers using state biomarker laws if you have FDA approval.
Great. Thank you. Last question. Are Pacific Edge and Castle Biosciences collaborating to build a strong case for reopening the LCD?
That's setting a few, Peter.
Yeah, collaborating is not my preferred word choice, but I maintain professional contact with the CEO of Castle Biosciences, and I am aware of what they are doing regarding their resubmission. Yes.
Thank you, Grant. Anything further from the room before we bring? Yes.
After listening to everything, I see it as a storm, as someone would. After hearing, listening to everything, I think that if we think about the pessimistic side, if the company is losing NZD 30 million per year, 2024 and 2025, and if we are raising NZD 20 million, that means whatever the loss was, we are just raising the money. Can we simply say it like that? Suppose if the loss is again NZD 25 million, then would we raise the capital again?
It's going to depend on the speed of recoverage by Medicare. That could happen. There could be a draft LCD, Pete, anytime. We just don't know, but it could drop in August or September. That then would change the dynamics for us. We are conscious of our spending. I think I said in my remarks, completely gutting the place is doable, but it would destroy everything that we've built. Not being able to sell the product to clinicians for a period would lead those clinicians to look elsewhere. Keeping a presence in that market is something we think is important.
If you think about positively and everything goes right, I think if it's a disruptive product, it's like a disruptive technique to help the patients, then can we say that the revenue can increase by 10x if the product is very successful and everybody likes the product in the U.S.? Can we say that our sales can go to 10 x? Because if somebody...
20 or 30 x.
Anatole, please jump in.
10x would be a failure. 20 or 30 x, yes.
Thank you.
50x .
50x .
It's a very big opportunity, very big financial opportunity.
While we didn't put anything in the slide deck today on this, the market opportunity is estimated between 3.5 and 4.5 million testing opportunities per year. When you put the average sales price of $1,018 on a Triage-Plus test, you can see how big the potential market actually is. There are a few things that we have to get right between now and then, absolutely. That's the prize that we're paying for, and that's why it matters.
That's just the U.S. market, yeah, without thinking about other markets. Last call, anything further? With that, I'd like to close the meeting with a special thanks to our shareholders in particular who have been very patient as we've been on this journey. Thanks to the board for their commitment and what has been a challenging and trying period, to Pete and his management team for keeping the faith, keeping the end game in sight. To you all, I may not be here next year with a bit of luck. Thank you very much for your support and onwards to refreshments outside. We'll go well. Thank you.