Pacific Edge Limited (PEB) Earnings Call Transcript & Summary

Good morning, everybody, and welcome to the Financial Year '25 Results Presentation for Pacific Edge. My name is Dr. Peter Meintjes, Chief Executive. With me here is Grant Gibson, and online and available for questions is our Chairman, Chris Gallaher. Please pay attention to the important notice in the disclaimer for every -- for the information that relates to this presentation. A quick agenda. We are going to look at our highlights. We're going to look at strategic delivery, financial performance and then end with some outlook. All right. So recapping our financial position here. We have had a reduction in the number of global tests that we operated this year, 11% down to 28,894 tests. We have had a reduction, but not quite as dramatic with our commercial tests down to 24,642. Our operating revenue as a consequence has also come down. Our net loss has remained roughly the same, and our cash and cash equivalents for the end of the March 31, 2025, reporting period is $22.6 million. Importantly, though, we consider this to be a resilient operating performance amid the Medicare uncertainty that we had navigated through the entirety of the last financial year. And while we have had an adverse Medicare Local Coverage Determination after the end of the financial year, which I'm also happy to talk about, that has impacted us as well. The operating revenue, net losses and cash burn is steady. Our tests per sales FTE has actually risen. So efficiency metrics that we care deeply about have improved. Our ASP when looking year-over-year has improved, although we did see a reduction due to some accounting accrual artifacts in the second half, and we can discuss those later. And non-Medicare revenues are actually up and represent now 57% of U.S. volumes and are continuing to grow. And that's been a focus for us as a business since we had the reduction in our sales force back in 2023. And this has been supported largely by the inclusion of Triage in the AUA microhematuria guideline. The longer-term economics, we believe, are reinforced by the draft CMS pricing of Triage Plus, which has been established at $1,018 per test, an improvement over the $760 per test for the current generation tests. A reminder, particularly since today's financial announcement comes at the same time as an announcement about a capital raise as a reminder of what we're all chasing here. We're chasing an $8.5 billion global total addressable market that focuses on 2 products or 2 areas of value, the hematuria evaluation in which we have Triage, Detect and Triage Plus and the non-muscle invasive bladder cancer area where we have Cxbladder Monitor and in the future, Monitor Plus. The total addressable markets are substantial, and that is one of the great opportunities that we have here. And our goal is to capture as much of that as we possibly can. So how do we do that? We create value for shareholders through 3 pillars. The first of those, adoption, retention and revenue generation. We'll speak quite a lot about that in the context of our financial results today. Evidence coverage and guidelines is something that has increasingly become a strength of ours at Pacific Edge and has been the driving force behind our inclusion in the AUA guidelines and will be the driving force behind the reconsideration requests for coverage. And, of course, Pacific Edge has a proud history of research, development and innovation, our third pillar of value creation. So what -- since the last time I spoke with our investors in a financial results call, the major achievement that we have knocked off as a company is inclusion in the AUA's microhematuria guideline. This is a company-defining strategic milestone and allows us to think differently about our path forward. Importantly, while the guideline focuses on intermediate risk patients who want to avoid cystoscopy, clinicians can actually order this on microhematuria patients of any risk. But the primary driver for the change in the guidelines was the clinical utility in the STRATA paper. The AUA would not have updated their guidelines to include multiple different urine-based biomarkers had it not been for the strength of the STRATA study that demonstrated how they should update the guidelines. And the STRATA study is excellent, but it is also imperfect. The guidelines language that you see today is the strongest language that we think was achievable on the basis of the evidence in the STRATA study. And our ongoing studies will only improve the quality of that language. Importantly, Triage was mentioned as the only urine-based biomarker to have Grade A evidence. And again, Grade A evidence is something that is only available to tests that have performed a randomized controlled trial. And since we are the only ones who have done so and the only one -- only company continuing to do so, this has created, not only a first-mover advantage for us, but also allows us to build a moat around our business vis-a-vis any competitors. The change was actually quite significant. Prior guidelines actually advised against the use of urine-based biomarker, and that's one of the reasons that the AUA took us through a protracted process through 2024, where it had to go out for peer review in September. But the 2025 guideline brings bladder cancer or hematuria evaluation for bladder cancer more closely aligned with other established disease states within oncology for prostate, breast, colon and other cancers. Although -- so intermediate risk patients, we have estimated it being around 70%. But this is actually something that's kind of unknown at this point because during the update to the guideline, the AUA also changed their definition of low, intermediate and high-risk patients. And so, that is something that we estimate it being around 70% of the patients, but that will be something that pans out over the course of the next couple of years. Importantly, this is about patients, and there are significant benefits to patients by reducing the burden of cystoscopies. And at the same time, there are benefits to payers where we reduce the costs associated with treating patients. And we also, for the physicians, reduce any legal liability of providing this option to those patients. We have -- we had the opportunity very shortly after the -- very shortly after Triage was included in the guidelines to be physically present at the AUA's Annual Meeting. And we have updated our investors about our presence at that meeting. But it's really fantastic to see independent urologists talking about the changes to the guidelines and using Cxbladder as the example for how they should treat patients going forward when they don't -- when cystoscopy is not appropriate. So, of course, around the same time as we spent time at the AUA, there was a Medicare non-coverage determination that came out in April. We note, of course, that this is inconsistent with the AUA guideline and the company believes very strongly that over time, that it is a matter of time before the coverage by Novitas is brought into line with the recommendation from an entire association of urologists are based in the United States. However, in the meantime, as we look at Medicare, it has been -- historically, we were paid at greater than 98%, and it has been the bulk of our revenue to date. We -- as mentioned already in this presentation, and I will mention it again, the percentage of tests though and the percentage of revenue that comes from non-Medicare sources has increased since it has been a focus for us as a business. We have challenged this determination, but ultimately, we lost. And -- but we believe that this can't really stand when contrasted with the AUA guideline recommendation for testing. So while 47% of U.S. volumes are from other contracted payers like Kaiser, the Veterans Administration, Blue Cross Blue Shield and noncontracted private payers, we expect these volumes to continue to grow without interruption. And for our Medicare volume, we are continuing to seek reimbursement for all Triage tests ordered on Medicare patients through the Medicare appeals process. We are also, for commercial patients, seeking to create client billing relationships, and we'll have more on that information as we go through our early access program for that. Long term, the definitive path forward for Pacific Edge is to be recovered on an LCD. And that LCD will be L39365. So we have reconsideration requests that have already been lodged with Novitas. We lodged the 1 for Triage in -- on the 20th of March U.S. time, and we lodged the other one in mid-May for Monitor. The 1 for Triage, of course, includes STRATA, the evidence that Novitas did not review as part of establishing the LCD, and it also includes the guideline recommended language and references to that guideline that is now under review. For Cxbladder Monitor, we've included 2 new real-world studies from Australia that were published in March. And those are of a clinical utility and clinical validation of Monitor in that setting. For Cxbladder Detect, we haven't generated new clinical evidence for some time. And one of the requirements for a reconsideration request with Novitas is to have new evidence submitted. So given that there is no new evidence, we have accelerated a plan that we had proposed to coincide with the migration to Triage Plus. We've now done it commensurate with this decision and are moving users from Detect to Triage. And one of the sort of post results points I will mention is that, this is, by and large, going very well. It is operationally very difficult to do for our customer service team and our commercial team. They have responded very, very well to this. And I'm pleased at the percentage of volume of Detect that has moved to Triage since we have deprecated the availability of Detect in the U.S. The bigger picture, industry experts typically estimate that it would take 6 to 9 months from the time that a reconsideration request is deemed valid for a single publication with only a small number -- sorry, a single product with only a small number of publications supporting it to be reviewed by Novitas, but Novitas does control that time line entirely. Also noting, as I mentioned before, we will attempt to get reimbursed on all Triage tests, and that includes an approach of appealing all of those tests through the stages of Medicare appeals using the guidelines as the primary reason for that as justification for them being medically reasonable and necessary despite a noncoverage determination. As we look ahead to Triage Plus, which is very much how we think about the future of our business, Triage Plus incorporates DNA to be a multimodal RNA plus DNA test. And the analytical validation and the clinical validation of Triage Plus has already been internally complete. The analytical validation, we have put into a fast-track journal to get that turned around and published really quickly. The clinical validation, we go for journals with an impact factor that is commensurate with the quality of the study that is in it, and we are -- and so we're chasing a higher impact factor journal -- and -- because that includes the results from the DRIVE study, which have been published as interim results as part of the AUA meeting as well, showing the performance characteristics for Triage Plus. So we will submit a reconsideration request for Triage Plus as soon as it is available. We need -- or sorry, as soon as the AV and the CV for Triage Plus has been published. And we are currently expecting that those will be before the end of the quarter, though when you go for a higher impact journal, as we are for our clinical validation, the time lines can sometimes get pushed out. In the meantime, we are running Triage Plus under early access, and we are leveraging Triage's inclusion in the AUA guideline as de facto medical policy for Triage Plus. And