Pacific Edge Limited (PEB) Earnings Call Transcript & Summary

Good day, and welcome to the Pacific Edge Limited Half Year Financial Result Call. At this time, I would like to turn the conference over to Dr. Peter Meintjes, CEO. Please go ahead, sir.

Thank you, operator, and good morning, everybody. Welcome to the Pacific Edge results presentation for the first half of FY 2023. Just as a reminder, please note that by participating on this call, you agree and understand all of the terms and conditions that are on this slide. Presenting with me today is Grant Gibson, and he will present on the financial results section later on. So a brief agenda here, we'll move through looking at the FY '23 highlights, snapshot of the company, various updates on how we're delivering through the strategy that we announced in May, if you look at the financial results in some detail in a slide outlining our outlook. The headline slide here for us, I'd like to direct you to the increase in -- of 34% in our global testing volumes over the result we had in the first half of 2022, an increase of 35% in commercial test volumes on the first half in 2022, an increase of 62% in terms of growth in operating revenue, and a net loss after tax of $10.6 million, and Pacific Edge remains with a strong balance sheet, $93.5 million cash and cash equivalent. And we continue to deliver on our strategy, research and innovation, evidence, coverage and guidelines, adoption, retention and revenue generation. So at a glance, Pacific Edge is -- the image to the left shows Pacific Edge's global presence, headquartered in Dunedin with U.S. lab operations in Hershey. And we are focused on commercializing molecular diagnostics bladder cancer at currently Cxbladder by developing IP into products, generating clinical evidence and publication and peer-reviewed publications and establishing reimbursement with private and government payers, all 4 as the benefit of our patient population. Again, as a reminder, we -- Cxbladder has a number of different products for assisting physicians to make decisions in the patient care pathway. And what I wanted to just draw your attention to here is the value propositions on the right-hand side. And a reminder that Triage, which can be used in primary care and specialist care, is used to assist clinicians to safely de-intensify hematuria evaluation from low incidence population. Cxbladder Detect, for use by specialists, it allows clinicians to adjudicate diagnostic dilemmas, including equivocal cystoscopy and atypical cytology in any patient population. And Cxbladder Monitor, for use by specialists in the surveillance setting for the monitoring of urothelial cancer recurrence intended to reduce the frequency of surveillance cystoscopy and improve patient compliance. Bladder cancer is a global challenge, a significant one, and Pacific Edge is predominantly focused on the U.S. market within their global context, the largest single market with the largest single payer, Medicare, where we already have established reimbursement. And the CMS as a payer desires to be first with best-in-class innovation and often demonstrates this by offering higher pricing and higher reimbursement than other regions of the world. So U.S. has the most advanced health care system. I mean a greater percentage of the population will actually receive the gold standard of care when introducing new products like Cxbladder. This slide is unchanged from when we presented this at the full year results for FY '22 and is a reminder of our priorities for our investment program. In the near term, we are focused on adoption, retention and revenue generation. In the medium term, we are focused on evidence, coverage and guidelines. And in the longer term, we're focused on product improvements through our research and innovation. Having a look at our commercial testing volume. So I direct you to the top right-hand side of the screen here where global testing volumes have increased by 34% and global commercial testing volumes mirror that with a 35% increase. The breakdown on the lower left of -- the product breakdown, the lower left of your screen highlights that we have seen -- and this is driven largely by Detect, which has increased from 56% to 61% between the first half of '22 and the first half of '23. Focusing on the U.S. We just wanted to remind you of the contracts that we have with some of the large payers in the region. And of course, the Kaiser health plan covers 12.5 million members with more than 85% of those in California. And in a progress update with respect to rolling out over 2 Kaiser accounts are among the top 20 accounts at Pacific Edge as we are growing there. And we have -- during the reporting period, we had 11 Kaiser sites place an order with us. The EMR integration, which has been of interest to many investors, is on track, although we do not have an ETA for completion yet. And -- but we will advise the market when we do. We're also continuing to drive adoption at the Veteran Affairs, primarily at the clinical evidence generation stage through the DRIVE study, and we have enrolled 80% of our target patient enrollment target. CMS, easily our largest payer, covers 61.5 million U.S. citizens and people over 65, and we are a Medicare-biased market because of the age -- the average age of the patient or patients presenting with hematuria and also presenting with bladder cancer. So this continues to be a very important element for us. Consistent with reporting on these metrics for the last 6 months, we wanted to show the growth in a number of unique ordering clinicians for Cxbladder, which has risen 46% from FY '21 to FY '23. And we maintain that this is an early indicator of future growth prospects and continue to focus on attracting new physicians. It would not be a Cxbladder. While simultaneously focusing on increasing the utilization of Cxbladder at accounts that are really familiar with our products on the patient