ASX Health Stocks: GTG pivots to US, vows to build a more efficient business

GTG to pivot to US with a more streamlined, efficient business model
Pacific Edge says it’s still waiting on Medicare decision in the US

GTG pivots to the US

Genetic Technologies (ASX:GTG) said it was undergoing a major restructuring to streamline its operations and focus on growth in the US market.

The company’s strategic shift focuses on leveraging its extensive U.S. distribution channels, including partnerships with Stayhealthy and Wellworx.

GTG plans to enhance its sales efforts in the US through both business-to-business and business-to-consumer avenues, utilising its “Gene by Gene” high-throughput lab in the U.S.

The company, which is known for its EasyDNA and GeneType products – tests that are designed to assess an individual’s risk for serious diseases using genetic information – has decided to shift to a “capital light” operational model.

This new approach will significantly reduce its operating costs by outsourcing laboratory functions instead of maintaining costly in-house facilities.

The company has secured an $800,000 short-term loan to support its working capital needs during this transition.

Additionally, GTG is considering launching an Entitlement Offer to raise further funds.

Despite these changes, the core operations of EasyDNA, which is already generating over $7 million in global sales, and GeneType, will remain unaffected, GTG said. The company remains committed to these key products, which will continue to drive its revenue growth.

The restructuring will involve moving the company’s Melbourne laboratory to a more cost-efficient model by using third-party contractors for some of its testing processes.

This move aims to cut the company’s monthly cash burn from approximately $800,000 to below $200,000, with the goal of reducing the annual cash burn to under $2.5 million. The company is targeting cash flow positivity by the end of 2025 or soon after.

As part of this transition current CEO Simon Morriss will step down in September.

The board members will also play a more active role in the company’s operations, deferring their fees until the end of the year and potentially taking them in the form of equity, subject to shareholder approval.

Waiting game for Pacific Edge

Pacific Edge (ASX:PEB), a cancer diagnostics company based in Dunedin, New Zealand, says it is still awaiting the final decision on US Medicare coverage for its tests.

The company has been in discussions with Novitas, the Medicare Administrative Contractor (MAC) responsible for its U.S. laboratory, about a new Local Coverage Determination (LCD) titled ‘Genetic Testing for Oncology’.

Pacific anticipated that the LCD would be finalised within 365 days of its initial posting. However, Novitas has informed the company that it is still negotiating with the Centres for Medicare & Medicaid Services (CMS), and that there is no available timeline for when the decision will be made.

The company has been advised to keep an eye on Novitas’ website for future updates.

In the meantime, Pacific Edge’s tests, including Cxbladder Triage, Detect, and Monitor, continue to be reimbursed by Medicare and Medicare Advantage payers according to the existing rates and guidelines for medical necessity.

The company remains optimistic that Novitas will finalise the LCD, though the exact timing is uncertain.

Pacific Edge will update shareholders as more information becomes available.