so, we are going to appeal those claims for Triage Plus during the early access program as well. Further evidence for Triage, and this is actually -- this is far more than a single bullet point on a single slide. The evidence published by Kaiser Permanente at the AUA was phenomenal. And we have put this out to our investors in a prior update, highlighting the importance of this. It is 3,353 patients, which puts to bed any notion that we might have poorly statistical -- poor statistical power in our clinical studies. And the results of the study are in very, very tight alignment with what has already been published for STRATA. And so, again, solidly endorsed the position of the AUA guidelines in recommending Cxbladder with Grade A evidence. An additional bonus, once this has been peer-reviewed and published, which we're anticipating will be in Q3 of FY '26. We expect that it will also demonstrate clinical utility and health economics in tandem within the Kaiser system. So one -- and 1 final point, we -- several months ago, we told investors that we were chasing 3 things. We were chasing coverage for all our products in Triage Plus, which at the present time, we are not successful. But we were chasing 2 other things, and that was guidelines inclusion, and we have that. We're also chasing a higher price for Triage Plus, and we also have that. That price becomes effective in January 2026. So importantly, how should we be thinking about Medicare recoverage and the estimated time lines? I already mentioned the 6 to 9 months. How are we mapping this out as we think about it internally? We're -- what we're really looking at is a decision somewhere between late Q3 and Q4 on Triage if all things go as we expect. But we note that it may take longer than that. That is, of course, possible. But on the strength of the evidence of the STRATA study and of the strength of the AUA microhematuria guidelines, we expect a very high probability of success for the reconsideration request for Triage. There is also a reconsideration request for Monitor based on the analytical validation publication that we put out last year and 2 real-world studies. And as mentioned on the previous slide, the reconsideration request for Triage Plus will only begin once we have the analytical validation and the clinical validation complete. At the bottom of this slide, you can also see the future catalysts for guidelines inclusion and Medicare coverage because our evidence generation program is ongoing. The STRATA Concordance publication is very important because that will allow us to establish equivalents between the performance of Triage and the performance of Triage Plus. So when we try to make the arguments that if Triage is medically reasonable and necessary, Triage Plus should also be medically reasonable and necessary, this will be a foundational paper for that. The Kaiser Permanente publications, I've already mentioned the first one, the one on Triage. There'll be a second one on Monitor to come out. And that one is also currently under construction, but there is no interim abstract that's been submitted to a conference yet for that. Our other critical clinical validation studies for Triage Plus include AUSSIE and microDRIVE, and they will be combined together in a pooled analysis. And we are already thinking about the analytical validation of Monitor Plus, the LOBSTER interim analysis and CREDIBLE, which is the clinical utility study to change the standard of care again with Triage Plus. During the last year, our volumes did fall amid the sales force being able to reach, not as many customers that we would have liked because there just weren't as many people in the team and the uncertainty of the Medicare coverage. But nonetheless, global throughput was not particularly different between the first half and the second half, but just a little bit down on all of last year. Our payer mix has changed a little bit. And so, as we look at FY '25, we can see a greater percentage of Triage tests. This is mostly driven by Kaiser. But going forward, this will be substantially driven by our decision to stop offering Detect, and you should see a significant change in that payer -- sorry, in that product mix. Our contracted U.S. payers underpin the growth that we've observed. And so, our relationship with Kaiser Permanente is very strong. We've seen an increase in U.S. commercial volumes of 2.7% against the prior half. Our non-Medicare volumes overall represented 47% of our commercial volumes versus only 40% in FY '25. And qualitatively, there's been strong performance from Kaiser in the Southern California region, with all 15 sites ordering, again, dominated by Monitor -- sorry, dominated by Triage, but with Monitor also increasing. The real-world evidence from Kaiser and the partnership that we enjoy there is already returning dividends for us as they look to grow internally. But when they start to publish outside their system, that will attract even more urologists to the value proposition of Triage. So we have begun to see the impact of the Medicare LCD after it's become effective on some of the volumes, but we expect to continue to use Triage -- sorry, to use the guidelines to drive volume for Triage across all payer types. The sales team has been focused on a couple of key performance indicators here, and both of them are going -- are trending upwards, which is good. So what we've observed towards the end of the -- in the fourth quarter for the year is that, we have 405.6 tests per sales FTE and actually our highest ever tests per ordering clinician and also with ordering clinicians not actually reducing. So both those 2 graphs showing positive trends within the context of the headwinds that we've been asked to navigate. We continue to focus on the most profitable territories. And overall, we are seeing a change in the mix of clinicians that understand the value proposition of Triage and that understand that they should be using Cxbladder tests more generally as part of the decision to defer a cystoscopy. Our cash collections continue to improve year-over-year, but we do note that the $571 million for the second half of the year is down on the $618 million. But the overall increase has been generally driven by the enhanced patient responsibility program, the increased percentage of Kaiser Permanente in our payer mix, the Medicare reimbursement for Triage, which historically kept that low and an improved payment on initial claims and on appeals because we have the right medical necessity documentation. We also -- we generally expect that these improvements are maintained and barring the variances related to accruals and the increased provisions against revenue, we expect this to continue to maintain or increase. So as previously mentioned, we have established a higher price draft price of $1,018 per test. And this improves the margin and margin percentage for any test ordered going forward. This will not be effective until January 2026, and it will not be effective until we have coverage for Triage Plus. But when thinking about the future prospects and the future profitability of the company, this is the number that you should have in mind for Triage for all hematuria volume. As noted earlier, a reconsideration request will be made as soon as we have the AV and the CV, and those are estimated to be published in June, though the CV may take longer through peer review. We are also accelerating our path to profitability by adding digital capabilities. Specifically, we have launched versions of a digital customer portal and a digital portal that reaches multiple users through the Lumea system. And, of course, those announcements were made through the course of the year. We have -- we continue to work on optimizing our laboratory information management system for improved workflow and efficiency of the technicians operating in the lab, and that's going to be -- that's going to continue to be a point of focus going forward. Optimizing our sales team structure and for expanded product adoption. Sales and marketing materials now reflect the AUA guideline messaging. And we continue to enhance the way we educate our customers through medical education speakers bureau, podium presentations, talking about our evidence development. Of course, it's not just what's happening in the United States. And as we look to the Asia Pacific region and consolidating in New Zealand, we did have a slightly down half for the second half over the first half. But both -- sorry, when you consider the entire year, we are up over any prior year and doing well in the Asia Pacific region. The STRATA paper and the AUA microhematuria guideline are also well understood within the New Zealand operating environment, though they don't, strictly speaking, follow the AUA guidelines. Southeast Asia is still in business development, and we continue to extend into that market through a distributor network. And one of the things that we are working on from an R&D perspective is that, we will continue to seed this market until we have an IVD kitted product that can serve the market with a laboratory in their local market. So our customer experience initiatives are delivering value. And as mentioned on a previous slide, we give customers a number of different ways to connect with Pacific Edge. The best example that we have is our 1-to-1 EMR integration, of which Kaiser is the most notable. And we also develop 1-to-many integrations with digital pathology, for example, Lumea and also Awanui in New Zealand. And we have a customer portal that is available to any customer account in the United States for the current release. We actually had to use -- as we transition customers away from Detect into Triage, we had to modify the digital tools, but it provided us with a great incentive to get people into those platforms as well. This improves the end-to-end experience for the ordering clinicians, and it makes it easier, whether it's in-clinic or the in-home sampling. It allows -- future features include the optimization of test kit management where they will have -- where each clinic will have a better understanding of their own inventory because it can track the inventory within the customer portal. And so, there -- but the primary features are having enhanced visibility and tracking over the orders as well, where once they placed an order, they also know where it is in our system. Pacific Edge is -- there are obviously a number of operating benefits for us, and that includes fewer errors on manually provided paper TRFs that are faxed or e-mailed to us, faster accessioning in our lab and delivering results to create and thus, reducing the demand on our sales force and our customer service teams to be more efficient and effective. One of the extensions of an initiative we've talked to investors about for quite some time, we have largely talked about simplifying Cxbladder. But 1 goal of -- there are a couple of different goals associated with simplifying Cxbladder. One of the goals, of course, is to make our current laboratory developed test, our testing service simpler for the technicians to operate. But another goal that has now been segmented from that goal more completely within our R&D team is to focus on making Cxbladder so simple that the reagents necessary to run it can be put in a single kit and that, that kit can be provided to other partner labs as an IVD. This will take some time to fully develop. But we intend to make that a focus of our R&D going forward. And what it means is that, Pacific Edge will operate in an IVD environment. We'll operate in an IVD superset environment that encompasses the regulations of Europe, the U.S.A. and the rest of the world through ISO 13485. And when we achieve these status in the different markets, it also increases the moat around our product versus any other competitors. I'll turn now to Grant for financial performance.

