Pacific Edge holds its annual shareholders' meeting next week amid an uncertain time for the cancer diagnostic company. Photo / Thinkstock
As Pacific Edge ponders its future in light of the uncertainty surrounding Medicare insurance coverage for its Cxbladder tests, shareholders are beginning to question the company’s governance structure and capital management.
Stock Takes understands a number of shareholders have expressed their views to the board with a range of suggestions, including cost reductions that extend to trimming the number of directors given the possibility of a change in strategic direction for the cancer diagnostics company.
There have been a number of suggestions made including that directors need to show more confidence by acquiring shares and that Pacific Edge undertake a share buyback programme, using $2 million of its approximate $75m of cash to purchase shares, which could be held for a revised CEO incentive plan.
Any incentive scheme should be staggered with milestones, including revenue, cost control, capital management and, crucially, the outcome of the Local Coverage Determination (LCD) that was to have stopped Medicare payments from July 17, but was delayed to allow Pacific Edge to respond to the concerns and possibly retain the coverage.
Stock Takes understands the board is considering a range of options and it’s likely to be a topic when Pacific Edge holds its annual shareholders’ meeting in Auckland next week.
In its most recent shareholder update, released on Tuesday, the company said it had achieved a record-breaking quarter in lab testing throughput for its Cxbladder products and it looked forward to having the opportunity to address Novitas’ concerns and give “confidence that our primary clinical evidence is sufficient to support continued Medicare coverage of the tests we currently have in the US market”.
Novitas is the Medicare administrative contractor that covers Pacific Edge’s tests.
“Despite the LCD not becoming effective on July 17 and its re-opening for notice and comment, we continue to work and develop the strategies that we set out in June,” chief executive Peter Meintjes said.
“We are also exploring the appropriate structure of the business and what other strategic options are available to the company that will enhance shareholder value.”
Test volumes processed at Pacific Edge laboratories rose to a record of 9706 in the first quarter of the 2024 financial year, a 9 per cent rise on the 8877 tests in the prior quarter.
The initial news in early June that US Medicare funding would end caused Pacific Edge shares to plummet from 49.5c to 10.9c but they did recover some ground after the reprieve was announced. The stock recently traded around the 20c mark.
Auckland-based Vend, which was sold to a US company in 2021 for $455m, recorded a $4.84m net loss for the 2022 financial year, according to a public filing this week.
Vend — which makes software that allows cash registers to be replaced by iPads — had at times been seen as an IPO candidate, and its trade sale was viewed as a blow to the NZX at the time.
The company posted revenue of $54.66m in the 12 months to March 31, 2022, up from $46.89m in the previous financial year. The net loss was smaller than the $6.85m recorded in 2021.
Vend’s balance sheet shows total liabilities of $73.84m, up from $63.12m in 2021, the bulk of which ($59.29m) is owed to related parties.
Vend was acquired by North American company Lightspeed and the purchase price was significantly more than the US$100m valuation attributed in 2016 at the time of its last major capital raise.
The sale represented a sizeable payday for early investors and venture capital fund Movac, which had a 9 per cent stake, and Milford Asset Management, which had a 5 per cent holding via its Active Growth Fund.
Vend founder Vaughan Fergusson, his ex-wife Mel Rowsell and early backer Sam Morgan each had an 8 per cent share, while the sale also represented major gains for two smaller earlier investors: Peter Thiel’s Valar Ventures and Lance Wiggs’ Punakaiki Fund.
The Canadian-founded, NYSE-listed Lightspeed is in the same market as Vend, selling cloud-based point-of-sale software, but is many times larger with a market cap of just under US$10 billion.
There is one item of intrigue in Vend’s latest accounts, with a note highlighting a complaint that has been filed in the state of California naming Vend Limited as one of the defendants.
Vend is just one of several smaller third-party suppliers named in the statement of claim, which is mostly targeted at Oracle’s NetSuite product, with a relatively small claim of US$170,000 across all defendants.
“It is too early to assess its likelihood of success or determine any potential liability,” Vend said in its financial statements.
Goldman Sachs must be thinking wistfully about what might have been. On Wednesday, the US investment bank reported weak second-quarter earnings. Downtrodden investment banking fees accompanied one-time losses in commercial real estate. Scant M&A activity produced an annualised return on equity of 4 per cent. Dreams of consumer banking riches have been dashed amid a near full-scale abandonment of that pricey effort.
Adding insult to injury, the likes of JPMorgan, Wells Fargo, Citigroup and Bank of America are exploiting an almost perfect environment of high interest rates and low delinquencies. Their lending businesses generated $63b of net interest income in the second quarter. JPMorgan delivered a 38 per cent return on equity in its consumer banking segment.
By contrast, Goldman has faced great internal and external criticism for diving into dull Main Street businesses. It may be the victim of bad luck, poor execution and hubris. But the calculation to diversify its operations remains understandable even now.
Maligned for years in the lengthy era of low interest rates and low growth that followed the financial crisis, big banks were fortified by their brands and massive retail footprints amid regional banking distress.
Among Goldman demerits in the quarter was a US$700m ($1.12b) pre-tax impairment from the US$2b ($3.2b) acquisition of fintech lender GreenSky. Billions of dollars of investments to build a lending business from scratch became intolerable for Goldman shareholders.
Critics must decide whether they prefer Goldman to be simply a highly volatile, if highly profitable, institutional securities and private capital investing outfit. Those shareholders value Goldman shares at 1.1 times its book value, while JP Morgan’s trade at 1.6 times.
As markets stabilise and recover, deal fees and investment profits will rise once again. Excluding one-time costs, Goldman’s ROE in the quarter remained nearly 10 per cent. At some point, leadership will have to decide if the bank makes another big strategic bet. The problem with the last one was execution, not concept. (Financial Times)
Investors have been tickled pink, boosting the valuations of Barbie doll-maker Mattel, media company Warner Bros. Discovery and AMC Cinemas ahead of the Barbie movie’s release.
Mattel was the fourth-most-traded stock among New Zealand investors on the Stake trading platform alongside US tech stocks in the past two weeks, with interest in the Barbie brand owner increasing by 2500 per cent.
Stake chief marketing officer Bryan Wilmot said the hyped and heavily marketed movie starring Margot Robbie and Ryan Gosling was an immediate sugar hit for Mattel and movie producer Warner Bros. Discovery stock, but the revival of the Barbie brand was more crucial for longer-term value and performance.
“When you have a franchise, you can continuously milk the future revenues from that. There’s potential there.”
A Ken sequel, perhaps?
WarnerMedia merged with Discovery in April 2022, bringing together content from the Discovery Channel, Warner Bros. Entertainment, CNN, HBO, Cartoon Network and the streaming service HBO Max - recently re-branded to Max.
Its share price was up 39 per cent year to date, to above US$13, while Mattel was up 17 per cent to above US$21.
In a double-headed hype for films following years of struggling revenue, Comcast’s Universal Studios-backed Oppenheimer was also released this week.
The film could not be further from the Barbie franchise — it was directed by Christopher Nolan, who created psychological films Memento, The Prestige and Inception, as well as the Batman trilogy. The Dark Knight is his most highly rated film on the Rotten Tomatoes audience rating platform.
Wilmot said while the release dates seemed competitive on the surface, the timing may have been choreographed between the two studios to “create incremental hype” for cinema.
AMC Cinemas had sold 40,000 double tickets to see both films in the United States, an offer that appealed to him, he said.
“I’m gonna do both.”
Additional reporting by Madison Reidy.
Minister Andrew Bayly sat down with Tom Raynel to discuss his 2024, and what comes next.