New Zealand Professional Investment Services Firm, Forsyth Barr

Forsyth Barr

New Zealand Professional Investment Services Firm

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

Equity Bottom-Up

<h2>Pacific Edge</h2>
1H20 Result and Capital Raise
Pacific Edge (PEB) announced a fully underwritten NZ$20m capital raise alongside its 1H20 result, as it continues to work towards commercial milestones in the US market to drive a step-change for the business. Post raise, this provides ~20 months cash on hand using 1H20 cash burn rates, with upside risk given cash burn has historically been seasonally higher in 1H, and should test receipts continue to grow.
What’s changed?
<ul>
<li>Our forecasts for FY20E and beyond have not been updated following the 1H20 result and capital raise announcement.</li>
</ul>
1H20 result — strong growth in NZ, costs controlled, US modest
PEB reported 1H20 operating revenue of NZ$2.3m, up +12%, with a modest increase in operating costs lifting the net loss to -NZ$9.4m (from -NZ$8.7m).
<ul>
<li>US: 1H20 revenue of NZ$2m, up +8%. PEB is cash accounting its US segment, with material potential revenue not being reported through the accounts (for example ~47% of current US tests are for customers of public health insurer, CMS. Until commercial sign-off is achieved, PEB is not recognising any revenue despite being ‘billable’ tests).</li>
<li>Rest of World: Revenue of NZ$0.3m (up +54% from NZ$0.2m), primarily underpinned by strong momentum in the small NZ market following an array of recent success with coverage and inclusion within the standard of care. Lab throughput is up +50% to 1,896 tests (including NZ, Australia and Singapore) given momentum in NZ and User Programmes in Singapore.</li>
</ul>
Aside from updated financials, there was little new insight on commercial milestones in the result.<a target="_blank"></a>
Capital raise — lifting cash balance to NZ$24.7m
PEB announced a fully underwritten NZ$20m capital raise, via an initial placement and subsequent 1 for 4.25 pro-rata renounceable rights offer.
<ul>
<li>Placement: NZ$7m at NZ$0.15/share on 21 November 2019.</li>
<li>Rights offer: 1 for 4.25 rights offer, to raise NZ$13.1m at NZ$0.10/share. This is a 34% discount to the theoretical ex-rights placement adjusted price of NZ$0.152. Record date is 29 November; settlement 18 December 2019.</li>
</ul>
PEB reported a net cash position of NZ$4.7m at 30 September 2019, lifting to NZ$24.7m post capital raise (~20 months of cash at 1H20 burn rates).
Near-term milestones PEB has called out
<ul>
<li>Additional peer reviewed papers: Due 2H20 “supporting clinical utility”</li>
<li>Coverage decision from public health insurer, CMS: PEB has submitted a dossier of evidence for review and is expecting to know the outcome in 1Q21 (based on expert opinion). 19,361 tests have been provided to CMS customers since inception (up +19% on FY19). When/if a coverage decision is achieved, tests to date may be partially reimbursed. The price for CMS was set at US$760/test (effective 1 January 2019).&nbsp;</li>
</ul>
<div class="content-highlight">
Investment View
The success of PEB will be determined by the commercial success of Cxbladder in the US. Investors continue to require patience, with the large US market challenging to secure reimbursement, albeit the prize is large.&nbsp;
</div>
Chelsea Leadbetter, CFA chelsea.leadbetter@forsythbarr.co.nz +64 4 495 5262

Pacific Edge
1H20 Result and Capital Raise
Pacific Edge (PEB) announced a fully underwritten NZ$20m capital raise alongside its 1H20 result, as it continues to work towards commercial milestones in the US market to drive a step-change for the business. Post raise, this provides ~20 months cash on hand using 1H20 cash burn rates, with upside risk given cash burn has historically been seasonally higher in 1H, and should test receipts continue to grow.
What’s changed?

Our forecasts for FY20E and beyond have not been updated following the 1H20 result and capital raise announcement.

1H20 result — strong growth in NZ, costs controlled, US modest
PEB reported 1H20 operating revenue of NZ$2.3m, up +12%, with a modest increase in operating costs lifting the net loss to -NZ$9.4m (from -NZ$8.7m).

US: 1H20 revenue of NZ$2m, up +8%. PEB is cash accounting its US segment, with material potential revenue not being reported through the accounts (for example ~47% of current US tests are for customers of public health insurer, CMS. Until commercial sign-off is achieved, PEB is not recognising any revenue despite being ‘billable’ tests).
Rest of World: Revenue of NZ$0.3m (up +54% from NZ$0.2m), primarily underpinned by strong momentum in the small NZ market following an array of recent success with coverage and inclusion within the standard of care. Lab throughput is up +50% to 1,896 tests (including NZ, Australia and Singapore) given momentum in NZ and User Programmes in Singapore.

Aside from updated financials, there was little new insight on commercial milestones in the result.
Capital raise — lifting cash balance to NZ$24.7m
PEB announced a fully underwritten NZ$20m capital raise, via an initial placement and subsequent 1 for 4.25 pro-rata renounceable rights offer.

Placement: NZ$7m at NZ$0.15/share on 21 November 2019.
Rights offer: 1 for 4.25 rights offer, to raise NZ$13.1m at NZ$0.10/share. This is a 34% discount to the theoretical ex-rights placement adjusted price of NZ$0.152. Record date is 29 November; settlement 18 December 2019.

PEB reported a net cash position of NZ$4.7m at 30 September 2019, lifting to NZ$24.7m post capital raise (~20 months of cash at 1H20 burn rates).
Near-term milestones PEB has called out

Additional peer reviewed papers: Due 2H20 “supporting clinical utility”
Coverage decision from public health insurer, CMS: PEB has submitted a dossier of evidence for review and is expecting to know the outcome in 1Q21 (based on expert opinion). 19,361 tests have been provided to CMS customers since inception (up +19% on FY19). When/if a coverage decision is achieved, tests to date may be partially reimbursed. The price for CMS was set at US$760/test (effective 1 January 2019).&nbsp;


Investment View
The success of PEB will be determined by the commercial success of Cxbladder in the US. Investors continue to require patience, with the large US market challenging to secure reimbursement, albeit the prize is large.&nbsp;

Chelsea Leadbetter, CFA chelsea.leadbetter@forsythbarr.co.nz +64 4 495 5262

Pacific Edge: 1H20 Result and Capital Raise

New Zealand

Pacific Edge Ltd is a biomedical company specialising in the discovery and commercialisation of diagnostic and prognostic technology for the early detection and monitoring of cancer. The Company has completed successful trials in bladder cancer detection and colorectal cancer prognosis.

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Pacific Edge (PEB NZ)

Pacific Edge: 1H20 Result and Capital Raise

Pacific Edge 1H20 Result and Capital Raise Pacific Edge (PEB) announced a fully underwritten NZ$20m capital raise alongside its 1H20 result, as it...

Forsyth Barr

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