Great. Thank you, Peter. Top line operating revenue for the financial year '25 was $21.8 million. So that was flat half-on-half, but it was down 8.6% on the prior year. And as Peter mentioned, the reduction in revenue was largely attributed to the drop in our U.S. sales force in the second half of the financial year '24. The key point on this slide is the increasing contribution that the APAC region is making to our overall contribution or overall revenue, which is reducing our reliance on a single market, and that is one area of focus for us. If we look at the cash, we had $22.6 million as at 31st of March '25. And the cash burn was largely flat half-on-half. The cash on hand will be assisted by the capital raise that we announced this morning on the ASX and NZX platforms of $20 million. When we look at the -- look a bit deeper into the numbers. As we said, revenue was steady half-on-half, but we do note that there was an increase in the average sales price to $594 versus $584 in the last financial year. Our operating expenses increased slightly second half versus the first half, but they were down 7.3% on the prior year. And that's largely in line with the revenue reduction as we reduced our focus on cost efficiencies and cost saving to make sure that our cash burn was retained at a level similar to prior years. Digging slightly further into our expenses, there's 2 key points here. And they really show in the year-on-year comparison of our research costs, which were up 21%. And that increased investment, particularly in our clinical studies, aligns heavily with our third pillar of evidence coverage and guidelines. The other key point is the reduction in our sales and marketing costs of 31% year-on-year, and that was driven by a significant reduction in our U.S. sales force in the second half of last financial year. Thank you, Peter.

