PEB
21/08/2014 16:03
MEETING
REL: 1603 HRS Pacific Edge Limited
MEETING: PEB: Pacific Edge 2014 Annual Meeting of Shareholders
Pacific Edge 2014 Annual Meeting of Shareholders
Good afternoon and welcome to the 2014 Pacific Edge Annual Meeting of
Shareholders. My name is Chris Swann and I am the chairman of the Pacific
Edge Board.
I am pleased to welcome you all to the beautiful Dunedin Art Gallery as our
venue for today's Annual Meeting. Today, we are webcasting this meeting live
... "Welcome to all of you joining the meeting online." We also have a
number of our senior managers here with us today as well as other members of
our staff and the company's professional advisers - welcome to you all.
I declare that a quorum is present and the meeting has been duly convened.
The Notice of Meeting, which includes the explanatory notes, has been
circulated to all shareholders and I intend to take it as read.
The audited financial statements for the year ended 31 March 2014 were
released on the 28 May 2014 and are set out in the Company's Annual Report
which was made available to shareholders on the 30 June 2014.
The minutes of the 2013 Annual Shareholders Meeting, held on 26 August 2013
have been approved by Directors and are available for inspection.
DIRECTORS
Before we begin the meeting, I would like to introduce you to your Directors.
Colin Dawson is our longest standing Director. As recently announced, Colin
will be stepping down from the Board at the end of today's meeting. I would
like to take this opportunity to thank Colin for the valuable contribution he
has made in guiding the Company through its formative and early stages of
growth. His expertise in health sciences has been of great value as we have
grown the Company to the point where it is today with the development and
commercial launch of our cancer diagnostic system, Cxbladder. Colin, on
behalf of the Board, management and shareholders, thank you for your
contributions.
David Band was appointed to the Board in 2007 and brings his excellent
management consulting skills to the Board.
Anatole Masfen is a co-founder of Artemis Capital, a private equity
investment firm which has a 2.5% shareholding in Pacific Edge. Anatole was
appointed to the Board in 2008 and brings strong commercial and investment
experience;
Bryan Williams, our most recently appointed Director in 2013. Bryan has
significant business and US governance experience which is of value to the
Company as we focus on the US market. He is also an internationally
recognised cancer researcher and research administrator with significant
business experience.
All Directors are independent, except for Anatole Masfen.
Both David Band and myself are retiring by rotation and putting ourselves
forward for re-election today.
There are further details on each of the Directors up for re-election in the
explanatory notes in the Notice of Meeting.
David Darling our CEO, with the support of the board, is putting himself
forward as an Executive Director.
The Board continually reviews the skills and capabilities we believe are
needed to take the Company forward. Over the last 12 months, the Board has
appointed Bryan Williams, with his noted experience as the Chairman of a US
based NASDAQ listed company, as a Director. In addition, Bruce Nogales with
his experience and capability in medical technology commercialisation, has
been appointed to the Board of the Company's US subsidiary.
In line with our commercial expansion, we are looking to add further
commercial and international expertise to the Board. We are in discussions
with several candidates whose commercialisation skills and capabilities would
be of value to the Company and we hope to make an announcement on the
appointment of new Directors in the near future.
MEETING AGENDA
The first item on the agenda is the Chair's address, followed by an address
from our CEO, David Darling, on the past year's activities and our plans for
the current financial year.
Following these addresses, we are happy to take questions from shareholders,
relating to the presentations. Please note that the only persons entitled to
speak at the meeting are shareholders, proxy holders or corporate
representatives of a shareholder.
We will then move to the resolutions contained in the Notice of Meeting.
Following voting on resolutions, we will be happy to take any general
questions you may have in regards to our Company and operations.
Following the close of the meeting, I invite you all to stay and share some
light refreshments with the management team and your Board.
A copy of the speeches and slide presentation will be available in the
investor section of the Company's website at www.pacificedgedx.com.
VOTING
Shareholders have received the Notice of Meeting which details the five
ordinary resolutions to be put to the meeting.
- The first two resolutions ask shareholders to vote on the re-election of
Directors - David Band and myself.
- The next resolution addresses the election of David Darling to the Board as
an Executive Director.
- The fourth resolution records the re-appointment of the auditors and deals
with their remuneration; and
- The final resolution asks shareholders to approve an increase in the total
aggregate amount of Directors' Fees payable per annum by $26,000 to a total
of $198,000.
There will be the opportunity to ask questions on each resolution before it
is put to the vote.
Voting at today's meeting will be by postal votes and proxies received at the
due cut-off of 4pm on Tuesday 19 August 2014.
I wish to advise that proxies have been received in respect of a total of
105,726,049 million shares, representing 33.18% of the total shares on issue.
I would now like to move to my address.
