Pacific Edge Limited (PEB) Earnings Call Transcript & Summary

Welcome, everybody. It will be -- it's especially good to welcome David Levison from the U.S., our President of PEDUSA; Peter Meintjes, our Chief Executive Officer; and Grant Gibson, our Chief Financial Officer. It's going to be particularly good to hear from David Levison who is at the [indiscernible] in the U.S. We believe we're going to have a large number of people on this call. So that -- fingers crossed, the technology holds up under the volume of our participants. Without question, it's been a very challenging few days for everybody; shareholders, staff, Board and other stakeholders. When Pete called me on Saturday morning and asked if I was sitting down, I knew immediately what the news was going to be. We're the #1 risk on your strategic risk register, one with [ assessed ] low probability, but very high consequences manifest, then your mitigation processes kick in. The Board met on Saturday, and we have immediately formed a subcommittee of the Board to deal with this issue and that subcommittee next day as we work our way through all aspects of this decision by Novitas. We are, first and foremost, focusing on stabilization of situation for all stakeholders, employees, shareholders, customers and suppliers. It's important to note that we have only had a couple of business days, in fact, only one in the U.S.A., to engage with all of our advisers and partners. So it remains very early days. There's a lot of material to get through, and work is underway on all work streams as we determine the best way forward for our company. In the very challenging environment that we are now in, we should never lose sight of the fact that we have world-leading technology, a very significant total addressable market, and we are well resourced to continue the journey. We're in a long game, and we have full focus on doing the best job we can for all of our stakeholders. We have a hard finish at 12 noon as we move to a town hall with our staff. But hopefully, we will be able to get to most of your questions in the hour that we have. I will now hand over to Pete and the team to take us through a few slides, and then we will open it up for questions. So over to you, Pete.