Thanks very much, Grant. So as we look forward, the AUA microhematuria guideline inclusion was a company-defining milestone because it enables us to drive sales, improve our marketing messages, but importantly, on the back end, handle reimbursement activities in a way that we didn't have opportunity to do so before. So we're determined to maximize this milestone through existing and new initiatives. The Triage Plus draft pricing gives us essentially a larger total addressable market based on the price of the test, supports stronger unit economics, margins and sales force efficiency for a faster path to cash flow breakeven and profitability if successful in reestablishing Medicare coverage. Our growth strategy that we are looking to accelerate with the new capital is, number 1, entrench our first-mover advantage and the moat for Triage, given the AUA guidelines inclusion; 2, continue clinical evidence generation for our future products, Triage Plus and Monitor Plus; 3, increase Triage throughput, throughput per sales head count and throughput per clinician to demonstrate the unit economics and profitability of our sales team. We will continue to seek Medicare -- seek reimbursement through the Medicare appeals process, again, relying on the AUA guidelines ahead of the resolution of the multiple reconsideration requests. We will increase the percentage of electronically ordered tests in our business, and we will also be focused more on patients with commercial insurance. We'll continue to emphasize the clinical and economic value of Cxbladder as a value-based care solution in our messaging to selling to institutional integrated hospital systems and payers. And we will initiate a client billing program to allow LUGPAs and hospitals to pay Pacific Edge for a test and then take over the billing for the commercial insurers themselves. And we will continue to invest in innovation and product development for IVD kits to support entry into international markets in a decentralized deployment model. And further catalysts, Cxbladder is under consideration by Te Whatu Ora for a national pathway in New Zealand. And so, with all of that, I'll thank everyone for listening. And now I will take questions.