population. So very much focused on the detection of bladder cancer in patients presenting with hematuria or surveillance patients with [indiscernible] 6 months post-TURBT for recurrence on the disease. We wanted to update our investors regarding the hiring plan that we announced in May. So we have increased headcount in sales, marketing, medical affairs and market access and reimbursement, and we have diversified the role. So it's not just about adding headcount, it's also about making sure that we've got the diversity of roles that are needed to execute commercially. And so we've listed some of the diversity of roles as well as the areas in which we've hired those individuals. And for us, it's a very, very important component that medical affairs and market access are both new activities to Pacific Edge in areas of the business, and we believe that these are high-value teams that will make an impact, not just helping to generate clinical evidence but helping to communicate that clinical evidence either to customers in the case of medical affairs or in the case of market access, to communicate that to government and private payers. Expansion in our marketing presence has been another key focus over the last 6 months. We have made several announcements and updates to the market about our presence at AUA and the shareholder updates about our presence at the BCAN Think Tank, that's the Bladder Cancer Advocacy Network Think Tank event, which is a very -- an event that connects researchers with patients in a very patient-centric kind of event. And the IBCN in Barcelona. IBCN is an event that alternates between the United States and Europe in terms of where it is hosted, and we featured a standing room-only session on our biomarkers for diagnosis and surveillance of bladder cancer there. So really focusing on our clinical evidence generation program at this meeting is driving interest from physicians. And the SUO meeting, which is a big meeting for Pacific Edge, will be next week, and the Society of Urologic Oncology is, again, one of the marquee events in the calendar, very research-focused where we have an opportunity to connect with the people who are using our product for clinical trials and find new advocates that want to either be part of our clinical evidence generation program or potentially perform investigator-initiated trials. I've got a little slide on that later on as well. Growth in the APAC market is unchanged at present. We have made some progress, however, in moving another district health forward to adopt Cxbladder at primary care, and we are hoping for that to have the appropriate increase in throughput during the next half. And we have added a dedicated resource in Southeast Asia in terms of a business development manager to be based out of Singapore. But that individual has only recently joined the company and just completed their first -- their 90 days of onboarding. So we're expecting them to be more active over the coming quarter and half. We wanted to be -- to maintain our transparency with investors about the situation with the proposal from Novitas, proposed LCD from Novitas that was released on the 28th of July. Again, this is -- Novitas outlined a new methodology for covering molecular biomarker tests. They did specifically in this release mentioned Cxbladder and Monitor as uncovered if the proposal were accepted. We would receive 45 days' notice of that effect. But importantly, because this is a proposal, it may be withdrawn by Novitas at any time or expire within 12 months. And then a small correction to what we guided the market before. We now understand it's not from the date of comment but from the date of proposal of the 12-month cost starts ticking. And so we note that in the -- at the bottom of the presentation here. Pacific Edge provided oral and written comments to Novitas prior to the close of public comment, and we are yet to receive feedback from Novitas. And due to the nature of how they operate independently, we do not have a time line yet for response. The key messages that we want investors to take away from this are here. Cxbladder remains covered by Novitas, and we have seen no reduction in demand as demonstrated by the results we have presented here for you today. Cxbladder has not been singled out. There are other tests that are affected, and we are working with the 21st Century Medicine Coalition and those other partners in our responses to Novitas. Also importantly, there has been no adverse reporting event. And this is important because when -- if there had been an adverse reporting event, it is appropriate for a Medicare-approved contractor to review the clinical evidence. However, that has not happened. And that's why we maintain that it would be highly unusual for Cxbladder to lose coverage without an adverse reporting in it. Based on the advice from our lawyers and from other experts that we've consulted in the industry and in our -- within our own team, the proposed LCD contains inconsistencies, unintended consequences and a methodology that may violate Medicare's own rules. And so while we maintain that this is a potentially high impact event, we maintain that it is a low probability event. The proposed LCD appears focused on a particular challenge that Novitas does have. There are a large number of the SNP-based personalized genomic tests for guiding therapeutic decisions after a confirmed diagnosis. And the way that it's currently written, the LCD would exclude any kind of diagnostic biomarker tests, which we maintain as an error. The LCD takes the highly unusual step of outsourcing coverage determinations to third-party databases, and there's not really a precedent that, that is the requirement that Medicare sets for this is, that Medicare administrative contractors are required to review evidence themselves and not outsource it is how to evaluate. Consequently, Pacific Edge has the leadership team and the relationships with lawyers, the