Thank you, Chris, and good morning, everybody. Just a formal note that you're to abide by the rules and this disclaimer as a consequence of viewing this presentation. We wanted to kick off by reminding everyone of the timeline that we've been operating under speaking to the facts. And in July 2020, Novitas did inform Pacific Edge that Cxbladder was a covered test under the LCD 35396 (sic) õ with a comment in the local coverage article, A58529, Cxbladder test is now covered utilizing the reasonable and necessary guidelines. Since that time, Pacific Edge has been paid by Medicare and appealed Medicare Advantage plans with high success. And leading up to an announcement in June when Novitas proposed a new approach to Cxbladder coverage among a new approach to all coverage in a draft LCD that is the topic of today's call. In a draft local coverage article where they seek to link coverage to relying on third-party databases, but Cxbladder was not mentioned in that local coverage determination or local coverage article. In July '22, we -- there was a revision to that draft where Cxbladder was specifically excluded from coverage, and the company went into a trading halt, and we notified the markets. At that point, Pacific Edge advised that the cessation of Medicare had a low chance of succeeding, but that it was a high-consequence event for our business, and that it would be unprecedented and potentially unlawful. We subsequently worked with our lawyers to make submissions prior to the comment period, which is the formal process. We leveraged comments from our customers, key opinion leaders and regular urologists, we spoke with and had comments from the bladder cancer advocacy network, our industry partners from the Coalition of 21st Century Medicine. And we were not alone. There were several other affected diagnostic companies that all submitted written comments for consideration and prior to September 6. The Board responsibly tasked myself and the rest of the management team with some contingency planning and to prepare for this outcome. And -- but it was important that until we knew the final contents of the LCD, which, as Chris noted, did arrive on Saturday, certain things would be unknowable until the final -- until the LCD was finalized. And indeed, some things have changed. The noncoverage determination, of course, has not. In November, we became aware that A58529 was retired, and Novitas guided us to use A58917 as the basis for coverage with Medicare Advantage plans. And then in January, as we announced in one of our quarterly updates, Triage against coding and then coverage as a consequence of being on the billing article LCA 58917. And then the most recent events, of course, are that Novitas has finalized the draft LCD noting multiple tests, including Cxbladder, all of our tests, Triage, Detect, Monitor, Resolve and even a reference to enhanced Cxbladder, which we have assumed at this time is Detect+. And they have described our tests as not considered medically reasonable and necessary, which quite clearly contrasts with what they said in July 2020. And the determination as a factual matter, the Medicare coverage of Cxbladder is expected to cease unless something else changes. So just moving on to the next slide. The -- summarizing what Novitas has actually said about our products in their review is that they have said there's insufficient validation in [ terms of ] clinical circumstances. There are a population and gender biases, high numbers of false positives, questions the credibility of Pacific Edge-funded research. Those are, of course, from our view, a number of -- most of those things, we would consider minor. And an independent evidentiary reviews that will agree the same. L39365 appears to also have a very strong focus on diagnostic, prognostic and predictive tests following or as an adjunct to confirm pathological diagnosis of cancer. And importantly, that has implications for our Detect product versus our Monitor product, where it is obvious that, that Monitor would be covered by this. It is less obvious to us that Detect falls under this LCD at all. And the immaterial valuation appears not to be very well understood as a standard of care by Novitas in this decision. And then again, as a factual matter, Novitas continues to reimburse Pacific Edge at $760 per test. And -- but that is expected to cease as of 17th of July, and our modeling going forward reflects that. Just as a reminder about the potential impact to our business, we have tried to be transparent in this by releasing the specific impacts. The majority of our population that we serve is over the age of 65 with the average age being of somebody presenting with hematuria, blood in the urine, 73. And consequently, a significant proportion of our commercial testing volume, 13,800 tests or roughly 60% is Medicare or Medicare Advantage. This is approximately 77.3% of our total operating revenue in the last financial year. So where we agree with Novitas is that Molecular Diagnostics is a developing field. This is a -- they do have challenges, as do we. And it is very, very important to assess genetic testing in the context of oncology with rigorous evidence-based approach to facilitate the appropriate testing for all Medicare beneficiaries. One of the main motivating factors for us as a company is to do things for the benefit of patients. And again, where we agree with Novitas is that there are some -- the review of Pacific Edge as evidenced emphasize some negative comments and confounding factors where future research and evidence can and are being undertaken. Many of the points raised by Novitas are things we have either already addressed or are addressing in commercial routine or are addressing in future studies. And at the time, all of this evidence was accepted as a consequence of being peer reviewed and published in well-respected journals. So importantly, where we disagree with Novitas, Novitas does not acknowledge and appears to sidestep in their comments that Cxbladder has a significant amount of support from urologists within the U.S. with over 1,100 clinicians ordering in the last quarter alone, a growing test volume of over 43% CAGR over the last 2 years. And this clearly demonstrates that urologists see a value in our tests. It also appears to us that Novitas misunderstands the value of noninvasive primary first-line testing. It also appears to us that Novitas misunderstands the value of our test in the context of AUA standard of care and how risk stratification is important to the AUA and the guidelines committee, even though we acknowledge that we are not yet in the AUA's guidelines. We are working with AUA guidelines committee members to solve the problems that they think are important. And the entryway to the AUA pathway is, of course, the presence of blood in the urine, hematuria, as a substantiated subscription of bladder cancer, which is not recognized in -- by NCCN at the moment, and it is also not recognized here by Novitas. Current AUA guidelines do recognize this require a cystoscopy, and Cxbladder can safely risk-stratify patients, allowing them to avoid that procedure. This is genuine value to urologists and patients. They also misunderstand the central value proposition of tests like Cxbladder with high NPV in that they allow urologists to reduce these procedures. So they appear to be focused on false positives. And if you actually read our test results, false positives or any positive result encourages physicians to follow a physician-directed protocol, which is to continue with standard of care, not relying on the positive result for their clinical decision-making. They are relying on the negative result, and the negative result is extremely confident with over 97% in the Detect test and over 99% in the Triage test. This understands how to interpret a positive result that physicians should continue to -- continue the evaluation of the patient for any other cause of disease, including upper tract assessment. So again, highlighting where we do disagree with Novitas is that this LCD is an unprecedented change to the threshold and the mechanism regarding what's acceptable evidence and what's not and appears to misunderstand some of the important needs within bladder cancer diagnosis. A prudent approach forward. So we continue to promote Cxbladder and process all tests ordered by U.S. clinicians with our current team in the short term. However, effective immediately, we have cost containment, including, but not limited to, immediate hiring freeze and a hold on discretionary spending and new capital expenditure. Contracted payers like Kaiser, [ Veterans ] Association and other minor health plans that we have contracted with in the course of ordinary business will continue to be billed. And because all of these contracts are independent, we expect to receive reimbursement from them in line with historic billing practices. We have ongoing studies with the Veterans Administration, and we have an ongoing project with Kaiser Permanente to integrate in their EMR. Strategic options for the longer term. The clinical evidence is among the most important elements of what Novitas has tried to assess here and of course, of our future going forward. Our clinical evidence will set our path to regaining Medicare coverage regardless of what sort of sub path we choose. We have, over the last 12 to 18 months since I joined the business, and specifically since our CMO, Dr. Tamer Aboushwareb, joined the business about 12 months ago, have been focused very much on reconfiguring in the framework of analytical validity, clinical validity and clinical utility, which is essentially the language of the guidelines committees. And that reconfiguration, we believe, sets us on the path of success going forward. Detect+ will be our strongest candidate for inclusion in the NCCN guidelines and the AUA guidelines as a single product for hematuria evaluation with the performance characteristics demonstrated in its analytical validation publication in very late last year in December. And we have, in the interim, already accelerated the completion of the DRIVE study with all available resources, initiated a microDRIVE and AUSSIE study. And a small note for those who may not be aware, a microDRIVE study is a very tight partnership with the Veterans Association, in which one contract allows us to access patients from through -- across the entire network of the VA, which is 183 hospitals, and consequently, will allow us to enroll faster. And this is an example of us performing our clinical studies smarter, not just harder. So reviewing our business in light of the LCD, we have to do this out of prudent cash management. The management and Board are reviewing the scenario planning that we commenced last year and to determine a path forward. And of course, all options are on the table here, as I think Chris also mentioned. So we will explore all legal challenges and appeals that are available to us and advise the market as we go. We will examine regaining coverage through Novitas. We will also examine regaining coverage through an alternative MAC. We obviously expect questions why we have not done so already and are ready to answer those. There are -- we will also look at alternative billing practices, and one example would be to increase the patient responsibility upon denial from either Medicare or private insurers. So we will explore that, but those are not without consequences. And we remain open to other strategic alternatives. The impact on revenue, expenditure, cash reserves, the required time and resources to regain coverage and shareholder value are determinative in our approach, and we wanted to make everyone aware of that at this time. Management and Board are committed to rightsize the business to fit any revision to strategy. Regarding our outlook, as per our press release and as per what I can imagine is a tone of voice that translates here, we are very disappointed by the new LCD. This is not what's best for physicians. This is not what's best for patients. And this highlights some areas of improvement in Pacific Edge's evidence but -- that we have either already addressed or are continuing to address them. This does not acknowledge the value that Cxbladder offers in patient diagnosis and management or the record demand from urologists that we are seeing taking up our product. Going forward, the single most important determinant of coverage is high quality clinical evidence. And the clinical evidence generation program has already been accelerated. And on the back of DRIVE, microDRIVE and AUSSIE, we believe that Detect+ is the strongest candidate for guidelines inclusion. We will continue to build and collect revenue on contracted payers in the U.S. and -- sorry, I can't go forward on the slide. We will continue to bill and collect revenue from the contracted payers in the U.S. and in APAC. We have world-leading technology, a strong balance sheet from which to chart a new direction. And despite this setback, we still expect to deliver on the significant opportunities that we see for our product in the U.S. and around the world. So with that, I thank you for your time. And myself, Grant, Chris and David Levison are all available to answer your questions. If you'd like to direct a question at a specific person, please do so. Otherwise, I may direct you to the best person to answer that question if I cannot answer it myself.

