FMA slams Pacific Edge

See also: Pacific Edge seeks $35m as sales start to flow

The Financial Markets Authority has slammed biotech minnow Pacific Edge [NZX: PEB] with a $500,000 compensation payout for slow disclosure of two big US deals.

In a statement to the stock exchange, the FMA said Pacific Edge had probably breached listing rules in 2013 when it announced two distribution deals for its cancer diagnostic tool Cxbladder, days after they were signed.

“Failure to make the disclosure in a timely way means that shareholders who traded in shares may have done so without having available to them all material information regarding the company and without the market price of the shares when sold reflecting that price impact of that material information,” said the FMA.

Shareholders who sold between the two events were entitled to compensation, the FMA said. Pacific Edge has agreed to make $500,000 available to pay them out.

Pacific Edge chairman Chris Swann said: “The delay of the announcements in question was not made with an intent to breach continuous disclosure but rather to meet the specific needs of the US contractual counterparties.”

On October 16, 2013, Pacific Edge announced it had signed an agreement with FedMed, a national preferred provider network in the US, to make Cxbladder available to 40 million Americans.

The share price on October 15 was 50c and rose to 66c on the day of the announcement.

On October 22 Pacific Edge announced another deal in the US, this time with America’s Choice Provider Network.

From 72c on October 21, Pacific Edge shares soared to a close of $1.06 on October 22 and reached $1.58 by October 24.

For the six months to September 2014 Pacific Edge reported revenue of $1 million and a net loss of $4.9 million.

Its cash available at balance date was $14.7 million.

FMA director of enforcement and investigations Belinda Moffat said the size of the payout was the result of negotiation with Pacific Edge and "is intended to reflect the approximate amount that may have been lost by investors who sold their shares in the days after the agreements were signed, but before the signed agreements were announced to the market, and who may have received less for their shares as a result."

She said the FMA had no reason to believe any buyers of the shares had knowledge of the US agreements.

The outcome was a good alternative to litigation, she said, and had taken time to achieve.

"We examined all the circumstances around the announcements that were made in October 2013 and concluded the investigation last year, then notified PEB of our findings at that time.  Following this we engaged with them.  That process has enabled this outcome and also compliance improvements to be implemented and has resulted in the swift return of compensation to investors, without the time and cost of litigation."

The company will announce its full year results on May 28.

Pacific Edge’s Cxbladder product is a diagnostic test that enables the non-invasive detection of bladder and other urinary tract cancers from a small volume of urine. Its shares closed on Monday at 72c.