Pacific Edge Posts $35.8m Loss Amid Medicare Coverage Uncertainty and Volume Decline

Draft Medicare Coverage Signals Potential US Market Rebound

Pacific Edge (NZX:ASX: PEB) has navigated a turbulent FY26 marked by a 47% plunge in operating revenue to NZ$11.5 million, largely due to the loss of Medicare coverage for its flagship Cxbladder bladder cancer tests from April 2025. Yet, the company’s strategic outlook brightened post balance date with the publication of a draft Local Coverage Determination (LCD) by Novitas, titled ‘Urine-based Biomarkers in Patients with Microhematuria’ (DL40378). This draft policy would for the first time establish hematuria evaluation as a Medicare benefit, explicitly including Cxbladder Triage and the higher-priced Triage Plus test, priced at US$1,328, 75% above legacy products.

The inclusion of Triage Plus in the draft LCD is a game-changer, potentially transforming Pacific Edge’s US unit economics and accelerating its path to profitability. The company has been advised that it can commence claim-by-claim reimbursement for intermediate risk microhematuria patients in line with the draft, substantially reducing the reimbursement uncertainty that has weighed on volumes and revenue over the past year. Pacific Edge expects the final LCD to become effective by the end of 2026, setting the stage for a commercial rebound.

This development builds on the company’s recent progress with commercial payers, including positive medical policies adopted by Sentara and Blue Cross Blue Shield plans in North Carolina, South Carolina, and Kansas City Missouri, collectively covering over 5 million lives. The company’s partnership with Kaiser Permanente’s Southern California Permanente Medical Group continues to underpin test volume growth in the US, despite the broader Medicare coverage headwinds. The Southern California Permanente Medical Group is a key commercial anchor, with Pacific Edge working to expand volume through EMR integration and clinical pathway adoption.

Pacific Edge’s draft Medicare coverage milestone follows a series of clinical evidence publications, including the DRIVE study and Kaiser real-world utility data, which have reinforced the clinical validity and utility of Cxbladder tests. The company aims to leverage these studies to secure inclusion of Triage Plus in the American Urological Association guidelines, further entrenching its tests in clinical practice.

Financial Results Reflect Operational Challenges and Cost Discipline

The FY26 audited financial statements reveal a net loss after tax of NZ$35.8 million, a 20% increase from the prior year’s NZ$29.9 million loss. Operating revenue halved from NZ$21.8 million to NZ$11.5 million, reflecting the Medicare non-coverage impact and ongoing US test volume pressures. Total laboratory throughput fell 16.3% to 24,190 tests, with commercial tests down 23.8% to 18,783.

Despite these setbacks, Pacific Edge managed to reduce operating expenses by 9.5%, aided by a leaner US sales force and disciplined capital management. The average monthly cash burn in 2H FY26 was NZ$2.4 million, down from NZ$3.3 million in 1H FY26. Cash and short-term deposits stood at NZ$7.8 million at year-end, down from NZ$22.6 million a year earlier.

To bolster its financial position and support the Medicare re-coverage push, Pacific Edge completed an oversubscribed NZ$25.4 million placement in May 2026 at NZ$0.17 per share, followed by a retail offer targeting up to NZ$6 million. These funds will underpin ongoing operations, evidence generation, product development, and commercial expansion.

Asia Pacific Expansion and Product Innovation Progress

While the US market grapples with reimbursement uncertainty, the Asia Pacific region delivered steady growth, with total test volumes in APAC rising 7.9% and commercial volumes down just 11.9%. Pacific Edge has established clinical pathways at Singapore General Hospital and Townsville University Hospital, including the first APAC adoptions of Triage Plus. The company is targeting profitability in APAC on a direct cost basis, supported by pricing improvements and product mix shifts.

Innovation remains central to Pacific Edge’s strategy. The company is advancing its next-generation tests, including Cxbladder Surveillance Plus for bladder cancer recurrence monitoring, aiming for a CPT-PLA code submission by December 2026 and claim-by-claim reimbursement by mid-2027 at a target price of US$1,800. This product pipeline is expected to drive long-term value and broaden clinical indications.

Pacific Edge’s commercial execution is increasingly focused on embedding its tests into clinical pathways supported by electronic medical record integrations, improving ordering efficiency and patient experience. The company’s leaner sales force is concentrating on profitable territories, raising sales force efficiency metrics despite lower overall test volumes.

Uncertainties Remain as Medicare Coverage Finalization Looms

The path to final Medicare coverage remains subject to regulatory timelines and stakeholder feedback. Novitas’s draft LCD is under a notice and comment period until mid-July 2026, with finalization possible by early 2027. The company acknowledges material uncertainties regarding the timing and outcome of the final LCD and the potential need for further capital if coverage is delayed or revenue targets are not met.

Pacific Edge’s management has expressed confidence that the draft LCD, combined with commercial payer momentum and clinical guideline support, provides a strong foundation for growth and profitability. However, the company’s ability to scale US operations and improve financial performance will hinge on the final Medicare decision and successful commercial execution.

Investors should note the company’s ongoing cash burn and the need for prudent capital management as it navigates this critical inflection point.

Pacific Edge’s FY26 results and strategic developments are detailed in its audited financial statements and recent announcements, including the NZ$25.4 million placement and the NZ$6 million retail offer to support the re-coverage push. The draft Medicare policy itself was the subject of a recent Medicare draft LCD coverage proposal that underscores the potential scale of the US opportunity.