coalition partners, the lobbyists, and really, the recommendation from professional societies, physicians and patient advocacy groups to affect a positive outcome, which for us is to maintain coverage of our existing products and have a path to coverage for any future products. So we maintain our position that the proposed LCD is unlikely to survive in its current form and continue to responsibly plan for all eventualities given the uncertainty. This slide is, again, likely unchanged from prior presentations. The most important guidelines groups for Pacific Edge, the American Urological Association, the European Association of Urology and the National Comprehensive Cancer Network, NCCN. But I wanted to direct you to the fourth bullet on the -- under the NCCN. The NCCN does have an annual review of clinical evidence that provided Pacific Edge has generated new peer-reviewed published information, we will be able to submit an updated clinical dossier to NCCN for them to reconsider whether we are still in the 2B or could be elevated to the 2A category. And so the clinical dossier is something that I will talk about more over time. It is a compendium of all of the clinical evidence that has been peer reviewed, that is assembled together and presented both to guideline committees and to private payers. And so our medical affairs team and our market access team play significant roles in, one, assembling the clinical dossier; and two, communicating their clinical evidence to either payers or guidelines, as appropriate. So we continue to generate clinical evidence. The U.S. primary study and Singapore study, as we've previously mentioned to investors, that is going to be a joint publication. The publication is still pending, but it has proceeded through order review and is currently under peer review. And we hope to advise the market when that publication that has been accepted. Additionally, we continue to invest in clinical development on -- for all of our products. And in this particular slide, we're trying to highlight for our investors when we will have the last patient recruitment to the best of our ability to intimate, but that's always a challenge. That is our target. And whether or not there is a patient follow-up step included prior to us being able to publish. In some cases, we can actually publish on some things immediately after the patients have been recruited and the test results are back. In other cases, to demonstrate the utility of the test in a longer term sense, we may need to follow that patient for a year or 2 years before we can report on whether that patient definitely did not have a recurrence of the tumor or definitely did not have a tumor. So that's just part of some of the weeds associated with it, but it's important in terms of understanding the time lines to publication of the peer-reviewed evidence that comes from our clinical evidence generation program. Yes. DEDUCT and LOBSTER are the 2 remaining studies that are highlighted on this slide. And importantly, we -- LOBSTER was one that we announced earlier in the year, and we have seen a nice rate of enrollment from the 2 sites that we already have onboard, which is -- so it's going very nicely. I wanted to draw your attention also to investigator-initiated trials and highlight why these are different and why these are valuable to us as an organization and why we should support them. So obviously, our core evidence generation program revolves around generating analytical validity, clinical validity and clinical utility evidence through peer-review publication. But investigator-initiated trials are ones where an investigator comes to us and proposes how they might like to use Cxbladder for a particular topic that's of interest to them. And then we choose to support that by offering them some free testing under a research framework and allow them to generate evidence on our behalf using our test and on those tests in terms of benefit of the -- evidence being independent of us as an organization. And typically, this kind of modest utility evidence is useful for creating familiarity and confidence with Cxbladder for the individuals running the test. Local development of -- local evidence development that might be useful for payer access in a local market on a country-by-country basis or simply to just get the scientific word out there in terms of publications, abstracts and presentation. And you can see an update of the types of studies that we have underway. We've bucketed them a little bit here for ease of digesting. But again, these are an important way to augment our core clinical evidence generation program. Finally, talking about research and innovation. We continue to evaluate product concepts to address unmet clinical needs, and we've added a couple of scientists to explore the market potential of various products. This is necessarily vague, but we do have R&D efforts focused on prognostics and in diagnostics in urology and an interest in adjacent disease with molecular signal in urine. And so the primary thing that we wanted to just update on is the MONSTER study, which again was also announced earlier this year. MONSTER is focused on minimal residual disease, which is slightly different from the recurrence of disease, but it's also something that is huge -- what is [indiscernible] as an unmet need in a post-TURBT context. So after the patient has received the transurethral resection of a bladder tumor, you might want to answer the question, did we actually get it all? And currently, these types of products can't actually do that. Inflammation causes the gene expression markets not to be reliable until 6 months after. The -- after the TURBT, so within that 6-month window, we would like to give physicians insights into products there. And so our partnership with [indiscernible] University is aimed to see whether we are able to do that. Moving on to Grant. He'll talk us through some of the financial details.