[Operator Instructions] And your first question comes from the line of Rob Morrison of Craigs Investment Partners.

So you mentioned that post coverage loss, there had been an impact on U.S. commercial test volumes. Could you quantify that, please? Was it down, say, 20%? Or is it more like 30-plus?

So it's just not as -- we haven't obviously published that figure to the market as part of these results. But just to give you some context, we think the number is less than 20%.

Great. And then looking at the other, so what is revenue, revenue per test number of tests? On the revenue per test, about 40% that of your revenue is coming from Medicare. So there will be a decline of about 40% there, but there will be some gains from private payer mix shift. Is that the right way to look at it?

Yes. So we do expect a greater percentage of commercially insured or private payers in our mix going forward, although it will vary quite a bit by product. Again, our appeal strategy for Triage means that we will continue to expect physicians to order Triage tests on their patients. And so, that applies to Medicare, Medicare Advantage and commercially insured patients. But the high-level market trend as it were is that, Triage is used a lot on microhematuria patients and microhematuria patients, and that's what the guideline was for, right, microhematuria, they skew slightly younger than the Medicare population. The average age of someone with microhematuria is 52. So, again, we expect on average that for Triage, the average age will be down. And so, the payer mix will be a greater percentage of commercial patients going forward.

Okay. Okay. Wonderful. And then -- so putting those 2 data points together, I guess, it will be reasonable to expect FY '26 revenue to fall maybe 30%?

We obviously don't give forward-looking guideline -- forward-looking guidance on that. But there will be some reduction in revenue anticipated, and we have modeled those scenarios as part of the capital raise.

Very good. Then could you give me on the cost base then, please? And just directionally, because I was looking at -- I look at that $21 million in the second half, and I wonder if I should annualize it. And then I think the sales force had contracted a fair amount in the fourth quarter. So how should we think about that?

I think as a first pass, noting that there's quite a lot still to come for the year as a first pass, it will be about the same in terms of cost base. We will continue to look for any avenues that we reasonably have to reduce unnecessary costs. That's just part of our MO in a cash burning company. But that's -- you can model it at this stage as being about the same.

Great. Great. And final question, if I may. Can I please just get an update on Kaiser? So specifically, in Southern California, is there still a decent runway to growth so we could triple where we are from here? And then just progress on Northern California?

Yes. So I maintain the view that the Kaiser implementation in Southern California has gone about as well as it could have gone. We saw an immediate step up. Again, we don't quantify this for investors, and we don't want to pull out Kaiser-specific revenue or data. We wouldn't do that for any customer. But sort of qualitatively, we did see a significant step-up immediately after the EMR was integrated. And then we have seen steady growth. I think there was only 1 month where we didn't grow. And is there room to grow? Absolutely, in our view. There are still plenty of doctors that are not using it on all of their patients. But maybe as a kind of an anecdote, the team at Kaiser were recently -- they went through an internal process where their finance department came and chatted to them about how the program is going. And their finance department came out feeling pretty happy about the whole thing. So when your finance department is on your team, you're in pretty good shape. And they are recognizing the savings in their system. They're recognizing the improvements in patient care and the physicians that we speak to at conferences are loving it. So I believe there is room to grow, and there are always going to be some laggards who will take some time to adopt despite a protocol.

Okay. And then on Northern California?

So look, we continue to try to press into other parts of California -- sorry, of the Kaiser system. Northern California is obviously the largest single system within that, but those conversations remain in their infancy. But the publication of the data that was published as interim results at the AUA and is in preparation, we see as the major trigger point to getting the rest of the Kaiser system on board as does that financial meeting, right? If the folks in Northern California understand how much they'll be able to save by adopting something that already exists in Southern California, we may be able to build momentum through that as well. But that is -- there's not yet any clarity around the time line that I could give you for that. `

[Operator Instructions] And your next question comes from the line of Matt Montgomerie of Forsyth Barr.