[Operator Instructions] Your first question comes from the line of Matt Montgomerie from Forsyth Barr.

Firstly, just condolences on the news, clearly, very disappointing, and I appreciate it's been a whirlwind a few days for the team. I might just ask Pete on the key question and what you've loosely referenced to potentially just expand on sort of the 5 future options that you outlined, and I appreciate there might be more and you are still exploring less at the moment, but I would -- and I think the market would appreciate just sort of preliminary views on each and what these actually look like in terms of like the legal challenges, what's the precedent for this after finalization, your exploration of alternative MACs, would this mean moving lab locations, regaining coverage in Novitas? Is there a chance that Novitas has come out with another draft determination which can give alternative pathways, et cetera? So I'm more just asking for a bit more detail on all those options and what the Board and the management's thinking is with respect to each, and even what your U.S. advisers [indiscernible] lawyers facilitate as well.

Thank you for the question. We appreciate that everybody probably wants more information than I can give at this point. However and particularly on the legal matter, that's one where we really can't elaborate, and we haven't had enough opportunity to determine a path. On the question of moving laboratories to another jurisdiction, for another MAC, it was very, very important to us to understand the content of the final LCD and how to interpret all of it before making that decision. But of course, we have engaged with -- before committing resources to a new location. But we actually still have some questions about certain elements of this to determine whether or not moving to another jurisdiction is prudent or worthwhile. At this time, we have no evidence to suggest, even though there are other MACs that may have a different opinion on our technology. We don't yet know whether this approach by Novitas is fully endorsed by CMS and is a reflection of a change that would be reflected in other MACs or not. So that is work that we have to do, and we needed to know the final content of the LCD to determine what we were comparing against. But now that we have that, while we pursue the legal challenges, we will look at alternative MACs. Typically, though, they cannot make a decision on your evidence without you being in the territory. And so that does involve us. But many of them are open to a conversation and those are the things that we are doing now. We have not historically had that, because we did not want to antagonize the situation. But now that we are in the situation, that is a prudent path forward.