CHAIRMAN'S ADDRESS : CHRIS SWANN, CHAIRMAN
OUR STRATEGY
Our strategy is to develop and commercialise novel diagnostic tests for the
early detection and management of cancer.
We have been building our business for the past thirteen years. This has
taken us from the initial development of the genetic databases for five
cancers - bladder, gastric, colorectal and endometrial cancers and melanoma -
through to the creation of our first commercially viable product and
establishing a presence in targeted geographical markets.
FY14 marked a milestone for our Company as we celebrated the commercial
launch of our flagship product for bladder cancer, Cxbladder, and generated
our first revenue from sales in the US.
FY14 FINANCIAL PERFORMANCE
We reported our first real trading revenue in FY14 and whilst only a small
number, we expect to see this grow as we expand our US presence.
We have continued to invest into the growth of our business, with the set up
and rollout of our presence in the US, investment into clinical trials and
User Programmes, further product development, and management of our portfolio
of intellectual property.
This ongoing investment into our business, particularly into the rollout in
the US market, was the primary driver for the $9.4 million loss reported for
the 2014 financial year. This was in line with budgeted expectations.
FUNDING FOR GROWTH AND CAPITAL STRUCTURE
In October 2013, we successfully completed a $20 million capital raising. My
thanks go to all our shareholders who participated and continue to support
us, as well as new shareholders who invested in our Company.
Over the years, we have received a number of technology development grants to
help us develop our products. These have been a very important funding line
for us. In February 2014, we were delighted to receive a Callaghan Innovation
Growth Grant that will provide up to $4.5 million, spread over three years,
with an additional two years available on review.
The Board is comfortable that sufficient funds are in place to support the
Company's planned development and growth strategy.
As at 31 March 2014, Pacific Edge held cash and equivalents of $20.4 million,
up from $10.7 million the year earlier. The Company is debt free.
BALANCING RISK AND GROWTH
Pacific Edge is a high growth Company, and as such, it is a relatively high
risk investment. The Board's objective is to manage these risks as much as
possible while developing and growing our Company and building long term
value for our shareholders. However, we also need to have the courage to
continue our investment so we can achieve our vision of being a world leading
cancer molecular diagnostics Company.
While we classify our Company as Bio-Medical and more recently a Cancer
Diagnostics Company, Pacific Edge is often grouped by the financial markets
with the Biotech companies. In the US, biotech companies are more commonly
therapeutic development companies. These have a very different risk profile
to Bio-medical and medical device companies.
Fast growing small cap, technology and biotech companies have forward looking
revenue and as such can often be highly volatile compared to other
industries. These companies are often higher risk and many operate at a loss
as they develop commercial products and business models. This is also true of
Pacific Edge.
Often there is no particular justification or news leading to a jump or
reduction in share price value as we have seen over the last year in our
trading positon. This year, however, we have seen American investors start to
question the valuations of some of pharmaceutical companies in the Biotech
sector who are developing complex and often expensive medicines, and this has
led to significant swings in overall share prices within the sector globally.
LOOKING FORWARD
Building acceptance and sales of our Cxbladder test and developing new
bladder cancer diagnostic tests for the American market is the primary
opportunity for our Company in the short to medium term.
Whilst Pacific Edge is still operating at a loss, we have a well thought-out
strategy and have successfully executed the launch of our flagship Cxbladder
product into the US market. The Company is well cashed up and the capital
available to us has been earmarked to accelerate our sales force rollout in
the US. It will also allow us to continue our research and development of new
products for urologist customers.
It will take time to build our business in the US market, and we have made
the first important steps. We have now started on our commercial journey
following the commissioning of our laboratory and launch of Cxbladder in
America in July last year.
Our business growth is progressing to plan and we expect revenue to grow
solidly over the coming year as we expand our footprint in the US.
Our employees are dedicated, focused and working smarter to get our lead
product used by more urologists and my thanks go to all the Pacific Edge
staff around the world who have worked tirelessly to get us to this stage of
our Company's development.
Our target is to achieve gross revenues of over $100 million after five full
years of trading and the Board remains confident that this is readily
achievable under our current strategy and growth plans.
I would now ask David Darling to talk to you in more detail about our
achievements during FY14 and our focus for the current 2015 financial year.
CEO'S ADDRESS DAVID DARLING
OUR BUSINESS AND CXBLADDER
The 2014 financial year has been a great year for us and marked the start of
a new era for our Company.
We have met all of our milestones and generated our first real trading
revenue from sales of our Cxbladder product in the US.
As many of you will already know, Cxbladder is a novel, non-invasive, urine
test for the detection of bladder cancer. It is used to define the
probability of having bladder cancer for patients presenting with haematuria,
which is blood in the urine.