Just checking you can hear me okay?

Yes, we can.

Yes, perfect. Just firstly, on sort of Triage in the context of guidelines, I'd be interested if you could talk to, I guess, urologists view stroke feedback and maybe even sort of ordering patterns in the non-CMS bucket post the announcement a few months ago around guideline inclusion?

Yes. Look, the feedback, admittedly, when we go to conferences like the AUA, we interact a lot with our key opinion leaders, people who have been involved in our studies, people who are in the Kaiser system. But we also do spend a lot of time meeting new doctors and new physicians and many of them actively came to seek us out during the AUA because of the prominence given to the change in the microhematuria guidelines and Cxbladder's prominent role within that. So now it's up to our commercial team to capitalize on all of that momentum. But I would say, there are a number of users who are new to Pacific Edge, and there are a number of users, a significant number of existing Detect users that are now new to Triage as we're migrating them across. And the reaction when they understand that it's in guidelines and this is the test they should be using is overwhelmingly positive. And we view the kind of the impact that we have observed to the number of resulted tests to be largely an artifact of the logistics of trying to migrate customers over from 1 test to another and that actually we'll be able -- we'll be growing volume pretty soon.

Okay. That's useful. Then just going back to Rob's question on the cost base, just confirming, so are you suggesting that the first half OpEx will be similar to last year? Or is it -- just clarifying.

It will be slightly down. But I think as a first pass, you can model similar, but slightly down is probably the way we're thinking about it.

Yes. Okay. And then just cognizant you've got reconsideration requests out there. It'd be useful just to understand the scenarios or the ranges in light of the different scenarios in terms of OpEx, like if you get an unfavorable reconsideration request or outcome, like where do you think -- how aggressive and where do you think OpEx goes to? And then equally on the other side, how should we be thinking about it?

I mean, I think the OpEx is going to stay roughly the same. Again, we are expecting -- our sales force have an objective to sell every Triage test that they possibly can, and we are going to be working very hard on the billing and reimbursement side to make sure that we get paid on every one of those tests. So we expect the OpEx cost base to be about the same, maybe it will be dependent on volume. And then going forward, of course, that will be determined by the per rep unit economics. So if the economics of operating a sales rep can be improved to the point that they are bringing in 2 to 3x their cost when contrasted with what they do today, which is roughly breakeven, then that is how we are thinking about how we would add further cost to the cost base. Grant, do you want to add anything else to that answer?

No, I think you've covered it. Yes, a lot of the investments we're doing are about making it easy to order. We've got the guidelines at our back. So we're expecting that sales force efficiency to increase, and that will really be the determinant. So we continue to monitor that really closely as to how many tests each account executive putting through and then their economics.

Yes. And just specifically on research costs, $14.6 million the year just being -- that's sort of the area where presumably you've got a very good line of sight almost irrespective of the LCD. How should we be thinking about that in FY '26 and then maybe a few years thereafter?

I mean, our -- we don't foresee that increasing. I mean, we have a series of trials that as one rolls off another will roll on, but we're not expecting to increase the costs on a monthly basis associated with any of the R&D work that we do.

Okay. That's useful. And then just sort of in the non-CMS U.S. business, revenue per test has been flat for sort of a couple of halves. Are you -- with guideline inclusion now, are you sort of expecting any growth there? Or do you think you're sort of like from a patient pay point of view, you've exhausted the lower-hanging fruit and just the billable percentage as well?

That's a really great question. So look, as commercial becomes a greater part of our payer mix and as we become successful with our commercial payer focused initiatives, we would expect that the ASP increases. However, these things take quite a long time, particularly if they have to go through appeals. I mean, looking at 90 to 180 days often to get paid by third-party commercial insurers in the U.S. So that will delay our ability to answer that question with any level of accuracy. But that is a long-term expectation that I think you can have, yes.

Yes. Okay. Then just sort of if we get a positive outcome around the LCD reconsideration shortly, would you look to raise capital again at that point, like cognizant that with revenue falling $20 million raise is obviously helpful in the context where the business is? Any thoughts on just the quantum of the raise today? And then...

The most uncertain variable regarding coverage, again, if we restrict ourselves to just thinking about Triage, the biggest variance is uncertainty comes from when we will be covered. It's not really -- I mean, look, it's very -- nobody can guarantee anything in life. But I would -- we have talked to no expert anywhere that believes that when you are in guidelines that your test is not covered. Those -- that kind of inconsistency, it can exist, but it has to resolve. And it has to resolve in favor of guidelines. That's a very, very firm view. So it would be -- we contemplate the scenario like theoretically, but the view overwhelmingly that we have and that we're operating towards is that, Triage will be successful. Monitor is a different story because Monitor is not in guidelines. Monitor has new evidence that supports its inclusion as a coverage test. And again, we expect a fair hearing from Novitas on that. But I would put a lower probability than that on that, but a very, very high probability on success for Triage.

