Exagen Q2 2025 Earnings Report

Exagen EPS Results

• Actual EPS: -$0.18
• Consensus EPS: -$0.18
• Beat/Miss: Met Expectations
• One Year Ago EPS: N/A

Exagen Revenue Results

• Actual Revenue: $17.20 million
• Expected Revenue: $16.25 million
• Beat/Miss: Beat by +$954.00 thousand
• YoY Revenue Growth: N/A

Exagen Announcement Details

• Quarter: Q2 2025
• Date: 7/29/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, July 29, 2025
• Conference Call Time: 8:30AM ET

Exagen (NASDAQ:XGN) develops and commercializes various testing products under the AVISE brand in the United States. The company enables healthcare providers to care for patients through the diagnosis, prognosis, and monitoring of autoimmune and autoimmune-related diseases, including systemic lupus erythematosus (SLE) and rheumatoid arthritis (RA). Its lead testing product is AVISE CTD that enables differential diagnosis for patients presenting with symptoms indicative of various connective tissue diseases (CTDs) and other related diseases with overlapping symptoms. The company offers AVISE Lupus that measures activation of the complement system by quantifying the level of B-cell C4d and erythrocyte bound C4d in the patient's blood; and AVISE APS, which consists of a panel of autoantibody tests that aids in the diagnosis and management of APS. In addition, it provides AVISE Vasculitis AAV, which utilizes a testing panel of individual analytes to provide physicians with results in the assessment and monitoring of anti-neutrophil cytoplasmic antibody associated vasculitis; AVISE SLE Prognostic, a panel of autoantibodies for assessing the potential for complications affecting the kidney, brain, and cardiovascular system; and AVISE Anti-CarP test, which identifies RA patients with severe disease. Further, the company offers AVISE SLE Monitor, a biomarker blood test; AVISE MTX, a patented and validated blood test; and AVISE HCQ, a blood test to monitor levels of hydroxychloroquine. It has a research collaboration and license agreement with Allegheny Health Network (AHN) Research Institute to develop novel patented biomarkers. The company was formerly known as Exagen Diagnostics, Inc. and changed its name to Exagen Inc. in January 2019. Exagen Inc. was incorporated in 2002 and is headquartered in Vista, California.

Exagen Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Exagen delivered record Q2 revenue of $17.2 M, up 14% year-over-year and the highest quarterly total in company history.
• Positive Sentiment: Test volume grew by 14% sequentially driven organically by existing commercial teams and new T-cell and RA markers, boosting average revenue per territory over 50% since 2023.
• Positive Sentiment: ASP expanded to a $428 trailing-12-month rate (up $27 YoY), contributing to a >60% gross margin and projected further margin gains as new biomarkers ramp.
• Positive Sentiment: Balance sheet strengthened with ~$30 M in cash, a new $20 M equity raise and increased credit capacity, positioning the company near operating cash flow neutrality.
• Neutral Sentiment: R&D pipelines advance with lupus nephritis urine/blood biomarkers in late-stage validation and anti-PAD4 markers on track for a 2026 commercial launch.

Presentation

[Operator]

Greetings, and welcome to the Exagen Inc. Q2 twenty twenty five Earnings Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded.

[Operator]

It is now my pleasure to introduce your host, Ryan Douglas, Investor Relations. Thank you. You may begin.

[Ryan Douglas, Director - IR at Exagen]

Good morning, and thank you for joining us. Earlier this morning, Exagen Inc. Released financial results for the quarter ended 06/30/2025. Chana Bali, our President and Chief Executive Officer and Jeff Black, our Chief Financial Officer, will host this morning's call. A recording of today's call and the press release announcing the quarterly results can be found on the company's website at www.exogen.com.

[Ryan Douglas, Director - IR at Exagen]

As today's call includes forward looking statements, we encourage you to review the statements contained in today's press release and the risks and uncertainties described in our SEC filings, which identify certain factors that may cause the company's actual events, performance and results to differ materially from those contained in the forward looking statements made on today's call. In addition, we will discuss non GAAP financial measures on this call. Descriptions of these non GAAP financial measures and the reconciliations of GAAP to non GAAP financial measures are included in today's press release. I will now turn the call over to John.

[John Aballi, CEO, President & Director at Exagen]

Good morning, and thank you for joining us. We're excited to report another strong quarter at Exagen, highlighted by record revenue and meaningful progress across our commercial, scientific, and operational efforts. Our focus on disciplined execution, physician engagement, and continued innovation is driving positive momentum as we look to build on our leadership in autoimmune diagnostics. Here are our highlights. Q two revenue came in at $17,200,000, representing 14% year over year growth and the highest quarterly revenue in company history.

[John Aballi, CEO, President & Director at Exagen]

Advised CTD test volume growth was substantial, and the team delivered the best quarterly volume since we made our strategic adjustments in the 2023, which is a strong step in the right direction. What's especially encouraging is that this growth is being driven organically by our existing commercial team and the growing clinical recognition of our differentiated science. For q two, we effectively still had 40 territories, meaning our average revenue per territory reached just over $430,000 for the quarter. That's an encouraging sign of commercial leverage, especially when you consider where we were a couple of years ago, averaging $285,000 per territory. We've seen our per territory revenue grow by over 50 since I joined, and it's important to note that the expected impact of our sales expansion likely won't be felt until at least q four, further accelerating our trajectory.