Cxbladder-detect is the first of our pipeline of products targeted to provide
urologists with a one-stop-shop. Cxbladder-detect is currently commercially
available in New Zealand and Australia and, since July 2013, in the US and we
plan to launch another new test for bladder cancer later this year.
Cxbladder-triage rules out patients from having to have a full urological
work-up.
THE US OPPORTUNITY
America is the world's largest and most comprehensive biomedical market and
it offers a massive opportunity for our Company.
There are approximately 1 million patients per year presenting with
haematuria that require a full urological work-up costing the US healthcare
system in excess of 1 billion dollars per year, compared to the 50,000 people
presenting with haematuria in the New Zealand and Australia markets combined.
Based on these numbers, In the US we believe there could be 2 million
Cxbladder test opportunities every year compared to 85,000 in New Zealand and
Autralia.
So, whilst the New Zealand and Australian markets are important to us from a
product development and commercialisation perspective, it is the scale and
accessibility of the American market that is paramount to the success of the
Company.
BUILDING OUR US BUSINESS
The launch of Cxbladder into the US market and the initial revenue generated
has been a fantastic achievement for all involved and I would like to
recognise the entire Pacific Edge team for this achievement. To get to this
stage, we have attained a number of important milestones.
The first was completing the build and fitout of the US laboratory in
Hershey, Pennyslvania, which we did in 2012. This laboratory currently has
the capacity to process up to 260,000 tests per annum. We have several
options open to us once demand exceeds capacity, including expanding the
current laboratory or building a further laboratory.
The second milestone was receiving regulatory approval for our product and
laboratory, which was achieved in 2013. This opened the way for us to start
planning for a commercial rollout in the US, with recruitment and training of
our initial sales force from July 2013.
The final step and the one we are now working towards is the commercial
rollout of Cxbladder-detect. This was an important focus for the management
team in FY14 and one which is ongoing. We are building our sales and
marketing strength in the market and expanding our reach.
OUR SALES MODEL
We have determined that the most successful way to build awareness and
generate sales is through 'User Programmes' where targeted clinicians are
provided with the opportunity to trial and use our Cxbladder test in their
practices. We have found that once urologists have the opportunity to trial
Cxbladder with their patients, they can see its positive benefits as a quick,
cost effective, non-invasive and highly accurate cancer detection test.
There are approximately 10,500 urologists in the US. We target high volume
clinicians or clinical groups for our 'User Programmes'. In some cases, these
clinical groups can be very large, with up to 100 urologists seeing thousands
of patients every year. Many of the customers we target have in excess of 40
practicing urologists within the group. To put this in perspective, this is
more than the entire number of urologists practising in New Zealand.
Our focus for FY15 is to increase the number of 'User Programmes' and
continue to translate existing 'User Programmes' into paying commercial
relationships.
THE US HEALTHCARE SYSTEM
The American healthcare system is quite different to New Zealand, with
payment primarily through insurance, either private or public.
National and Regional Provider Networks, or NPNs and RPNs, are key components
of our reimbursement in the US healthcare system. They comprise networks of
clinicians, hospitals, laboratories, other specialists, private insurers and
large employers.
Providers, such as Pacific Edge, negotiate agreements with these National
Provider Networks to provide their products and services at agreed prices to
patients who are insured by insurance companies that are part of that
Network.
The benefits of these agreements are two fold - firstly, the agreements allow
access to Cxbladder, at an agreed price, to insurers, urologists and their
patients. Secondly, the endorsement provided by the agreement encourages the
use of Cxbladder as an accepted test for bladder cancer. The Pacific Edge
sales team are still required to sell to the urologist or clinician.
Since October 2013, we have signed four agreements with National Provider
Networks - FedMed, America's Choice Provider Network (ACPN), Stratos and
MultiPlan. These agreements give millions of Americans access to our product.
We are also advancing commercial relationships with private insurance
companies, Integrated Healthcare Providers, Veterans Administration, and the
Centre for Medicare and Medicaid Services, which provides healthcare
insurance for 100 million people or nearly a third of the American
population.
TIMELINE OF ACTIVITY FOR DEVELOPMENT OF US SALES
It is important to understand the timing involved in generating sales in the
US and that the signing of an NPN agreement is one step in the sales process,
which can take a number of months.
For example, we signed an agreement with FedMed in October 2013 and our first
sales request originating from that Provider Network was received in April
2014. Reimbursement takes yet more time and the revenue for this test was not
collected until one month later in May 2014, a significantly faster time
because of the network.
Altogether, in this example, seven months elapsed between the agreement being
signed and the first revenue being received.
As awareness and acceptance of our product grows, we would expect the time to
reduce between the signing of agreements, the ordering of the first tests and
the consequential reimbursement.
OUR OTHER MARKETS
While the US is our biggest opportunity and our primary focus, we also have
franchise partnerships in New Zealand, Australia and Spain.
