Escaping the Billing Graveyard: The Pacific Edge Story (ASX: PEB)

Good morning,

Welcome to today's edition of The Armchair Analyst, a 5-minute daily update on the ASX life-sciences sector.

What’s more impressive…

Building a billion-dollar business over 20 years.

OR, having 75% of the revenue stripped away overnight and clawing it all back?

That is the story of Pacific Edge (ASX: PEB), which sells a diagnostic product for bladder cancer - Cxbladder.

The next company in my Biotech 165 Challenge.

In 2021, the company was riding high after securing national pricing for its test, its own CPT code and broad-based Medicare coverage. ~NZ$1.4B valuation peak.

In 2022, it was all stripped away… when Medicare coverage was revoked.

This led to several years of wandering in the billing graveyard.

But signs of life are emerging.

Earlier this year, a panel of independent doctors endorsed the Cxbladder product and essentially begged the regulator to reinstate reimbursement.

AND, last week, a draft Medicare coverage determination was published, indicating that reimbursement could be back at US$1,328 per test.

Nearly double what it was priced at before.

Today, I’ve once again enlisted the help of Surgeon Dan, who was the lead author of an independent study on Cxbladder, to give his first-hand account of the product.

Hi there, Armchair Army Surgeon Dan here.

I'm a doctor who has worked in urology for over 7 years in public hospitals in Western Australia.

I’m also a big stock punter.

Today I'm looking at Pacific Edge (ASX | NZX: PEB).

Now, this company holds a special place in my heart.

Not only because I have used it personally as a urology surgeon, but also because I was the lead author of an independent prospective clinical study that validated it.

Last week, Pacific Edge announced an update that was years in the making, bringing it one step closer to the holy grail for any diagnostics product.

Reimbursement in the US.

But it wasn’t an easy pathway to get there.

Pacific Edge actually HAD reimbursement at one point, lost it, and has spent the last several years trying to get it back.

Pacific Edge (ASX: PEB) sells a suite of non-invasive genomic urine tests for bladder cancer.

This test, processed through its own CLIA-certified laboratories in Pennsylvania and Dunedin, New Zealand, is called Cxbladder.

Right now, the standard of care to test for bladder cancer is a cystoscopy.

It involves a surgeon taking an incredibly thin camera and putting it through your wee hole, passing through the urethra and looking into the bladder.

Yes, it is as uncomfortable as it sounds.

I've done THOUSANDS of these procedures.

In my experience, the vast majority of surveillance cystoscopies in low-risk patients find absolutely nothing. 

Normal bladder. No recurrence. Come back in six to twelve months. 

But this is the scary thing about bladder cancer…

Five-year survival peaked at 80% in the late 1990s.

It now sits at 78%

Things are going backwards.

Partly because the average patient is above 70, and tends to receive less aggressive treatment. 

Partly because treatment hasn’t moved for decades. 

Mostly because of something structural that affects every patient who walks in and meets the urologist.

The surveillance loop.

Most bladder cancer is non-muscle-invasive bladder cancer (NMIBC). 

When teaching it to medical students, I called it the bladder rainbow.

Three out of four patients will see this cancer come back.

10-year recurrence rate of roughly 74%, with about 60% occurring within the first 2 years.

Which means the patient needs to undergo a cystoscopy every 3 to 6 months.

Then annually, often for life.

Just to check if the cancer has come back.

The trouble is that the surgery is incredibly uncomfortable.

Camera up your wee pipe.

Now imagine doing that every few months, for years or for life.

What happens is that patients who need a checkup just stop coming.

And when they stop coming, cancers can get worse.

But what if there was a way to better decide who actually needs a cystoscopy?

That is what Pacific Edge has created.

The theory is simple. 

Cancer is in the bladder, urine washes over it… test the pee in a cup.

Good theory. But every test we've had until recently has failed to deliver.

Urine cytology, the current global standard urine test, has a sensitivity of about 22% for low-grade disease.

It’s essentially worthless.

NMP22 BladderChek: 12% sensitivity. NMP22 ELISA: 27%. UroVysion FISH: 33%, costs ~$800, and needs a specialist lab.

BTA Stat: ~67% sensitivity, but lights up from blood in the urine itself, the very symptom you're investigating.

None of these tests gave a urologist enough confidence to skip a cystoscopy.

I was the lead author of an independent prospective validation study to assess the performance of Cxbladder.

We recruited 236 patients over 15 months: 134 for Cxbladder Triage and 102 for Cxbladder Monitor.

We were blinded to the results, and every patient received the standard-of-care cystoscopy regardless.

The scores were compared retrospectively against the final diagnosis.

Triage (n=134): NPV of 96.43%. Two false negatives. Both with very lowest-risk bladder cancer. Superficial. Low grade. Non-invasive.

Monitor (n=102): NPV of 95.16%. Three false negatives. All low risk.

Not a single high-grade cancer was missed.

Not one muscle-invasive tumour slipped through.

We looked at the low-risk subset in the Triage arm (non-smokers with no haematuria). 

Three turned out to have superficial bladder cancer. Cxbladder flagged all three.

Every single one of those 23 patients could have safely avoided a cystoscopy. 

The test, combined with routine imaging, ruled out urothelial carcinoma completely in that group.

There is a clear clinical use case for Cxbladder Triage, the frontline test for patients presenting with blood in their urine.

Much better than any of those other tests.

Much more comfortable than a cystoscopy.

Here is the challenge with diagnostics products...

If you can’t bill for the product, it most likely won’t get used.

I remember being in a room with other urologists discussing Cxbladder, and the feedback was: Why should I give up my cystoscopy list for this test? 

Clinical performance isn’t enough to make a product successful - the financial incentives need to line up as well.

