Pacific Edge : Investor Update - Oct 2023

OCTOBER 23

INSIDE
Letter from the CEO	2
Q2 24 test volumes	3
Selling the value of Cxbladder	4
Medicare coverage update	5
Detect+ clears first hurdle	6
Cxbladder economics	7
CREDIBLE study 'green lit'	8

LETTER FROM THE CEO

BUILDING RESILIENCE AMID CHANGE

Dear Shareholders,

The second quarter of the 2024 financial year was one of significant challenge and change for Pacific Edge. Despite this operating environment, Cxbladder throughput was 8,525 tests for the quarter, which is down 12% on prior quarter, but still our third highest quarter and an increase of 8% over the same quarter in the prior year.

We started the quarter with Novitas, our Medicare Administrative Contractor, finalizing 'Genetic testing for oncology' (L39365) as 'future effective', a move that was set to end Medicare coverage of our tests.

However, following pressure from Pacific Edge, peer companies, industry partners, healthcare providers and the clinical community, the determination was withdrawn, and a new, albeit unchanged draft (DL39365), was released for public review and comment in line with statutorily regulated procedures.

This very welcome decision returned Pacific Edge to a condition we have endured for much of the last year. We remain a covered benefit by Medicare and continue to receive reimbursement for our tests. Yet once again we are having to make the case that Cxbladder is medically reasonable and necessary despite historical coverage from Novitas clearly indicating that this is the case. With uncertainty over whether our message will be heard, and uncertainty regarding when the determination will be finalized, there is naturally uncertainty regarding how long Medicare coverage will continue.

Notwithstanding the strength of our existing clinical evidence, the strength of our written arguments to Novitas, and the strong support we have received from the most significant organizations in the US urology community (see page 5), the risks of a non-coverage decision are now more elevated than we assessed for much of the last year.

"Our operations are now configured to ride out a non-coverage determination..."

In response we have restructured our business (see page 4) to reduce our cash burn. This contrasts

with our prior focus on top line revenue growth. The approach we have taken is in line with our communications to investors at the Annual Shareholder Meeting in July. Our operations are now configured to ride out a non-coverage determination and regain Medicare coverage relying on our existing capital reserves.

We now have a smaller sales force. Each team member has a larger territory, where the focus is on territory profitability, not throughput growth alone. The team is adopting refined value-based messaging to healthcare providers and clinicians emphasizing that the greatest clinical and economic value of Cxbladder is realized if the tests are protocolized in the clinical pathway to safely avoid or defer cystoscopies and imaging for hematuria evaluation or bladder

cancer surveillance (see page 4). We are supporting this change

by better equipping the team with marketing collateral and digital technologies to ensure that clinicians - having determined the clinical utility of Cxbladder for themselves - elect to protocolize our tests systematically on every eligible patient type. We are also seeking to facilitate this decision by offering a seamless ordering and results delivery experience.

We continue our evidence generation activities with a focus on the end points required for inclusion of Cxbladder in the clinical guidelines of the American Urological Association (AUA) and the National Comprehensive Cancer Network (NCCN). Guideline inclusion, as we have noted before, remains the most effective strategy to entrench coverage of our tests (see page 8).

Finally, just as the quarter closed, the US Food and Drug Administration (FDA) has proposed rule changes that could see Cxbladder falling under its oversight and regulated as a medical device. We highlight our views on the relevance of this development in the context of the complex history and legal challenges associated with the various ebbs and flows on this topic over the last couple of decades on page 7.

Ngā mihi nui,

Dr Peter Meintjes

Chief Executive

2 PACIFIC EDGE LIMITED INVESTOR UPDATE | OCTOBER 2023

TEST VOLUMES

RESILIENT THROUGHPUT DESPITE HEADWINDS

Test volumes processed at Pacific Edge's laboratories in the second quarter of the 2024 financial year (Q2

1. fell 12% to 8,525 from 9,704 in the prior quarter (Q1 24) amid the reorganization of our US operations and publicity on the Medicare coverage determinations. The volume of tests processed in Q2 24 represents an 8% increase on the 7,864 tests processed in the same quarter of the prior year (Q2 23).

The reorganization (see page 4) weighed on sales activity in August and early September. Meanwhile, volumes were also impacted by some uncertainty among physicians and healthcare providers over Cxbladder's coverage status following the Medicare non-coverage determination in June by Novitas and then its July withdrawal. These effects were exacerbated by the normal July holiday season lull.