Great. Thanks, Peter. So as Peter mentioned, our operating revenue has seen strong growth, growing to $8.7 million. So it's up $3.3 million on the same period last year, which is a 62% growth. Of that increase, $2.4 million growth to the underlying commercial test volume increases. So that's driven by the 42% increase in commercial volumes in the U.S. and [indiscernible], which makes up 95% of our revenue. The other $900,000 relates to the weakening New Zealand dollar against the U.S. dollar, and we'll talk about that when we look at our operating expenses as well and the impact that had. On a constant currency, our revenue growth was 45%. Total revenue is up 102% to $13.6 million. So the strong growth is in part to the FX gain that we've seen with the $3 million benefit related to that and also increase in interest revenue. Operating expenses were up 54%. Whatever I mentioned, that's also been impacted by the weakening New Zealand dollar against the U.S. dollar. So when comparing us on a like-for-like currency, the growth of expenses is up 43%. We have a strong balance sheet, which positions us well for future growth. So cash and cash equivalents are $93.5 million as at 30th of September, and that's down $12 million on the 31st of March 2022 dollar. So if we look at the operating costs, as we mentioned, we were up 54%, and on a like-for-like currency, up 3%. So Peter discussed the investment in people as one of the key initiatives, and that's responsible for driving 56% of that increase. And a large component of those people are focused on commercial. So when you look at sales and marketing costs, which are up 84%, a high focus on people [indiscernible] selling, increases the sales and marketing, which accounts for 61% of all PEB's outlook. Our lab operation costs are also up 45%, which is largely driven on volume, but also, we're incurring some higher freight costs, which have been seen with other companies around the world. Research, as we mentioned, we've got a higher focus on clinical studies, and that's driven cost up by 44% along with the addition of a couple of the R&D spend. I'd like to hand you back to Dr. Peter Meintjes to wrap up, and then we're open to take questions.