Peter, it might be useful if David Levison can just give us some context on discussions that he's had with our partners at Century 21 who are also impacted by this.

Yes. And the conversations that happened yesterday.

Yes.

Sure. I'm happy to do that. So for those of you who don't know, the [indiscernible] for 21st century medicine that we shortened to C21 is a group of molecular diagnostic companies that formed about 17 years ago this coalition to say, our needs are a little different. They are different than the big labs or different than some of the other multiservice labs. And we have our own requirements in terms of lobbying, in terms of regulatory requirements. And so we've been a part of this organization now for the last several years. And they have multiple members that are in the same position as we are, where the Novitas decision was negative for them. C21 has done a phenomenal job, in my opinion, based on my career of getting the right people in the right places at the right time, both on the legislative side as well as the regulatory side. So in my conversations with the C21 senior executives and the legal counsel over the last several days, they are already setting up meetings, hopefully, with the appropriate legislators in Congress, with the appropriate senior members of the CMS team because one of the alternatives, one of the attempts that we're going to make in these multiple work streams that Pete and Chris, both referred to is to try and convince our -- the friends in Washington, this is not good for Medicare patients, and therefore, it needs to be relooked at.

Your next question comes from the line of Christian Bell from Jarden.

Yes, team. Condolences on what's happened over the last few days. I know it's early days but [indiscernible] but we'll see how we go. So the first one for me, I guess, this is kind of based on the language -- some of the language used in your announcement. But what makes you quite confident that your studies can regain coverage? Like do you believe they know that they were for sort of large part wrong and that's why they will remain an outlier opinion? And have you had a chance to speak to any of the KOL were a part of the NCCN or AUA? And if you had, do they remain supportive of your studies to date and the studies that you're currently doing due for publication in the next couple of years?

So maybe I'll start, but I'll defer to David L. for the KOLs, a part of the question. But so Christian, they did a thorough review of our papers. But it seems that there was a focus on the negative and various minor confounding factors in what has driven their criticisms. So some of the criticisms are reasonable. But we've always maintained that in totality, many of those criticisms have been addressed by future publications and can continue to be addressed. And -- but very importantly, it's also about the way that you write about them. So even though the data itself was good, we often wrote about things in 2012 differently than how we think about our business now in 2020. And it would have -- with the benefit of hindsight, it would have been better to make very clear statements in our prior literature to say this is an analytical validation of a specific product because that is how guidelines committees think. So it's not just the evidence itself, which is good, but it's how we rigidly apply the AV, CV and CE framework to the way that we design our studies, run our studies and write about our studies. So when we do that for Detect+, that is what gives us the confidence that we will get in guidelines. And to add to that, the consulting that we have done with guidelines members regarding Detect+, and let's make [ no bones ] about it, it's a significant road map and there's a lot to execute on, but that is what we're doing now is what the guidelines committees are looking for, both from a validity perspective and from a utility learning perspective. And I'll defer to David to answer the questions about reaching out to KOLs.

Great. Thank you, Peter. I couldn't agree more. Our publication are solid. And in my opinion, what Novitas missed in their review was the impacts on the patient. And our tests are very good at taking patients that are at low risk of having a disease and telling the physician you can do the -- you don't need to do a full workup. And they really missed that, in my opinion, on the review. And that's why moving to the KOLs, we're obviously having all those conversations right now with the KOLs, informing them of what's going on. They have historically been strong supporters. And so far, I've heard nothing but other than strong support. One thing that we need to remember always is these clinicians don't make any money on [indiscernible] tests or any other lab-developed tests. We ask them to go through some hoops to get our samples collected and those kinds of things. There is no financial incentive for us, for the physicians to order our tests. The only reason a clinician would order a test is because it's providing clinical value, clinical utility to them. And as both, Pete and Chris mentioned already, we've seen significant growth over the last several years. And that growth is coming because our test actually help patients. And that's where I think the Novitas review, while accurate, missed the mark.