Tests processed in our US laboratory were 7,335 tests in Q2 24, a 15% decrease on the 8,627 tests in Q1 24. The figure represents a 9% increase on the 6,699 tests processed in Q2 23. The number of unique ordering clinicians in the US fell 7% through the quarter to 1,147 but is up 17% on the 978 clinicians who ordered tests in Q2 23.

Asia Pacific volumes in Q2 24 were 1,190 up 10% on the 1,077 tests processed in Q1 24, and up 2% on the 1,165 tests processed in Q2 23 with the quarter-on-quarter increase largely reflecting an increase in test volumes associated with clinical studies in the region.

TOTAL TEST VOLUMES: GROUP

	10,000
	9,000												1,077
	8,000											1,061		1,190
volume	7,000								983	1,165	1,139
6,000
						952
					1,074	1,117
Test	5,000				1,079
									8,627
			1,073
4,000
		943									7,335
								6,699	6,629	7,817
	3,000	1,088						6,073
						5,290
					4,706
					4,277	4,591
	2,000	2,791	3,110	3,824
	1,000
	-
		Q2 21	Q3 21	Q4 21	Q1 22	Q2 22	Q3 22	Q4 22	Q1 23	Q2 23	Q3 23	Q4 23	Q1 24	Q2 24
								US	NZ

UNIQUE ORDERING CLINICIANS: US

	1,400
	1,200										1,150	1,232	1,147
									1,082
Physicians	1,000							895	978
800					741	789
		657	690
	600	516	530
	462
	400
	200
	-
	Q2 21	Q3 21	Q4 21	Q1 22	Q2 22	Q3 22	Q4 22	Q1 23	Q2 23	Q3 23	Q4 23	Q1 24	Q2 24

PACIFIC EDGE LIMITED INVESTOR UPDATE | OCTOBER 2023

3

NATIONAL SALES MEETING

SELLING THE VALUE OF CXBLADDER

'Cxbladder can help reduce the number of unnecessary procedures in your office and prioritize patients that need further investigations.' That was the focal point of new messaging to clinicians introduced at our US national sales meeting held in Denver in the middle of September.

Across several sessions the Medical Affairs Team linked Cxbladder utility pathways to existing American Urological Association (AUA) guidelines to drive the adoption of our tests.

For clinicians using Cxbladder Detect this means that they can safely rule out 78 of every 100 patients presenting with microhematuria from receiving cystoscopy and imaging procedures when compared to following the AUA guidelines without Cxbladder Detect.

For clinicians using Cxbladder Monitor this means that they can safely reduce the number of post- surgery cystoscopies by 50%, and also continue to non-invasively monitor patients that may have recurrent disease after guidelines no longer recommend invasive monitoring procedures.

This creates benefits to patients who present with comorbidities that elevate the procedural risks of cystoscopies and delivers the clinical benefits of not missing any serious disease. It is also economically beneficial to healthcare payers, enabling them to minimize unnecessary procedures,

make more efficient use of staff time and facilities (see page 7).

Alongside these key messages - we highlighted the investments we are making to drive the integration of Cxbladder into EMRs and online customer portals as part of our effort to deliver an improved customer experience with seamless test ordering and results delivery.

The sessions were enthusiastically received by the team, amid recognition that they are better positioned than they ever have been to capitalize on the opportunities our test offers.

RESTRUCTURE & INVESTMENT

CHARTING A COURSE TO ENTRENCHED COVERAGE

Guided by the principles we set out at our Annual Shareholders' Meeting in July we have completed the strategic restructure we flagged for our US and Asia Pacific operations.

With this smaller organization, we will continue to focus on growth from Account Executives in larger territories, from national accounts and capitated systems and from global market opportunities. In the event of an adverse Medicare coverage determination, we are also positioned to make further changes while continuing to pursue a course to regain coverage within our existing reserves.

In practical terms this has seen a reduction in the number of US sales territories from 29 to 17 and a reduction of the US sales regions from three to two. In the Asia Pacific our renewed focus is on growth markets in Australia and Southeast Asia. This approach recognizes that the primary opportunity for growth in New Zealand would be from a national contract with Te Whatu Ora that may take some time to develop.

We continue to invest in enhancing our sales capability (see above) and to amplify our clinical development program within the urology and oncology communities, supporting our efforts to see the inclusion of our tests in clinical guidelines.

