Pacific Edge shares and been falling lower as unprofitable growth stock was hit hard during the heavy sell-off, and more recently was down after delivering its 2022 full-year result, which did not have much to excite investors. However, a week after jumped after a promising update following a long dry spell – which will greatly increase adoption rates for its tests across the Kaiser network of 39 hospitals and covers more than 12.6 million members.
For the 2022 full year result total revenue rose +33% from last year to $13.9m, while Cxbladder test sales rose +49%, with the company reported a net loss of $19.8m – larger than the
previous year’s loss due to accelerated investment to drive adoption of
tests.
Pacific Edge remain well funded with
$103.5m of cash remaining to adequately fund at least 6-7 years of cash burn.
The company highlighted that covid had still played a part in making things
challenging over the last six months, and that weekly tests for the month of
April was up +25% from last year and that growth was going to a be a marathon
not a sprint.
Pacific Edge shares have been
hit hard given they are a growth stock with a long time horizon to
profitability and extremely sensitive to the recent rise of interest rates –
not helping that they are in a cash burn situation, while covid had hampered
anticipated growth plans. We still like the fundamentals of the company and
large addressable market it can penetrate into, and hope to see more
promising updates 3-12 months from now, we are BUY rated at current levels
given adequate funding to support their growth initiatives but believe this
is more suited towards long-term investors that are patient for long slow
growth.
We see upside potential from Pacific Edge meeting
its US revenue targets and with positive cashflow over the near-term and
plenty of cash on hand it should help boost the research and development of
its other cancer diagnostic products such as – gastric, colorectal, and
endometrial cancers and melanoma, as well as scale up its operations and
expand into Asia.