Great. Thank you, Grant. And so in terms of outlook for specifically over the next 6 months, so we have cautious optimism for the final 4 months of FY '23 as we continue to implement strategy that we outlined in May. Acknowledging that there is a proposal from Novitas around the proposed LCD, but also noting that it has not impacted commercial or clinical throughput at this time. Even in the event of an adverse result from LCD, Pacific Edge has a path to reestablish coverage, and so we worked on those contingencies. So we have a world-leading technology, a strong balance sheet, and we are building momentum in the world's most important market for bladder cancer. Thank you, everyone, and we will now open to -- operator, we'll now take questions. Audio first, one question per person, and then we'll go into some of the questions that have come through in the chat. And if you have additional questions, please feel free to ask them now. Thank you, operator.

[Operator Instructions] We'll take our first question from -- or I'm sorry, we'll take our first question.

This is Matt Montgomerie from Forsyth Barr. Firstly, well done on a solid result and the ongoing transparency in terms of the clinical evidence pipeline, et cetera. I might just start, Pete, on the outlook. And I acknowledge the improved transparency to the market in terms of the clinical evidence pipeline, cost investment, where that's going, personnel, et cetera. However, when I turn to that slide and bullet point number two, in particular, you state that you're delivering growth in line with expectations and are investing prudently. I guess it's difficult for myself here to understand what that really means with no reference point to broader expectations. You outlined the strategy in some detail to the market in May, and notwithstanding the ongoing Novitas uncertainty, it would be great if you could, I guess, kindly share with us those expectations at a high level just for us to get a greater understanding of what, I guess, you're referencing in the broader trajectory. Firstly, is that in the last few months? Or is it, I guess, over the next 3 or 4 years, et cetera? It's just hard for me to get a reference point, I guess.

So Matt, if I can rephrase to just try to understand your question. You're essentially asking what are our internal milestones for whether or not we're on track and going to continue to hire in accordance with our plan?

Yes, exactly. I mean it's just hard for us to get a feel for that from the outside looking in.

Yes. So obviously, we don't -- there's a certain element of this that we keep to ourselves in terms of how -- what those expectations are. But what we have committed to publicly in the last presentation in terms of increase in headcount, I believe, was a total of 36 account executives and up to 4 regional sales directors. So that's a total of 40 in the direct selling team. And so right now, I believe we are at 32. So there is still room to grow. But of course, we don't hire them all at once. And it's really, really important that as we hire them, we make sure that they become top performers or at least performing like our tenured reps to -- before we consider whether or not we should hire all of them. So that's in line with what we proposed 6 months ago.

Yes. Okay. That's clear. I mean I'm just trying to get a feel for the trajectory internally. Like is that sort of low double-digit sequential growth run rate that you're experiencing, broadly consistent with what you're seeing today in this last quarter? And therefore, looking forward, is the cost investment material? It's just hard to get a feel for it.

We think the analysts are doing a reasonable job of estimating where we are at the moment, both in terms of the throughput, the revenue and the cost base. But we can probably chat a little bit more in our one-on-one session about how else that -- about even more detail there.

[Operator Instructions] We'll take our next question.

It's Christian Bell here from Jarden. But before I just start, if we once sort of asked our 1 question, are we able to come back online? Or do we have to take out further questions on the webcast?

You can ask additional questions once everybody else had a go, yes.

Okay. Cool. So my first question just relates to the NCCN review in April 2023. By an inch, it's only, what, 6 months away. What evidence do you think you will be able to actually submit today? Will it basically be the U.S. primary study that's still pending? Or are you going to be able to include some of the other studies that are already underway, STRATA and all that? And then part B is, from your experience, getting the 2B recommendation, do you think any dossier that you will be able to provide would be able to satisfy the additional requirements to get to that?

Great question. So firstly, we did not submit in FY -- well, sorry, calendar '22, and so there is -- there are a number of new additions that we can target for submission in '23 as we've recompiled the dossier. And that's just anything that we published on Cxbladder in calendar year '21 or '22 will be eligible to be included in the clinical dossier. It was not included in the prior submission. There are a number there. I'm sorry, I don't keep track of all of them in my head, but my team do. And -- but to your -- the other part of your question, a question, we are optimistic that we will be able to submit the U.S. primary, Singapore primary data as part of that as well. But of course, the time lines are not necessarily up to us. So we do have to wait for the journal to get back to us on that. But as soon as we do, we'll let the market know. But if it is published, it will be added to the clinical dossier and submitted alongside the others. And what is our expectation? So we do believe that the clinical study -- clinical evidence we've generated to date is good clinical validity evidence. And as we increase the strength of that with multiple publications, we can -- we should be able to get greater and greater inclusion. But the key will always be utility data. And so again, in the spirit of full transparency, STRATA is the utility study that generates the highest quality of information. So we are more confident when we can include the data from STRATA, but we have -- we will continue to attempt it with validity data and modest utility data from [ IIPs ] and other things because that can also be used in our submission and that we included in [indiscernible] the consequence of that.

So you'd say a low chance in April 2023 then given it's more clinical validity as opposed to utility?

