Pacific Edge : Investor Update - Jul 2023

Dear Shareholders,

I am pleased to announce another record-breaking quarter in laboratory testing throughput for our Cxbladder products. I'm sure it is not lost on shareholders that this announcement comes on the day (US time) that we would have lost Medicare coverage, were it not for the recent announcement that Novitas1 will not make Local Coverage Determination (LCD) L39365 eective on July 17, but will republish with the opportunity for open meetings and public comment.

This was the best possible result that we could have expected from our intense eorts since Novitas announced it had finalized what we and other commentators have noted as a substantially flawed LCD on 2 June 2023. Now, Pacific Edge will have the opportunity to address Novitas' concerns and convey our confidence that our primary clinical evidence is sucient to support continued Medicare coverage of the tests we currently have in the US market.

Since the finalization of the adverse LCD our focus in conjunction with various partners has been on pursuing a range

of actions aimed at retiring or delaying its implementation on the grounds that Novitas did not follow statutorily regulated procedure. We now appear to have prevailed on these procedural matters.

Consequently, until we are further advised, and until we have concluded the notice and comment period and a new LCD is finalized, Pacific Edge expects to continue to bill and receive reimbursement for our tests from Medicare and Medicare Advantage.

Pacific Edge will continue to

argue that the new approach in the LCD to use third-party databases to preemptively non-cover diagnostic tests without evidentiary review

is unprecedented, not statutorily supported and possibly unlawful. However, we will focus more heavily on the evidentiary review in the LCD of Cxbladder products, rebutting what our Medical Team and many prominent Key Urology Opinion Leaders perceive as a flawed analysis that lacks understanding

of how to use our test and lacks knowledge of the standard of care in urology. We break down our analysis of the evidentiary review for investors on page 5.

"We now appear to have prevailed on these procedural matters."

The events of the last few months have prompted a thorough review of our business operations in the event of a non-coverage determination, and this has already created unanticipated value, including important revisions to our strategy.

Starting today, and as flagged earlier this month, we will ask our patients to accept a greater degree of financial responsibility for the costs of performing a Cxbladder test if an insurer denies us payment. Pacific Edge will pass on a higher patient responsibility to patients with private insurance when that insurer denies the claim. Patients will be asked to sign a patient responsibility notice that will include our Patient Assist Program (see page 6).

Regarding our clinical evidence development, we announce today that we have reached the primary endpoint for the STRATA study,

so will cease enrolment, and begin analysis, before deploying our clinical evidence generation resources onto other studies. Our high-level focus on clinical evidence generation remains the cornerstone of our long-term strategy (see page 8).

Despite the LCD not becoming eective on 17 July and its re-opening for notice and comment, we continue to work and develop the strategies that we set out in June.

We have finalized and announced the enhanced patient responsibility program, acknowledging it will take time to determine its ecacy.

We continue to explore establishing a second lab in a jurisdiction governed by the MolDx Program to see if it would provide greater certainty of retaining or regaining Medicare coverage.

We are also exploring the appropriate structure of the business and what other strategic options are available to the company that will enhance shareholder value.

We aim to coalesce all of our recent activities and update shareholders on these workstreams at our Annual Shareholders Meeting to be held in Auckland and online on Thursday 27 July 2023 (see page 7). The event will include presentations from our Chair Chris Gallaher, Pacific Edge Diagnostics USA President David Levison, our Chief Medical Ocer, Urologist Dr Tamer Aboushwareb, and myself.

It will be an important event for shareholders, and we encourage you all to attend.

I look forward to seeing you there. Ng mihi nui,

Dr Peter Meintjes

Chief Executive

Firstly, through our industry partners we have initiated lobbying eorts to engage with our local (Pennsylvania) Congressmen and Senators to reach the White House and the Department of Health and Human Services (HHS) that oversees the Medicare Program.

Our goal here is to highlight for those political leaders the significant consequences for:

• Medicare patients who will have lost access to our tests;
• Physicians who will have lost the ability to choose our tests for their patients; and
• The Medicare Program, which will not realize the clinical and potential economic benefits of modern non-invasive biomarker tests that improve the standard of care by reducing unnecessary invasive diagnostic procedures.5

Secondly and coordinated in parallel, we have made procedural arguments through our US attorneys to the HHS Oce of the General Counsel (OGC), which has the power to direct

Medicare to retire or delay the Novitas LCD. Our focus has been on highlighting several procedural anomalies in the finalized LCD:

• We were denied 'notice and comment' on a new unpublished evidentiary review in the LCD;
• The LCD continues to rely on third-party databases6, which have no statutory role in coverage determination, when MACs are statutorily required to determine coverage; and
• We had non-commercial products reviewed without requesting consideration;

Novitas now appears to have acknowledged 'notice and comment' argument while remaining silent on the other matters.