I guess, I mean I understand the design of the studies and prior to this Novitas decision has sort of been restructured to target guideline, things like that. So obviously, this is quite a lethal kind of conclusion that has been done by the Novitas. But I guess, has it had and do you expect it to have an impact on the urology community? And I guess, from David's comments, today, from your current conversation, that doesn't sound like it is.

My view is that Medicare's decisions, for all the reasons David outlined, does not change how physicians think about this. What does change though are the consequences. Without payment for our tests, we can't continue to operate with the cost of each test, right? So we have to think very, very carefully about what those options look like. And we haven't determined what the path forward is. But we can't service the demand without payment. And that's just [ isn't ] obvious, is it? So we need to look at all of our options and determine what the best path forward is there.

And Pete, if I could just add something to that. Everyone should remember that prior to July of 2020, we didn't have Medicare coverage. We had significant volume in the Medicare population. There was no expectation of paying. And again, that just shows the value the clinicians should see in our testing.

Okay. Great. And then so you sort of mentioned in your commentary as well that -- well, you didn't specifically say, but it sounded like what you're trying to say was that your DRIVE, microDRIVE and AUSSIE papers would be enough to keep and to basically gain to a recommendation from [ MCP, ] which would set within the whole event. Peter, is that right?

We may need additional evidence from a clinical utility study in addition to gain guidelines inclusion. But that puts us in the best possible position for that utility study.

So I guess the question is once you sort of gather everything that you think would require, what kind of timeframe are you thinking to actually receive coverage after publishing and sort of timing in with [indiscernible] Global? I know you've got published [indiscernible] but when would you expect they're ready to present and then receive a guidelines decision the [indiscernible]?

It's too hard to know for certain. And one thing we have maintained in the market is that we will continue to submit to NCCN every August as per the submission window for bladder cancer to encourage them to do 2 things: One, review our evidence with a view to covering; but also to actually establish bladder cancer early detection guidelines that are similar to the prostate cancer early detection guidelines. If they do that, that would be very helpful, but that's a relatively heavy lift. That is one of the things that we believe is important. As to the timeline question -- sorry, I tried to mute there, but that didn't work at all. As for the timeline question, the studies act as though the kind of start of the next part of the process. So the study is the first part. We then, as you point out, we do have to publish that data. We do have to get that data reviewed. And once -- when that data -- so NCCN and AUA follow slightly different processes. NCCN has a submission every August. So long as the publication comes out before that August, we can submit in that timeframe. And AUA convenes their own committees on their own time schedule. So we actually expect them to be later adopters even though they do have early detection pathways for bladder cancer, which are useful for [indiscernible] valuation products. And so we can't give you a confirmed timeline, but those are all the events that have to happen. And then there's the subsequent component of if we've got a code and we then have to get coverage through the guidelines and a price as well. Importantly, and this is the point that we really want to make here is that we have already pivoted in this direction, we are already working towards it, and we know what needs to be done. So the timing will depend on our ability to execute and our ability to focus, and that's where our attention will be over the coming months.

Do you think it would be optimistic to say that all that's going to probably done in [indiscernible]?

Again, I wouldn't comment beyond what I've already put out there. But yes, [indiscernible].

Okay. And then -- so I mean, how likely would have been for an organization like the NCCN or the AUA to actually go do such a conclusive analysis from a national provider?

I don't have any hard data on that, but my -- they are separate committees. They have separate priorities. One of the things that Novitas, we think, got right stylistically is when you do work -- when do you point out a third-party database, you're obviously absolving yourself of a responsibility in this particular situation is a responsibility given to them by Medicare. But you've got to pick partners that will be independent and rigorous, et cetera. And so as a general rule, we do believe that NCCN is rigorous and independent. And so if they've agreed to accept that as a criteria for involving NCCN, if NCCN inclusion happens [ specifically ] that would quite clearly overturn their determination on the LCD itself. So hopefully, that answers your question, Christian.

Sorry, a couple more questions and then I'll [indiscernible]. Your comments on Kaiser and the other private players that currently [indiscernible] Let me reframe that. Your comments on Kaiser and your expectation that they will continue to pay for your test, is that based on conversations you've had with them? What kind of communications have you had with Kaiser?

It's based on the independent nature of the contracts that we have with each of them. That's the foundation of that. We have, of course, had conversations with Kaiser, and they remain supportive at this time.

Okay. And then sorry, final one. You mentioned that you sort of have prices compensations in the [indiscernible]. I'm just trying to get around the same. But while you weren't able to move labs to another jurisdictions to avoid aggravating [indiscernible] are those conversations with [indiscernible]?

