In the Waiting Room – Pacific Edge and EBOS

6 June 2023

New Zealand

Pacific Edge and EBOS are both put into a trading halt.

Unfortunately, Novitas has finalised its LCD decision, Pacific Edge’s Cxbladder product will no longer be covered by Medicare coverage in the US. On the basis that Pacific Edge’s current body of evidence isn’t sufficient to be “considered medically reasonable and necessary”.

Medicare’s coverage was a huge catalyst to our recommendation on Pacific Edge, as it represents 60% to 70% of Pacfic Edge’s total revenue. This is a huge hit to their business and question their road to breakeven while local regional health board wins are a positive sign. With ~$77m cash on the balance sheet, this will deplete a lot quicker than anticipated, the question is will be able to last the next 3 to 4 years – without Medicare coverage.

We will wait for the company to make a formal announcement. EBOS shares are also in a trading halt, as it considers information received regarding the Australian Chemist Warehouse contract.


Australia

The Australian market (ASX200, +1.0%) was up on Monday, after a strong lead from Wall street.

Materials and Energy were the best performing as commodity prices held up strong, OPEC holding a meeting to restrict supply to prop up oil prices, and strong data from China lifting iron ore prices.

The major news for today is RBA’s interest rate decision which is split 50/50 on a hold or a 25-point hike as economic data continues to hold up. The +5.75% increase in minimum wage, to support cost of living problem will fuel inflation to hold-up, as well house prices recovering in recent months – providing buffer to raise rates if not today but the next meeting.


US

Apple unveiled its Vision Pro (clearly they need Steve Jobs back from the dead for their naming their products – it’s not exactly an inspiring title). It’s an “impressive” product in terms of tech – the product is essentially like having a 4k screen in front of each eye. Yet it’s priced north of $3K ($3,499) and looks like a water snorkeling mask. The key issue here is that it doesn’t do much different to Meta’s competing product – it augments reality and displays images in front of your eyes. Companies have been trying to convince people to put virtual reality headsets in front of their eyes for a long time – it’s a big ask. Not expecting a whole lot of sales of these devices at first; good read-through for Unity (NYSE: U) which will likely be the key provider of the augmented reality software environment Apple will be using. Apple has plenty of cash to burn on augmented reality, but the bigger question is whether the mainstream will pick it up.


Chart of note – Bitcoin is starting to correlate with gold (but for how long?)

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