I guess what I'll commit to is the higher chance when we have STRATA published. So -- but we will definitely attempt it with the new. We can also have utility data out of New Zealand, and there may be additional utility data coming from New Zealand researchers that will give us a chance. But we don't control those independent publications in the time frame. So it would be responsible to be heard, but to know for sure what's going to be in the clinical dossier. But we will always focus on trying to include as much utility data as we can because that is how we'll get the best results from the NCCN and any guidelines group.

We'll take our next question.

Tom Deacon from Macquarie here. Just wondering, in terms of your key messages from investors over the LCD coverage update, the adverse reporting, what is the typical timing that you would receive an adverse reporting event in the LCD process? Is it when they're about to signify the finalization of the LCD? Or does it typically happen at the dry stage?

So it's actually the other way around. So an adverse reporting event, Tom, would be, for example, if someone used our products and clinical practice found out that the sensitivity and the specificity were not what we published they were and if the actual sensitivity and specificity will lower -- lowering the performance characteristics of our test and they published that. That would be an adverse reporting event. So there is no such reporting event. And so it's not a component of the evaluation process. But an adverse reporting event would be a trigger for Novitas to review the evidence, including that publication that contain the adverse reporting events and then say, hey, look, we should drop coverage at the [indiscernible]. But none of that has happened here.

Sure. So given the way that Novitas has framed the changes to the LCD as it currently stands, you wouldn't expect to receive an adverse reporting event, right, under this scenario?

Yes, there is no adverse reporting event that management is aware of.

And we'll take our last question.

Peter, Grant, can you hear me?

Yes.

Yes.

Congratulations on some good growth. So starting out on the cost, that was a pretty substantial step-up. For the full year, how should I think about that in 2H? So can we expect that to continue at the same level in 2H or perhaps step up a little bit more?

We don't give formal guidance, as you know. But we continue to believe that the factor is driving our business, including the access to hospitals resuming post-COVID, including the increased spend on marketing, the increase in medical affairs. For resources, market access resources and direct selling resources will all be synergistic over time. So we believe that we can continue growth for quite some time. But I guess you're asking more about, can we give you guidance for the rate of growth and that's something at this time we don't do. But the -- what I would say is the factors going into how you might predict it going forward are unchanged. So we believe that it will be consistent.

Okay. One final one, if that's all right. So from your cash flow from operations, it gives cash from customers. And if you do that as a percentage of operating revenue, that's gone down to, I don't know, like 84% from 100%. Could you comment on -- so first of all, is that still with Novitas? I imagine not, right, but then what would cause that?

Sorry, what's the second question? You're looking at -- sorry, Rob. Could you give the question again? I don't think we caught all of that.

Sorry. So in the financial statements under cash flow from operations, there's an item where it's cash flow from cash receipts from customers. As a percentage of your U.S. -- excuse me, sorry, as a percentage of your total operating revenue, that's decreased year-on-year. Could you tell me about the drivers of that?

Yes. There's been -- we've had a bit of a delay in some of the billings to go through, which has now gone through. So it's just delayed slightly the receipt of the cash. There's been no fundamental change in the recoverability going into the underlying business drivers of that. So just a slight timing issue that will be rectified at the full year.

And there are no further audio questions at this time, gentlemen.

Okay. Great. Grant, do you want to...

Yes. I'll read out. We have a number of questions we received about the business, which is fantastic. And I'll just work from the orders that they've come in. So the first one is around the Veterans Administration. So the process of completing the DRIVE clinical studies also result in VA Urologist beginning to actively use Cxbladder and the clinical practices.

I guess before the DRIVE study is completed. Yes, in theory, it can, but we do view it as more of a change out of -- the purpose of completing the DRIVE study is to establish in the Veterans Association on a veteran cohort, the utility of the test. And when we do that, then we've established medical policy in addition to the contract -- the payment contract that we already have with the VA. That's a necessary step to complete the study and to have it reviewed internally to drive the coverage, which is [indiscernible] for medical policy in the sense within the VA system. So generally speaking, any adoption prior to the completion of DRIVE was that the VA would be modest.