They're in their infancy. That's a fair assessment. So we are -- we know to whom we need to speak. We have a broad acknowledgment that they are willing to engage with us in an informal capacity, but the formal stuff can only happen if we elect to move our lab. Although David, would you like to add any other color to that particular question?

No. Peter, I think that's very accurate. Each of the [ math ] works independently. That's part of the process. And we need to continue the discussion with all of them to understand where we would have the highest probability of getting coverage before we're making decisions about moving the labs.

While we are not completely uniform across MACs, surely, the decision -- the conclusions reached by Novitas would have an influence on the other one [indiscernible]?

Yes and no. They are competitive. Remember that every 3 to 5 years, CMS puts out a rebidding process. And so all of the MAC compete with each other for new geographies. So there is certainly a competitiveness. And for example, in this recent Novitas LCD, they eliminated the use of [indiscernible] as -- and it's been around the market forever as they cover test. They are the only MAC in the country, as far as we know, that now has removed that. So there is not consistency across the board. And that's part of the challenge with CMS. They want it to be consistent. And so it's one of the other reasons that we think that what Novitas has done is beyond the median.

Your next question comes from the line of Robert Morrison on behalf of Craigs Investment Partners.

Can you hear me okay?

Yes, we can hear you, Rob.

Sorry. Yes, I'm really sorry to hear about yesterday's news because I think you've got a strong team and a good product. So hopefully, this is as bad as things get from a sentiment perspective. First question is: So assuming this decision stays in place for the future, I'm assuming that -- am I right in assuming that Medicare Advantage revenue collectability will go to 0, too?

The best answer is that that's probably right for your models. The reality is it will be a little bit messier than that. It takes a while for them to update their policies for the ones that have been paying. And so it may not be immediate. But over the long term, for your modeling purposes as an analyst, I would model it at 0.

Cool. And so we were talking before about how if we get to an NCCN guideline inclusion, then we can get coverage again. But correct me if I'm wrong, I thought there was a requirement that now for Cxbladder test to be done and covered, it must be preceded by a tissue or cell test, which pretty well precludes the use of the test. Is that right?

So yes, that requirement is there. This is one of the areas where we actually see conflicts. And since we're going into the details here, there are -- that -- those are the words in the LCD. And we -- and as naively read, that would mean that anything used prior to a tissue biopsy or because they did add another comment there, the substantiated suspicion of disease from a couple of other sources other than specifically a needle-operated biopsy, there are -- so there are a couple of parts forward here, and it's difficult. The one thing would be to try to figure out what the definition of -- or to modify the definition of substantiated suspicion of disease. Another thing would -- sorry, what's in conflict with what they've written there about substantiated suspicion and biopsy is that they actually do cover tests that are in the NCCN guidelines in [ compendium ] as part of the early cancer detection pathway for prostate. But NCCN doesn't operate guidelines for bladder cancer early detection, only AUA does. And so this is where through just the existing landscape, there are some exclusion criteria here that are very unfavorable to Pacific Edge while we continue to deliver clinical value. And so that's very hard for us to understand, and we do need to do additional work there to understand what would the position be? Could there be some early bladder cancer detection guidelines that we can get into? Can we help establish them? Could we highlight for Novitas and particularly other payers that hematuria is a substantial suspicion of disease? But those are very complicated questions that don't have a short path to being answered. And so -- but those are among the avenues that we think still need to be understood in the context of this determination.

No, it makes sense. Because I guess you're in a bit of a tricky position assuming things go forward as they are, right, where about 65 -- or sorry, 2 things, right? So a, 60%, 65% of the tests you sell won't be paid for; and b, by law, I believe the urologists can't decide to prescribe the test based on what insurance coverage they have. But so that's for the population as a whole, right, that apart from the large institutional accounts you have mentioned are there areas of the population that you could target that would have a high -- they only do private pay where you would get paid, for example?

Yes. So one of the options that I alluded to before, and we're evaluating this option and they absolutely would be consequences to adoption if we increased the patient billing component, but it is one thing that other companies in this space do, do. So again, our list price is still $2,995. Our Medicare reimburse price is $760. We can offer a patient responsibility in our billing practices of some other number. And when your insurance company denies you on the $760, whether your insurance company is Medicare or any other private payer, we could then say the responsibility of this patient is X. And that is the strategy we are yet to evaluate. There are comparables in the market. And we will look to determine whether that is a viable path forward.