Thirdly, we have sent ocial requests to Novitas for meetings from our executives and our Medical Aairs Team to discuss the substantial misunderstandings about our peer-reviewed and published clinical evidence.

We have earnestly stressed that we would like

LC D C H A L L E N G E CO N T.

to find a mutually agreeable solution that is based on scientific and clinical evidence. We expect to have the opportunity to comment in line with their statutory obligations of 45 days, but this meeting has not yet been held, or scheduled.

Novitas now appears to have acknowledged 'notice and comment' argument while remaining silent on the other matters.

Should L39365 ultimately confirm an unfavorable result for Pacific Edge, additional options are available. Pacific Edge can initiate a Medicare appeals process on behalf of an 'aggrieved beneficiary'

• a patient who has been denied coverage on the basis of this LCD
• who will have standing to initiate that process.
  Pacific Edge has two paths here, firstly to appeal claim-by-claim through up to five levels of appeal starting with Redetermination (level 1), Reconsideration (level 2) and
  a Medicare Hearing in front of an Administrative Law Judge (ALJ, level 3 - which has the authority to overturn an LCD), but secondly to directly challenge the validity of the LCD in a Medicare Hearing. Our lawyers, our Medical Aairs Team and our Market Access Team are already prepared with the arguments.
  While we are hopeful of success, it is a lengthy process and there
  is no certainty that we will prevail. In the meantime, we will continue to generate clinical evidence for our products, intended to achieve coverage and guidelines inclusion.

REBUTTING NOVITAS' CRITIQUE

Pacific Edge and Novitas have conflicting views in several key areas related to our primary evidence.

NOVITAS SAYS: Populations of patients in Pacific Edge trials that were tested included a strong bias towards male patients of European ancestry and were not vetted in the context of Medicare patients.

WE SAY: Novitas appears not to understand the basic demographics of bladder cancer. Males are three times more likely than women to present with the disease, patients with European ancestry also have higher incidence when compared with other ethnicities and these demographics are therefore present in greater numbers in our clinical trials. Our evidence is relevant to Medicare patients since the average age of bladder cancer patients is over 70 and Medicare eligibility is for patients over the age of 65.

NOVITAS SAYS: Cxbladder delivers a high number of false positive results, and this leads to patient anxiety and distress.

WE SAY: Novitas appears to misunderstand how Cxbladder is used by clinicians. Cxbladder's proposition relies on its high Negative Predictive Value (NPV) i.e., a negative result allows urologists to reduce unnecessary tests and procedures confidently and safely in patients at a low risk of having bladder cancer but are required to be investigated by the current standard of care. In the event of a positive Cxbladder result, clinicians should continue the evaluation of the patient for any other cause of disease, including upper urinary tract assessment.

NOVITAS SAYS: A good test should dierentiate between urothelial carcinoma vs other types of urinary tract cancers. WE SAY: Cxbladder is not a multi cancer assay and

we never claimed or attempted for it to fulfill this role. The goal of our test is only to identify the probability of presence or absence of a single cancer (urothelial carcinoma) to improve the standard of care for hematuria evaluation and/or surveillance for recurrent disease.

NOVITAS SAYS: Pacific Edge studies have a short follow up period.

WE SAY: Our tests provide a snapshot in time assessment of patients and are neither prognostic nor predictive tests. Follow up period is irrelevant for point in time diagnostics.

NOVITAS SAYS: Pacific Edge did not recruit patients with inflammatory conditions to assess the use of our products in those patients.

WE SAY: We have excluded all those patients from clinical and commercial use of Cxbladder as we already know those patients are not the right target for our tests.

NOVITAS SAYS: Pacific Edge's authoring and funding of the primary literature for Cxbladder is a concern.

WE SAY: It is the industry norm for studies demonstrating the analytical validation, clinical validation, and clinical utility of biomarkers, medical devices, and pharmaceuticals to be funded by those who develop those innovations.