Alongside this we have stepped up our investment in clinical studies with the CREDIBLE clinical study (see page 8).

Guideline inclusion, an expanding portfolio of evidence supporting the clinical utility of our tests, and strong medical communications are the best way to entrench coverage. In the event of an adverse Medicare local coverage determination, they are also the best strategies to ensure we follow the fastest route to regaining coverage.

Finally, we are driving improvements in the performance and efficiency of our operations with the continuing drive towards digitalization. This includes efforts to:

• improve the customer experience and data provenance to our lab with integrations into our customers' Electronic Medical Records (EMR) systems,
• create a customer portal for managing test requests, test results and documentation required for establishing medical necessity, and
• the ability to electronically manage patient recruitment, patient data, monitor clinical study sites and analyze data for clinical and research applications.

4 PACIFIC EDGE LIMITED INVESTOR UPDATE | OCTOBER 2023

MEDICARE COVERAGE

A PERSUASIVE CASE - NOW TO THE VERDICT

Pacific Edge is confident we have made the best possible legal and clinical arguments for Cxbladder to retain Medicare coverage during the open public meetings and the written comment period for the draft Local Coverage Determination (LCD) 'Genetic testing for oncology' (DL39365).

Our representations to Novitas were strongly supported by the leading professional societies in urology - the American Urological Association (AUA), the Large Urology Group Practice Association (LUGPA) and the American Association of Clinical Urologists (AACU) - and by our industry partners, the Coalition for 21st Century Medicine (C21), the American Clinical Laboratory Association (ACLA) and by many other key urologic opinion leaders.

Together we highlighted the shortcomings in the MAC's evidentiary review to justify the non-coverage decision and the sharp contrast with its earlier reliance on the same evidence to cover our tests. We also highlighted the flaws in the conception of the LCD and particularly the unprecedented approach of outsourcing Medicare biomarker coverage decisions to three external databases1.

We followed up these public submissions with written comments to Novitas including a point-by-point rebuttal of Novitas' review of the Cxbladder clinical evidence. Meanwhile a 'who's who' of US key opinion leaders in urology, including numerous guidelines committee members, wrote an independent editorial commenting on the impact of Novitas' approach. This editorial has been accepted for publication in the journal "Bladder Cancer" and covers the importance of urine biomarkers with specific reference to Cxbladder and their optimal usage in hematuria evaluation and recurrence monitoring.

The submission period ended on 9 September and now Novitas must consider and respond publicly to all of the comments presented during the notice and comment period.

Novitas has given no indication on when it is likely to finalize the LCD, but it is statutorily required to do so (or withdraw the LCD) within 365 days of the original publication date. An LCD becomes effective 45 days after it is finalized.

The presentations given at the open meetings and details of written submissions are available on our website: https://www.pacificedgedx.com/ investors/presentations/

PAST AND FUTURE: PACIFIC EDGE'S MEDICARE JOURNEY

July '20

July - Sep '22

Jan '23

June - July '23

July - Sep '23

Novitas informs	Open Meetings,
Pacific Edge that	Public Comment
Cxbladder is	Support from
covered
industry, patient
	advocates &
	customers to retire/
	revise DL39365

Triage gains coding	We pursue all	New draft LCD issued
and then coverage	legal and political	(DL39365)
under LCA (A58917)	strategies to overturn	Notice and comment
	the LCD
	period (ends 9 Sept)
		Medicare coverage
		continues

Novitas proposes	Contingency	Novitas finalizes	Novitas agrees to	Date by which
non-coverage for	planning for	LCD (L39365) with	follow procedure	Novitas must
Cxbladder with	adverse LCD	non-coverage for	for notice and	finalize or
LCD (DL39365)	determination	Cxbladder, future	comment on the	withdraw the
Implementation	amid expectation	effective on 17 July	LCD	LCD
of continued	2 June '23		26 July '24
seen as unlikely	LCD stayed,
coverage
July '22		Medicare coverage
Sep - May '23
	continues
			6 July '23

1 The draft LCDs outsources coverage decisions to three knowledge bases to determine coverage, rather than the MAC. They are Clinical Genome Resource (ClinGen); National Comprehensive Cancer Network (NCCN); Oncology Knowledge Base (OncoKB) knowledge bases.

PACIFIC EDGE LIMITED INVESTOR UPDATE | OCTOBER 2023

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