Pacific Edge Limited [NZX: PEB] has benefited from a burst of optimism today, causing the share price to leap over 18%.

Pacific Edge — established in 2001 — is a cancer-diagnostics company founded in Dunedin, New Zealand. They specialise in genetic-biomarker testing known as CxBladder. This process is non-invasive and able to detect the presence of cancerous cells in urine.

Pacific Edge has a market capitalisation of $407 million. The share price currently sits at $0.69.

 

Why has the [NZX: PEB] share price surged today?

 

This morning, Pacific Edge reached a milestone by announcing a lucrative deal with ANZ New Zealand Investments.

  • ANZ has made an investment offer of $22 million.
  • In return, Pacific Edge will issue 33,846,154 shares to ANZ, priced at NZ$0.65 per share.

Chris Gallaher issued the following statement:

‘The investment from ANZ New Zealand Investments adds further depth to the Company’s share register and is a reflection of the growing investor interest in Pacific Edge following our recent achievement of two major commercial milestones in the USA. The suite of Cxbladder products are rapidly being accepted as an alternative to many of the traditional testing options for bladder cancer. This additional growth capital will accelerate our commercial progress and allows us to execute on our future growth opportunities, therefore adding value for all shareholders.’

This positive development reinforces a string of successful moves in recent months:

  • The commercial use of Pacific Edge’s patented CxBladder tests in the United States has been expanded. This partnership with the Centers for Medicare and Medicaid Services (CMS) provides healthcare coverage for all Americans over the age of 65, as well as coverage for patients with low incomes.
  • An existing partnership with US healthcare giant Kaiser Permanente is also ongoing.
  • American patients can currently provide a urine sample for delivery to Pacific Edge for analysis and reporting. The ability for non-invasive, regular testing will benefit both patients and physicians in the long-run.

 

Where could [NZX:PEB] go from here?

 

ANZ New Zealand Investments is the country’s largest fund-manager — with $33 billion under management.

Their commitment to Pacific Edge shows a measure of positivity. The company’s long-term prospects in the American market appear to be attractive.

However, for prospective investors, some caution is still needed.

Our analysis indicates:

  • Pacific Edge has a price-to-book ratio of 27.6x, which is higher than the 3.8x average usually seen in the biotech industry.
  • It has a return on equity of –130.21%, which indicates that the company has a history of being unprofitable.
  • In addition, the company has reported an after-tax net loss of $18.9 million for the year ended March 31.

This makes Pacific Edge a speculative investment with a potentially volatile share price. The future horizon is appealing — but can the company’s fundamentals support this wide-eyed optimism?

Discerning investors should approach this stock with caution.

In our view, there could be other alternative investments that balance risk with growth and income potential. You can discover these opportunities by subscribing to our Inner Circle Newsletter.

 

Regards,

John Ling,
Analyst, Wealth Morning