Thanks, Andrew. And the second part of your question is, on Slide 16, we expect most LCD contains inconsistencies, unintended consequences and a methodology that may violate Medicare rules. Does Medicare -- does the comment relate to Cxbladder usage or other tests?

So the comment relates to the LCD itself, and so -- and the proposal of -- the new approach that they have proposed, which affects a number of other tests and not just Cxbladder, is the thing at issue there. So yes, it relates to multiple products.

[ Elaine's ] got a question. Is your R&D focused on new products or improvements to existing products?

We actually segment our R&D into those 2 areas, product improvements and new products. And so we do both. I would elect not to comment on the proportion of each, but we are actively improving current products, and we are actively investing in new products.

Richard's got a question. Has thought been given to the price received where the triage, a lower price might drive up adoption?

We constantly evaluate the appropriate pricing scheme, but due to the nature of hospital contracting, we believe we actually have an appropriate price pay-up on our products.

What's driving the change -- from Chris, what's driving the change in the LCD rules? Is it simple divide to reduce costs? Or is it a lack of confidence in clinical performance?

That is actually a very, very complicated question because we cannot know for certain what is driving them, but we can -- we have inferred, as mentioned in the presentation, that we believe Novitas has a genuine challenge, and that challenge is, how do they determine whether or not they should pay for single SNP tests that are part of pharmacogenomics testing? That is when a patient already has a cancer diagnosis and then you try to decide what therapeutic might work for them on the basis of their genetics. And they have written some rules to help them address the deluge of these markets that are coming in. And incidentally, PEB has got swept up in that process. So again, we have written as such in the comment period. And while we don't know Novitas' views on our comments, we do believe that we are on solid footing, that the rules that they have created were not intended to affect PEB. And -- but nonetheless, the proposal currently worded does say that.

Thank you. Peter has got a question, which I can answer, around what percentage of the revenue comes from CMS or percentage from Medicare and Medicaid? We don't disclose that publicly, but we have stated in the past that around 2/3 of our revenue from the U.S. comes from either Medicare or Medicare Advantage, which is Medicare Advantage is of all of Medicare that's provided by private insurance due to the government's focus. On Medicare and Medicare Advantage, we are currently receiving a high percentage of reimbursement. We've even stated publicly what percentage, but it is high. So that should give you enough details to understand the importance of Medicare coverage to [indiscernible]. And another question from [ Elaine ]. Do clinicians receive rebates of payments for using Cxbladder with a new product?

The short answer to the question is no. That would actually be -- again, there are complicated reasons for this, that we are -- and Cxbladder is reimbursed under Medicare Part B, which is outpatient. And it is third-party billing as a consequence of it being outpatient, not bundled care, which is not Part A. When you have a Part B billing, often incentivizing the physician to all of the tests can lend you in present because you are essentially -- you may be incidentally incentivizing a physician to give -- to order a nonmedically necessary test. There are some very serious rules around that. It is different if the physician is actually running the test in their own lab. And so what you're asking is for us to -- do we have a business model in which we sell a product to a lab rather than a reference -- a service to a lab. And right now, that's not something that we do.

This is from [ Ty ]. It seems to me you're able to meet the requirements of proposed LCD in its current form. Are there required changes?

So the -- hopefully, we've been clear. In its current form, the answer is no. But we've not been advised either of changes to the LCD or changes we would need to make to address that.

Thanks for your question, Jamie. Do people -- do we have feet on the ground in Europe?

No, we do not. We attend conferences in Europe that may be of relevance to our international program and our U.S. program.

Christian, I understand the investments haven't had enough time to make an impact. So if you give some forward indicators that could provide some confidence, can you give us an idea of perhaps the accounts that have been EMR integrated or some other KPIs you think would be useful to gain confidence in the quarters going forward?

Well, I think we kind of already do that, releasing the throughput information on a quarterly basis, also the throughput, her ordering clinicians and other data like that, which we think throughput is certainly the leading indicator of revenue. And both when it is as a clinical trial or as an evaluation by potential commercial customers. So we think those are ones that you should rightfully be paying attention to.

