The finalised LCD, which included Cxbladder and tests provided by other companies, did not meet the threshold required for coverage under the US Social Security Act.
Pacific Edge said it would seek to explore legal options, including a potential appeal, with its US lawyers.
“As a direct result of the LCD, Pacific Edge’s revenue is expected to reduce substantially from current levels until Cxbladder tests regain coverage,” it said in a statement to the NZX.
In the year ended March 2023, tests for Medicare and Medicare Advantage were about 60 per cent of US commercial tests, or about 13,800 tests, and generated about $15.3m, or 77.3 per cent, of 2023 total operating revenue.
Post July 17, all these tests were expected to be affected by the Novitas determination.
Pacific Edge chief executive Dr Peter Meintjes said the company was “surprised and disappointed” with the finalised LCD.
He said the local coverage determination “appears to materially misunderstand the important role that biomarkers can play”.
“Notably, our largest US customer Kaiser Permanente is expected to continue payment for our Triage and Monitor products, irrespective of the Novitas determination. We also expect continued reimbursement for the small proportion of patients insured by the US Veterans Administration and other direct bill-payers.”
Pacific Edge told the NZX it was currently unable to fully determine the impact of the new LCD on test volumes in the US market for the 2024 financial year.
In the meantime, the company would continue to promote Cxbladder and process all tests ordered by US clinicians while it considers its strategy and future options.
Chairman Chris Gallaher said Pacific Edge is well funded with cash and cash equivalents and short-term deposits of $77.8m at the end of March 2023.
“Despite this setback, the company believes that it can still deliver on the significant opportunities we see for Cxbladder in the US and around the world. We will update the market as we gain greater clarity and have determined our strategic path forward,” Gallaher said.
Pacific Edge said the Novitas announcement highlighted some areas of improvement in Pacific Edge’s “evidence portfolio” that either have been or are being addressed.
“It does not acknowledge the value Cxbladder offers in the patient diagnosis and management, or the record demand from urologists,” the statement to the NZX said.
“The single most important determinant of coverage is high-quality clinical evidence,” Pacific Edge said, adding “the clinical evidence programme has already been accelerated”.
Forsyth Barr analyst Matt Montgomerie said it was “extremely disappointing” for the company because it had only just started to gain traction in the US.
“It means that 65 to 70 per cent of their revenue will go to zero from July 17,” Montgomerie said.
“They [Novitas] are essentially saying that CxBladder tests are not deemed as being medically reasonable and necessary, given that they are not included in guidelines.
“This is a way of drawing a line in the sand for coverage of the tests.”
Pacific Edge had made reference to clinical studies.
“Part of the new strategy is improving the body of clinical evidence,” Montgomerie said.
“It’s an unexpected and precarious situation and you have to give them credit for being quite open and transparent on how they see it.”
Shares in Pacific Edge, before the company went into a trading halt pending the announcement, were at 49.5c, compared with its September 2021 peak of $1.56.
(Correction: A previous version of this story said Medicare was to stop cover of Cxbladder from next week. The correct date is July 17.))
