Pacific Edge announces Medicare coverage of Cxbladder tests in the US market is expected to cease from 17 July 2023. This development follows the finalization of a Local Coverage Determination (LCD) (L39365) by Novitas, the Medicare Administrative Contractor (MAC) with jurisdiction for Pacific Edge's laboratory in Hershey Pennsylvania. The finalized LCD, which includes Cxbladder and tests provided by other companies, specifically notes the Cxbladder tests Triage, Detect, Monitor, Resolve and Detect+ as `not considered medically reasonable and necessary', the threshold required for coverage under the US Social Security Act.

A number of other companies are also affected by the LCD. Over the coming days Pacific Edge will seek to explore all available legal options (including a potential appeal) with US-based lawyers, the key opinion leaders among customers, partners at The Coalition for 21st Century Medicine, and other impacted companies. Pacific Edge is currently unable to fully determine the impact of the new LCD on test volumes in the US market for the 2024 financial year.

For the immediate future, the company will continue to promote Cxbladder and process all tests ordered by US clinicians whilst it further considers its strategy and future options. The company believes that in the short term it is prudent to continue to support Cxbladder as it determines the best path forward, but the approach will be accompanied by cost containment initiatives including, but not limited to an immediate hiring freeze and a halt on discretionary spending and new capital expenditure. In light of this new LCD, management and the Board at Pacific Edge are reviewing the scenario planning commenced last year to determine a strategic path forward that potentially includes: a) legal challenges or appeals, b) seeking to regain coverage through Novitas, c) seeking to be awarded coverage through an alternative MAC, d) alternative billing practices that would increase patient responsibility and e) remaining open to other strategic alternatives.

Which of these the company adopts, will be determined by considering a number of factors including the potential impact on revenue, expenditure and cash reserves, the time and resources required to regain coverage, shareholder value implications, and the expected likelihood of success.