I've got another question. Are you planning they'll give an FDA approval by 10-K?

The short answer to that question is no. That would be considered -- it is not a requirement for operating an LCD, at a clear regulated LCD. It's not required for any part of our business in the United States.

Damien, are you willing to provide more details on expectations around the Kaiser ramp-up?

We can -- not really the asset. We are expecting that the EMR integration will make it easier for clinicians who are already familiar with the product to order the test. We will also have to engage in education of our customers within Kaiser who are not familiar with the test and leverage Kaiser resources and our own resources to do that. We do believe that the EMR integration will make it possible, but everyone in, initially, the SoCal region to order the test easily. And the interface itself will provide prompting as to when is the appropriate use of the test, but I'll give you an example for that. If a patient is being evaluated for hematuria, they have an ICD-10 code associated with that in their electronic medical record. The software, the EMR integration will recognize that ICD-10 code and Cxbladder will be available in the drop-down list of available tests for that physician to honor possibly even at the recommended test or requiring test to order on a patient presenting with hematuria. So those kinds of things, we believe, can have a significant impact, but there is no substitute for the amount of effort we will have to do to educate physicians on Cxbladder within the Kaiser network, both with the combination of our resources and Kaiser's resources once it is available.

Okay. We have another question on the proposed LCD. It's focused on the comments that the LCD is focused SNP-based PGx tests. We're guiding therapeutic [indiscernible] confirmed diagnosis, currently excluding diagnostic biomarkers from clinical focus, which does this relate to Cxbladder?

And again, hopefully, we've -- we've actually made it clear. We don't think it relates to Cxbladder. But currently, as proposed, Cxbladder is an effective test by the proposal. That is also why we believe that there are myriad ways that could be resolved for a positive outcome while acknowledging that there is uncertainty and if they don't listen to us and other affected companies, they could proceed and so there is some risk. But we view that, that is low probability because the wording should not apply to diagnostic tests.

Thank you. A question around that I can answer from Chris is what recovery is PEB made on that process prior to issuing an ICD code? So we were clear at the full year last year that there is no expectation of any recovery. And we have removed the note that was included in the account that says potential. So that has become clear as time has moved on, and there's no expectation of any recovery of those tests prior to LCD coverage. A couple more questions from Christian. You said you are trying to schedule meetings with Novitas and its parent. How would this go?

So Novitas have indicated to us they won't take a meeting until they have fully reviewed the comments from all groups. However, we have had a meeting facilitated by our partners with C21, that's Century -- the 21st Century Medicine Coalition with CMS being the national organization, Novitas being the local Medicare administrative contractor. And we have made them familiar with the issue. They were not familiar with the issue because it's the Novitas initiative and Novitas proposal. And consequently, they will now review that internally from their perspective as well.

I probably got time for one more, again, from Christian. Can you provide details on the initiatives and strategies that have been led by the medical affairs and medical sales team to detect growth in the pipeline?

I can give a little bit of color there. Again, a lot of this stuff happens at conferences and a lot of this stuff is just sort of BAU. But we -- keeping a leader engagement is a very broad bucket that involves assembling features bureaus that people who will speak on behalf of our company. As it prefers to Cxbladder, we built a kind of a group of them that will speak to other urologists on our behalf. We will -- the -- at conferences, we will have principal investigator meetings, which we are doing at the SUO meeting. We will organize clinical advisory board to guide us on the next phase of growth and the appropriate clinical trial design for various utility studies with a combination of our medical affairs team and those experts on our clinical advisory board. And we will also make medical affairs messaging and our clinical evidence generation or our clinical evidence, something that we communicate through medical communications on podium at conferences. These are paid presentations where we bring speakers. There are some announcements. I believe they're already on social media speakers who will be speaking on our behalf at the Society for Urologic Oncology next week. But -- and so we promote those kinds of activities to customers. And so anything that is around the communication of clinical evidence to urologists, those are activities that the medical affairs team will be involved in and leading.

Great. Thank you, Peter. I think our time is up.

Yes. Thank you. Operator, we can end the call.

This does conclude today's conference. Thank you for your participation, and you may now disconnect.