Pacific Edge expects revenue to be hammered by Medicare decision

Wednesday, 7 June 2023

A decision by the US national health insurance programme is expected to cause a significant revenue drop for a New Zealand diagnostics company.

Pacific Edge said Medicare coverage of its Cxbladder tests in the US market was expected to cease from July 17.

It follows a local coverage determination (LCD) by Novitas, the medicare administrative contractor with jurisdiction for Pacific Edge’s laboratory in Hershey Pennsylvania.

It specifically notes the Cxbladder tests Triage, Detect, Monitor, Resolve and Detect as “not considered medically reasonable and necessary”, the threshold required for coverage under the US Social Security Act.

Pacific Edge said it would explore its legal options and consult stakeholders, as well as other affected companies.

It said its revenue was expected to reduce substantially from current levels until Cxbladder tests regained coverage.

In the year ended March 2023, tests for Medicare and Medicare Advantage were 60% of US commercial tests, or about 13,800 tests, and generated 75.3% of the year’s total operating revenue.

Chief executive Peter Meintjes said the company was surprised and disappointed with the finalised LCD.

He said it seemed to materially misunderstand the role biomarkers could play in “first line” diagnostics for risk stratifying patients with hematuria into those that would benefit from further potentially more invasive medical attention and those that would not.

“While Novitas appears to have reviewed all available evidence for Cxbladder, we believe that Novitas’ analysis has sought to predominantly emphasize negative comments in Cxbladder publications. We believe that focusing predominantly on only negative comments likely mischaracterises issues or confounding factors with our evidence that were addressed in subsequent publications and routine commercial testing, while also dismissing the support Cxbladder receives from key opinion leading urologists, and the US patient advocacy group Bladder Cancer Advocacy Network.

“Importantly, urologists have identified the value for themselves and their patients as demonstrated by the record number of urologists using the test, 1151 in FY23 Q4, and the record growth in Cxbladder testing volume at 43% CAGR for the last two years. “Molecular diagnostics is a developing field, and this LCD has made an unprecedented move to change the threshold regarding what’s acceptable evidence and what’s not, by relying on third-party databases that do not adequately cover the current standard of care in bladder cancer diagnosis.

“Consequently, Novitas does not appear to acknowledge that Pacific Edge’s products improve the standard of care in bladder cancer diagnosis and does not appear to consider the benefits of non-invasive testing alternatives and may result in worse outcomes for patients.”

Pacific Edge shares had been in a trading halt but resumed trading a 5c, down almost 90%.

Chairman Chris Gallaher said the company was still well funded with cash, cash equivalents and short-term deposits of $77.8 million at the end of March.

”Despite this current setback, the company believes that it can still deliver on the significant opportunities we see for Cxbladder in the US and around the world. We will update the market as we gain greater clarity and have determined our strategic path forward.”