Yes. I suppose what I'm getting at is like if you include your net cash today or 31 March, we're sort of looking at $42 million, $43 million, I guess, on a pro forma basis, if you will, OpEx is still relatively high, which is obviously understandable given the investment for growth over the long term. But it still feels like there's a decent gap potentially.

So, if in the event that Triage is noncovered, so let's entertain something that, to be perfectly honest, I think is ridiculous. If it becomes noncovered after our reconsideration request or it remains noncovered after our reconsideration request, then we have Triage Plus coming, which was -- which is all new development in our AV, CV, CU framework that, at least from my perspective, is also -- is essentially unimpeachable. So, again, like Novitas has to play by set of rules, too, right? And if you are medically reasonable and necessary, they're supposed to pay for your tests. And they do that, they assess whether it's medically reasonable and necessary by taking -- by reviewing a reconsideration request. And so, we have that in. It's a very powerful one. The -- and so, we have to let that process play out rather than -- yes, rather than bounce around things that are extraordinarily unlikely.

Maybe another way of asking, do you -- assuming CMS -- if we just assume CMS coverage for the sake of the argument, do you think what you've raised today is sufficient like you can generate -- you can get to breakeven within a certain time period? Like let's put sort of time line aside. Do you think, call it, the $40-odd million in cash is sufficient if you get coverage?

Okay. So that is a different question. And one that is very difficult to answer, again, because of the high -- but it depends on a couple of things, right? It depends on how quickly we get recovered. And so, if recoverage is quick, then obviously, the chances of us having sufficient capital to reach profitability or breakeven increases. If it is delayed over the estimates we've provided, then it would jeopardize that. And so, there may need to be more capital. But if it happens the way we anticipate, there's other variables. And at least one of those other variables -- so there are really 2, whether or not we can increase the price of Triage Plus even further, which again, we have flagged that as unlikely, but that we do have some initiatives around that. How successful our client billing process is? How successful our commercial payer strategy in general is, like whether we're getting paid on 30%, 40%, 50%, 60%, 80% of tests, right? We don't know that yet, and it will depend on that. And then it will also depend on how efficient we can make our sales force as a consequence of better messaging, guidelines, all the medical education that we do and whether they can genuinely deliver 2 to 3x their cost. Because when your sales reps can deliver 2 to 3x their costs, then the answer is, like how quickly can we get them to that point. And sorry, I can't give you like a date, but those are the variables that we are focused on as a business that will determine our future capital strategy.

All right. I do have some questions that have come in.

And there are no further questions.

I do have some questions that have been put in online. So thank you, Andrew. The first one is, I've read that the DOGE team with Trump and Musk are working on cutting costs in Veteran Affairs and also Medicare. Will this impact your clinical trials? And are there any other impacts expected for Pacific Edge?

So that's probably a bigger question than you really know, but I'll just give you some examples. Short answer is yes. But -- so number 1, in the Veterans, we have had 1 or 2 partners on our clinical studies lose some of their research capabilities. We've been fortunate enough that it hasn't affected us in any kind of serious way. We've been insulated from it, but that is something that could theoretically happen as other sites could be affected and our partners may not have the resources to be able to do that. Another thing that could be affected is, if we were looking for a national coverage determination or working with the FDA, these government agencies, they might be affected. But we work with Novitas, which is actually a private company that Novitas is owned by GuideWell. GuideWell is owned by Blue Cross Blue Shield of Florida, I think, or South Carolina, I forget. Like they're a commercial entity, so they're going to be insulated from that. But sometimes -- like you could imagine that some processes for either government reimbursement or regulatory approval might be delayed as a consequence of those investments. But the counterpoint to that is also that we save the Veterans Association money. And we save the Medicare system money. We know this, and we continue to emplore them to adopt this at scale so that they can recognize those savings. And it is difficult to get them to think of this at a system level because they see it as a cost for genetic testing as increasing, and they don't necessarily see the reduction in procedures in the same budget. That's our challenge as a business to solve, but those that do get it, will start to adopt the test more quickly because we can save the Veterans Association money. We can save the Medicare program money, and we can make politicians and CMS political appointees aware of that, and we have.

Next question is from Steve. We could have managed a few more months with the cash that we have at $22.6 million. This capital raise at a vulnerable time in the share price indicates that we're obviously not expecting any good news in the next few months. Is that a reasonable assumption?

So I don't think it's a reasonable assumption. And I would also note that we raised at a premium to the current share price, obviously, $0.10 being a premium over, I think, $0.082 at the close of play yesterday. So we encourage shareholders to take advantage of this capital raise because we think that the commercial and clinical milestones that this business has achieved are shortly to be translated into the commercial success we have all desired for a number of years. And maybe I'll leave it at that.