Cxbladder was actually launched in 2013. Almost 13 years ago.

In 2018, it secured a national price of US$760 for all Cxbladder tests in the US.

In 2019, the company had secured its own product-specific CPT codes for Cxbladder detect and Cxbladder monitor.

In 2020, Novitas (the Medicare Administrative Contractor with jurisdiction over PEB's Hershey, Pennsylvania laboratory) provided Medicare coverage for Cxbladder.

The medicare coverage decision meant that Cxbladder had broad coverage around America.

The stock ran to an all-time high on the New Zealand exchange, and the company dual-listed on the ASX at the same time.

Once Medicare coverage and Kaiser Permanente (a large US insurer) kicked in, US volumes grew by 60% and revenue by 70% in a single year.

Pacific Edge hit ~NZ$1.4B market cap in late 2021.

Less than 12 months later, disaster struck.

Novitas announced proposed changes that would disrupt reimbursement for Cxbladder.

In 2023, these fears were confirmed.

In early 2025, the decision was ratified.

Genetic testing in oncology wouldn’t be covered by Medicare.

This effectively ended the broad reimbursement coverage for the entire Cxbladder Suite. 

Detect, Triage, and Monitor.

Medicare reimbursement accounted for about 60% of Pacific Edge’s volume and 75% of revenue. 

Overnight, gone.

Pacific Edge responded quickly by aggressively cutting staff.

It also set up a bunch of legal claims and appeals, most of which have been denied or ongoing.

The share price was smashed, and the stock went into a big lull:

This decision by Novitas effectively wiped out 75% of Pacific Edge’s revenues overnight. 

It had to do something to turn things around.

This was the five-step playbook that it ran:

This strategy culminated in a Contractor Advisory Committee meeting in February this year, where Novitas consulted with several leading urologists regarding the decision to cover Cxbladder.

This is essentially Medicare's "let's ask the doctors" step before changing a coverage policy.

Now, if you want to get an idea of the endorsement of the Cxbladder product, just listen to this hearing from the 1:25:00 mark.

One by one, each of the specialists on the call pleaded their case to Novitas to reinstate coverage for Cxbladder.

These are not Pacific Edge employees. 

They are independent customers and users of the product.

This Contractor Advisory Committee was likely the straw that broke the camel’s back for Novitas to change its mind and return Pacific Edge’s product to Medicare coverage.

Just last week, draft changes were proposed for Medicare coverage for Cxbladder.

This time, the reimbursement is set at US$1,328. Nearly double the original coverage amount.

So the tide seems to have turned for Pacific Edge. 

Driven by its biggest supporters, the surgeons themselves.

By now, you may recall my 5-point scorecard for evaluating medical products. Here's how Cxbladder stacks up.

Let’s see how Cxbladder stacks up…

Tick. 

My published data showed 100% detection in the low-risk subset; every patient who had cancer was flagged.

Also, Triage is included in both AUA/SUFU (Grade A, 2025) and NCCN bladder cancer guidelines.

Another tick.

Very straightforward urine test, well-known style, no patient discomfort, and around a 7-day turnaround time for results.

Cxbladder Triage is charged at US$325 (patient out-of-pocket), which likely slowed adoption of the product. 

However, at the suggested price point of US$1,328, the new Triage Plus is now in the same billing conversation as a cystoscopy. 

The US lab has a capacity for about 260,000 tests per year. 

US tests are processed locally, and Asia-Pacific tests are sent to Dunedin, New Zealand. 

BUT, it has slipped off the scene due to a loss of reimbursement, so Pacific Edge will need to ramp up in marketing again to get things going.

Over 5,000 Urologists have used this test. AUA guidelines have specifically named it and given it a Grade A evidence level in 2025. 

Big tick.

Preference is there; the payment pathway just reopened.

Thanks once again Dan for a fantastic analysis.

Here’s my take.

When Cxbladder finally gets its reimbursement back, the product goes from "handcuffed" to "the standard of care." 

And Pacific Edge is on the way.

BUT, with essentially a three-year delay, it will still take some time for commercial activity to ramp up.

The choice of go-to-market strategy is interesting. Because this test has been around for a while.

Losing coverage the first time may mean some brand rehabilitation is needed for the Cxbladder test.

However, the test is coming on at nearly DOUBLE the price, meaning more margin for Pacific Edge to work with.

Speaking with the CEO, Peter Meintjes, earlier this week, he wants to go directly to integrated delivery networks (such as universities or hospitals) rather than on a physician-by-physician basis.

Selling top-down may lead to longer sales cycles, but with sticker customers and larger contracts.

The good thing is that the company is well-funded, having raised about A$20 million a few weeks ago, and burn is low.

This should give them a good chunk of runway to work out the sales model before ramping up bodies in the US.

As Dan’s data showed, there is a clear clinical utility for the product.

And listening to each of the specialists, essentially begging Novatis to restore Medicare coverage, is a powerful endorsement of the product.

At the end of the day, I lean on people like Dan to tell me if there is an actual, real demand for services like Cxbladder - and the clear answer is YES.

The company will still need to pick up the pieces from the three-year delay and rebuild sales momentum for the product.

This takes time.

BUT, with the scars of the past largely behind them, it could be an interesting time for Pacific Edge.

A big thank you to CEO Peter Meintjes for sharing the story with us.

See you all tomorrow,

The Armchair Analyst.

The share price of my first-ever Armchair Pick, Tetratherix (ASX: TTX), has been on a run this week… on essentially no news:

Almost 75% up on my initial entry price of $4.00.

It seems like the story is finally starting to cut through.

A bunch of catalysts on the horizon (including two 510(k) approvals) and the launch of the nasal spray peptide product.

For my take on the stock, read:

Disclosure: I own 16,250 escrowed TTX shares.

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