In New Zealand, all tests are analysed in Pacific Edge's laboratory in
Dunedin. We have had excellent acceptance of our product from DHBs and
healthcare providers and expect to see increasing revenue from this small
market.
In Australia, we have partnered with Healthscope, a large Australian
pathology company and healthcare provider which was necessary to help us
access public funding for our products. Our Cxbladder technology is fully
integrated into their Melbourne-based business which is the commercial hub
for all Australian tests. We are expecting to see an increasing number of
tests being driven out of Australia in the next year.
In Spain, we have an agreement with Oryzon. They have chosen to launch
Cxbladder in Spain to support secondary detection of bladder cancer and we
are working with them to build this specific dataset and are hoping to see
Oryzon underway within the next 12 months.
USING INNOVATION FOR COMMERCIAL DEVELOPMENT
New Zealand is also an important market for us to innovate, trial and polish
new products and alternative methods of getting our product to the market. We
did this successfully with our 'User Programmes', which were first trialled
in New Zealand, and we have just announced an ecommerce site for online
ordering of Cxbladder tests by New Zealand residents and healthcare
professional such as rural GPs.
Online purchasers of the Urine Testing Service in New Zealand will be sent
the proprietary Urine Sampling System (U.S.S) developed by Pacific Edge. This
allows them to collect a urine sample in their own home, without the need to
visit their doctor or specialist. A detailed test report will be sent
directly to the purchaser's GP or their nominated healthcare professional.
Providing patients with direct access to Cxbladder through this online
platform is a key part of our commercial strategy in New Zealand.
The e-commerce platform offers significant utility for patients and GPs and
would appear to be quite a 'sweet spot'. We had our first e-sale in about an
hour after launching the site. We will continue to progress this site in each
of our key markets where possible.
THE OPPORTUNITY
As we have outlined, the opportunity in the American market alone is huge
with up to 2 million potential test opportunities for Cxbladder each year.
Our product is specifically targeted to test people presenting with
haematuria - blood in their urine - to determine their probability of having
bladder cancer. With its great accuracy it is seen as a more effective and
accurate replacement for other tests currently in use and it is expected
Cxbladder will be used alongside other diagnostic tools such as ultrasound
and cystoscopy to enhance a urologists effectiveness in their clinical
work-up.
Over the past three years, we have worked closely with urologists to
understand the value Cxbladder can offer them in a clinical environment.
While our flagship product has been developed for use by urologists when
patients present for a full urological workup, we have also identified a
number of other potential uses of this technology, at different stages of the
detection and management of bladder cancer.
We are currently developing our next product, which can be used by primary
physicians to triage out patients who do not require a referral for a full
urological work-up. This could dramatically reduce the number of patients
requiring a full work-up, significantly reducing the cost and pressure on the
healthcare system and offering peace of mind and better care for patients.
We already have growing brand and product awareness amongst urologists and
believe that focusing on developing these new products for bladder cancer is
the fastest and surest way for our Company to grow its revenue.
Therefore, this will be our focus for the short to medium term.
OUR FOCUS GOING FORWARD
We have six key initiatives for FY15.
1. Expanding our sales presence in the United States and driving revenue
2. Continuing to rollout our 'User Programmes' to targeted clinical groups
and urologists, particularly in the US
3. Continuing to negotiate agreements with large customers, National and
Regional Provider Networks in the US and other business enabling
organisations
4. Focusing on developing new bladder cancer products where we have
identified an opportunity
5. Successfully launching our new product Cxbladder-triage in New Zealand as
a pre-coursor for the US market.
6. And an ongoing focus on the rollout of Cxbladder in other targeted
markets.
Our primary goal will be to strengthen and grow our footprint in the US
market.
To carry out these growth initiatives, we will continue to invest into our
Company, particularly in our people, new products and in the protection of
our intellectual property. In the US specifically, into expanding our sales
and marketing team and consequentially the technical team in the laboratory
to grow with the inflow of customers tests.
It is our vision to have a suite of products for urologists and GPs that
enables them to obtain a complete clinical evaluation using our Cx products
and to provide the patient, physician and clinician with ease of access to
our technology. We have a vision of making Cxbladder products easily
available to our customers when and as they need them.
Pacific Edge is a unique New Zealand business and our products can make a
difference in healthcare globally. We are well managed with a strong Board
overseeing our growth.
We have expert scientific and clinical advisory boards, with experienced
members who provide valuable advice and guidance to us on our journey.
This is an exciting time for our Company as we start to build the commercial
side of our business. We expect to see cashflow from sales offsetting our
losses as we increase the acceptance and use of our Cxbladder technology in
our targeted markets, particularly the US.
We will continue to evaluate other markets where we can leverage our products
and franchised business model.
End CA:00254217 For:PEB Type:MEETING Time:2014-08-21 16:03:40