There's a further question. In 2018, it was announced that Johns Hopkins Medicine has commenced their commercial evaluation. Has this progressed or died?

I would have to answer that it died, and I would assume it died before I joined the company in 2022. But at the same time -- sorry, I would also say that we actually have a new engagement with Johns Hopkins unrelated to that, as we do with all major institutions in the United States that are interested in using. So, while I don't think there is continuity between that statement and any sales activity that we have today, Johns Hopkins is a major center for urology and urologic oncology. And so, we do know the key opinion leaders in Johns Hopkins. I believe they currently order commercial volume for our test, though I couldn't tell you the volume without looking it up. And -- but they do not make systematic hospital-wide decisions like you might imagine DHBs do in New Zealand, right? So that's the challenge. And so, there will be individual physicians within Johns Hopkins that are advocates, and we need to foster that for greater penetration within that account.

I'm going to have to summarize the next one. There's quite a bit of colorful language. But in summary, this calls out Novitas' flawed review of the LCD and the evidence of Pacific Edge. The question is, is it now realistic for them to -- in this environment to quickly review the latest submitted documentation? And do CMS have any sway to bring some common sense to the coverage issue?

So look, we'll continue to do everything we can here. The short answer, though, is yes. Novitas have the capacity and the capability and the legal requirement to review our reconsideration requests. It's important to note that what we were trying to do prior to losing coverage, those -- the procedural -- the process was kind of against us. Here, the process is what we are following, and there are 2 of them. One is the appeals process that I spoke about through the presentation. We will appeal denied Triage claims with guidelines inclusion all the way through the Medicare appeals process. And in a meeting with Novitas, they told us you're perfectly entitled to do that and tell us we're wrong for denying your claims that way. And similarly, if you disagree with our evidence assessment, the process you need to follow for a definitive change in your Local Coverage Determination is to provide us with new evidence in the form of a reconsideration request, send us your strongest possible evidence, which is why we waited until we had the guidelines as well to independently validate the STRATA publication before sending and then we sent within 3 weeks, right? In March, we sent it to them, and they now have it in their pipeline to review. I have personally e-mailed the Director of the Coverage and Analysis Group at CMS to ask them if they can accelerate the review. I do not know whether they will do that, but they have said they will take it to their meeting and try and do that. We will try everything that we can to get Novitas to pay attention to the importance of this issue, where -- including asking urologists to send letters where we just provide the bullet pointed talking points and then they put it on their letter heads to remind them that this is guideline recommended testing that is not being made available to the Medicare population and that it is on them to fix it. So those points have been made in multiple forums. And to those who might think Novitas is just 1 big block, I will -- they are not -- there are people on the inside there who genuinely respect the role that evidence plays in these decisions. It is worth noting anecdotally, though, that the Medical Director for the Novitas program left in March and a new Medical Director for Novitas joined in May. That Medical Director who has joined is from MolDX and is experienced in molecular technologies. So we view this as a positive development, though, it is definitive of nothing. But we do not believe that we are bashing our heads against the wall. We are following the process that Novitas and CMS have given us to get coverage on the basis of our new evidence.

Great. Just a final couple. Do the clinical guidelines impact the legal liability for a user of Cxbladder?

So look, this is one of those things that may be a little bit hard to explain to a New Zealand audience how litigious the United States can be. And it's also hard for us to understand these risks. Some of them may be red herrings. But when a guideline explicitly like it did in 2020, said biomarkers are not considered appropriate for use in lieu of a cystoscopy, right? That's fairly clear language that if you go against the recommendation of that association and you use it for that purpose and let's say, a patient does get -- does have bladder cancer and you told them they didn't have it, like that physician is the one taking the risk. That physician can be sued. Being agnostic of the language for biomarkers, this applies to anything. So if a physician deviates from guidelines, a physician has some level of legal exposure. Now that might make one say, well, we're -- Cxbladder is included in guidelines. Now they're going to get sued if they don't use it. That's not the correct conclusion to come to because of the specific language that is being used and that it is about appropriately counseled intermediate risk patients may receive a urine-based biomarker in lieu of a cystoscopy. So could we get stronger language at some point in the future? We could. It will be on the basis of evidence, and that is the kind of thing that we are looking to create with the CREDIBLE study, and that won't be available for another couple of years, though.

Matthew, I think we've answered your question on how long to reach breakeven after coverage. We just go to John's question. Is Pacific Edge considering a share consolidation, for example, 1 share for every 2 existing? I can answer that one. We've had a number of issues we've been dealing with that the share structure hasn't reached the top of task to do, but we will look at that. It's not -- the current structure seems to be working, but we will consider it. That's the end of the questions.

All right. Well, thank you, everybody, for listening, and thank you for your questions. We appreciate your time today. And please also have a look at the capital raise presentation that has been published today. We look forward to having more investors come and join us on this journey. This is a really fantastic opportunity to be part of the future of Pacific Edge as we conquer the various milestones that are in front of us towards a profitable future. So thank you.