Okay, cool. So I think your cash burn was about $30 million in FY '23. Very roughly assuming things continue as they are, do you have a pretty rough idea based on the contingency planning you mentioned how much you could reduce that by, like, where are we, at like 15% or 33% or something like that or?

We believe that, that decision will follow the revision of strategy. And so once we determine those options, we will be able to advise you. And we'll [indiscernible].

Yes, makes sense. So because Triage, like you mentioned I got in on that, it was an LCA, right, and kind of got newly covered based on that. So how does this new Novitas decision reconcile with that and that it seems like another -- presumably another department granted on your test coverage and then a month or 2 later, they come out and say none of them have coverage. Do you know what that thinking was on that?

The short answer is no, and it is very hard to know. But we will engage with Novitas to try to understand what we should be doing.

We have a number of questions come in online as well so we should try to address some of those as well.

Perhaps a good opportunity to gather those, get through some of those now. We got 15 minutes left or so.

Yes, sure. A question from Andrew. Can you please discuss Novitas's concern about high number of false positives from Cxbladder bladder tests?

Hopefully, I addressed that earlier in the presentation. So physicians should not be making a determination for Cxbladder Triage or Cxbladder Monitor on the basis of its positive predictive value. These are high NPV tests, which are optimized specifically to rule out the healthy patients. And those with positive results are encouraged to continue a physician-directed protocol, which means the continued evaluation putting the standard of care, looking for all possible cancers. And that's very, very important. We -- that is -- and so that is why Novitas appears to completely misunderstand that issue. And it's not about false positives, it is about how we have designed our test to provide the highest possible negative predictive value.

Next one, Grant.

Aaron's asked, we're bringing on board a well-regarded U.S. biotech or healthcare partners strategic shareholder, operating benefits to the [indiscernible] on regaining CMS coverage and improved U.S. access.

Sorry, Grant, I didn't actually catch that question. Could you say that again?

Okay. Bringing on a biotech partner with a well-known name in the U.S. would then open doors and assist in getting coverage in?

I'm happy to take that. I think in the fifth bullet point [ page ] of the alternatives we had, there's one called other strategic options. And all of those strategic options will be on the table.

Great. Thank you. What is the view of other urologists that are using the test at the moment? Do you perceive that there's the opportunity for them to band together? And I think what they mean is band together against and make a submission to Novitas?

So we -- so we will be approaching our customers -- and David is probably best positioned to answer this question, to be honest. But we will be approaching our customers and key opinion leaders to get their views. We will also be reviewing line-by-line the Novitas decision with our medical affairs team and then seeking an opportunity to get senior key opinion leaders to sign on to our analysis and use that as part of any future processes. But I would be reluctant to comment beyond that. But David, if you have anything else, any other color you'd like to add?

No, I think that's accurate. I actually got to see an early draft of that line by line. I was very impressed with that, a little more work to do. But we will be getting clinicians to opine. Unfortunately, and this is by design to some extent, Medicare and the MACs don't have a lot of vehicles for people to make formal requests or complaints in Medicare other than during the open comment period. And that's one of the procedural things that we think Novitas did incorrectly in this case, where they added a lot of language into the final LCD that was not in the original draft LCD, therefore, we did not have a chance to comment on that. And that will be our primary argument for why this should be retired before it goes effective.

And David, would you make any comments because when we've discussed, you mentioned that there is a meeting in June, an open meeting, and how we might be able to express opinion there?

Yes. I'll tell you what I know, but I'm not as clear as I would like to be. There is a meeting on June 21. It is positioned as a question-and-answer period for how you code for this new LCD. We are working with some of our key opinion leaders in the Novitas jurisdiction to see if they all have an opportunity to talk and comment in that period. We don't know exactly what that's going to look like, whether they will be able to make comments or not, but we will obviously attend and listen and hopefully, some of our clinicians will be able to express what I believe will be their strong disappointment for no longer being able to serve their Medicare patients as well as they'd like to.

Thanks, David.

I think you've covered most of the questions on this one. But we haven't covered private payers or commercial insurers. So will the test continue to be covered and paid by private insurers in the U.S.? So that's excluding Medicare and Medicare Advantage.

Where we have positive medical policy and a contract in place, those are the documents that govern whether we'll be paid by private payers. And so all the prior statements are true. And the non -- which we bill private payers with whom we don't have a contract. And again, this is somewhat in the weeds of the American healthcare system, but we have always acknowledged that we don't get paid on the majority of those patients. And that's just a part of why our ASP is actually lower than $760, which is the right reimbursed by Medicare. So there are a number -- as we go forward, we will look to change that. But that's not -- that is what we mean when we say we expect to be paid in line with historical receivables from those payers.

