Since last year, there had been a cloud hanging over the Dunedin-based listed cancer diagnostic company in its key United States market.
There was the possibility that its Cxbladder tests could be dropped by Novitas, the Medicare administrative contractor with jurisdiction for Pacific Edge’s laboratory in Hershey, Pennsylvania. Those tests represented a significant portion of Cxbladder testing revenue.
As recently as late last month, when the company was releasing its strong full-year financial results, Dr Meintjes said the company was prepared for an unfavourable outcome but believed a favourable one was "much more likely".
But the call from Dr Meintjes was to inform his board chairman that an unfavourable final version of the local coverage determination (LCD) had been released and Medicare’s coverage of those tests was expected to cease from July 17.
Speaking from Melbourne last week, Mr Gallaher said an unfavourable result had always been assessed as low probability on the advice of legal and commercial contacts in the US. But alongside that low probability came high consequences.
"It’s a very significant customer at the moment but all is not lost," he said.
All companies had a strategic risk register, such an occurrence was on Pacific Edge’s and it had manifested close to a year after first being raised.
During that period the company had continued to invest significantly in the business and it also had cash reserves of more than $70 million.
It still had customers in the US who "made their own rules" and were unaffected by the decision, it had a new product in development, it had business outside of the US and the announcement also needed to be kept in context — "there are still lots of people out there who are buying our test", he said.
The opportunities were still there and the company’s goal had not changed. It still had a "world-leading product" and people were still being diagnosed with bladder cancer every day in the US.
"We will persevere, it’s a long journey," he said.
Pacific Edge had the support of the American Cancer Society and also key opinion leaders and it was "hard to uncover" why Novitas had done it. Other companies were also affected.
For investors, it was a matter of waiting to see which path the company was going to take, after working through the various options with a balanced approach, and an update would be provided its annual meeting in Auckland next month, he said.
Dr Meintjes was basing himself in the US for the next few weeks while the company worked through the issue, particularly legal aspects.
The board and management team were exploring the full range of alternatives to either overturn or delay the LCD; regaining coverage through Novitas or through an alternative MAC; initiating alternative billing practices that would increase patient responsibility; and considering other strategic alternatives, including partnerships with other large biotech businesses.
Mr Gallaher paid tribute to the board and management team and also the 120 staff, saying they were also in "problem-solving mode", in the wake of the decision.
He singled out previous chief executive David Darling’s perseverance and persistence and now Dr Meintjes’ skill set which was "taking it [the business] to the next level".
Throughout the uncertainty, Dr Meintjes had been both unperturbed and balanced and those were traits that investors and employees were looking for.
Mr Gallaher likened Dunedin to being the spiritual home of Pacific Edge; it was where the technology was developed and where laboratory work and product development work continued.
It was disruptive technology which was asking urologists "to do something different" and that was something that took time.