Pete, the only thing I'd add to that, Pete, is the clinical evidence that we're developing that will be helpful with not only Novitas and the other MACs and all the guidelines committee will also be extraordinarily appropriate and useful with the private payers. So the data that we're developing here has multiple uses. And I believe once we get some of these first studies published, we'll have a strong case to go back to commercial payers and sign contracts for ones we do not have contracts today.

Thanks, David. Grant, anything else in the last couple of minutes?

Yes, there's been a number of questions come in, but I think we've covered most of them as far as we can. There's just one that's just come in. How do we mitigate the very high-risk of Novitas and others misunderstanding and then branding our products? In other words, what are the lessons to learn to avoid this happening again? I think you've addressed it with the clinical studies and the real focus on those.

Yes. Look, so Grant's part answer there is right. Obviously, we need to address their concerns. We have a team of people in the U.S. that do try to engage with Novitas. It's not always easy. The [indiscernible] also made it difficult to engage on other issues, although we did manage to do that. Generally speaking, our MAC is someone that we expect that to be able to approach, have consultation with. And that is part of the issue with this particular determination is that there was no -- we've essentially been given an evidentiary review without a consultation and without the ability to comment back, as David said, because they added so much between the draft and the finalization, which is unprecedented. So possibly, there are procedural reasons why we might challenge this. There are substantial reasons why we might challenge this. And those are all options -- we leave all options on the table. But I'm sorry for rambling, but in terms of the lessons learned, we think even prior to this determination that there are lessons that we have learned that are in our practices that put us in a better position going forward.

No further questions that have come up.

Thanks, Grant. So we still have time for one question from the folks on the phone.

You've got a follow-up question from Matt Montgomerie from Forsyth Barr.

Just one more follow-up quickly. Just noting the LCD has a reconsideration option, can you just explain the reconsideration request process timing of this, and what sort of precedents you can point to within Novitas or other MACs?

David, would you like to fill that?

Sure. There is always a reconsideration process. And that's actually the biggest change that Novitas made between the draft and the final LCD. They opened up this other pathway that they hadn't had in the draft for reconsideration. It goes without saying that we've been doing a lot of work in the last year since the draft was put out. And we already had put in a request for reconsideration to Novitas. That request had been accepted. We believe that the LCD that came out is basically their answer to us on that reconsideration request. We're going to continue to pursue that. But they did -- Novitas did look at all of the data up through the most recent publication in 2023 in their LCD. So we really believe that while we certainly have the reconsideration opportunity, it will be most effective when we have additional data points.

Yes.

Thanks, David. One more?

Your next question comes from the line of Christian Bell from Jarden.

Yes. So would you be required to change the study design of the current study to address the concerns or you don't actually think that that's required?

We don't believe that changing the study design of the current studies, DRIVE, microDRIVE and AUSSIE is necessary to be considered useful supporting documentation by guidelines committees.

Okay. Great. And then just given you will continue to provide without payment and you're kind of, obviously, size of the business or [indiscernible], how much flexibility is there actually in the current cost base going forward, like even you will be looking at cost saving initiative?

So probably no comment on that, but -- I don't want to comment too much. We obviously cannot continue to provide service at the current levels without finding a way to get paid for the tests or without cutting costs here. There have to be -- we have to rightsize for the situation that we're in or without getting the decision overturned. So there's only a short period of time where that is appropriate. And I think that was addressed by saying -- under the heading Short Term in the presentation.

I think that's right, Pete. We have to be very conscious of our obligations to our staff. And we'll be treating those with respect and accordance with the law. So not the right form probably to talk about much more than what Pete just said.

Okay. But with the investment and digitalization, which was quite important against catalyst for FY '24, I guess is there a risk now, or is there something that you're not willing to give up?

Everything will be reevaluated in light of the new strategy, which is yet to be determined, so yes.

Every thing's on the table.

We have a hard stop. So thank you, everyone.

I think the time has come. So thank you, Peter, Grant, David L, and thank you for those online and on the phone. There will be, I guess, the next formal opportunity for deep questions and answers will be the ASM in July, assuming that develops in the interim, of course, we'll be very mindful of the continuous disclosure obligations. And we'll be disclosing as and when things materialize. So with that, I will call an end to the meeting. Thank you all for your time. And we'll move on now to the next session with our staff.

Thank you, everybody.

Thanks, everybody.