[John Aballi, CEO, President & Director at Exagen]

Layer on top of that, the fact that we've begun to expand in areas we believe have high growth potential with team members of incredibly high character and talent, and it's hard not to get excited about the special business we are creating. The sequential revenue growth we saw in q two is coming from increased ordering within our physician base, an expansion of our physician base, and continued improvement in our revenue cycle efforts. It's great to have growth driven by multiple levers. As I've said before, we're committed to building a business that scales profitably. And the changes we've made over the past eighteen months to our commercial leadership, sales processes, and operational discipline are continuing to show meaningful traction.

[John Aballi, CEO, President & Director at Exagen]

We're seeing consistent ordering patterns from high value clinicians and continued onboarding of new physicians, a testament to both the strength of our platform and the execution of the field team. Our biomarker launch this past January continues to go extremely well. The addition of novel t cell and RA markers has been a meaningful catalyst in our commercial conversations. And we continue to hear enthusiasm from clinicians who are eager to learn about new science in a field that seemed very little biomarker innovation in the past fifty years plus. I was out in the field a couple of times this quarter, once in Arizona and again locally in San Diego.

[John Aballi, CEO, President & Director at Exagen]

And in San Diego, I had the opportunity to speak with a physician who shared a powerful case for why he has switched his biomarker profiling exclusively to the Advise platform. This clinician had a patient present with joint pain and had a negative serological profile by conventional standards. After ordering Advise CTD with our new seronegative RA markers, the result came back positive for RA thirty three, and subsequently, he ordered a joint X-ray. The result confirmed joint erosion and a diagnosis that would have likely been missed without a bias. Additionally, we've had two very interesting examples of the impact our t cell markers can have come up in the past quarter as well.

[John Aballi, CEO, President & Director at Exagen]

The first was a patient in Florida who had been diagnosed with lupus twenty years ago and then lost to follow-up. She went to see a new rheumatologist who uses Advise in his practice, and initially, the doctor wasn't convinced that the original diagnosis was correct. He ran the Advise CTD profile, and the traditional lupus markers weren't present. Instead, this patient was only positive for ANA, b c four d, which is unique to Exagen, two of our new t cell markers, and one other non lupus autoantibody. The clinician told us that if it weren't for the unique markers Exagen provides, he would not have been convinced of a lupus diagnosis and instead taken a different path in treating this patient.

[John Aballi, CEO, President & Director at Exagen]

The second t cell example we stumbled upon when one of our scientists noticed an interesting abstract at a conference. This was a presented case study of a very interesting patient who had ANA negative lupus nephritis, which is rare and at odds with the current ACR SLE guidelines. But nevertheless, the case study detailed how a 42 year old male presented to the hospital with lower extremity pain and swelling with mild proteinuria. The clinicians evaluated him for SLE, but ANA was negative, and so the suspicion faded initially. The patient continued in and out of the hospital for a few weeks with various forms of hematuria and nephrotic range proteinuria and continued to be treated with steroids and hypertensive medications.

[John Aballi, CEO, President & Director at Exagen]

Ultimately, a kidney biopsy was performed, it revealed class four lupus nephritis. AVISE testing confirmed a positive T cell profile, which was the only serological abnormalities identified consistent with lupus in this patient. The patient was subsequently treated with additional steroids, but also strong immunosuppressive therapy and discharged. Upon reevaluation, his creatinine had improved along with his symptoms. And while continued long term follow-up is needed, this is a great example of how our efforts to bring novel biomarkers to the clinic can have such a significant impact on patients and in moving the rheumatology field forward.

[John Aballi, CEO, President & Director at Exagen]

This is the type of clinical impact we're building for, and that's what our science is about. We also made two important additions to the Exagen team this quarter. First, we welcome doctor Michael Moeller as our new chief scientific officer. Michael is one of the most accomplished scientific leaders in autoimmune diagnostics with more than two decades of r and d experience. He's widely regarded as a key opinion leader in biomarker development and was responsible for commercializing PAD four at warfarin, a marker we plan to launch later this year.

[John Aballi, CEO, President & Director at Exagen]

Michael brings deep scientific credibility and cultural alignment to our team. He understands the rigorous pathway to launch and scale high impact diagnostics and shares our vision for building a company that transforms autoimmune care through precision medicine. Second, we added Chaz Macon to our board of directors. Chaz is a proven executive in the life science tool space and brings a strong strategic lens to our boardroom. His addition was opportunistic and reflects our belief that when smart opportunities present themselves, we will move decisively to execute.

[John Aballi, CEO, President & Director at Exagen]

We continue to make strong progress across our r and d pipeline. First, as it relates to lupus nephritis, both our urine and blood based efforts are advancing well. The intended use applications are becoming increasingly clear, and we are actively working on strategies to secure reimbursement so that patients can access these tools. We're at the tail end of our first pharma engagement using the urine platform, and we expect to unlock additional partnerships moving forward. More to come, but the science is exciting.

[John Aballi, CEO, President & Director at Exagen]

Second, our efforts to discover novel blood based biomarkers of kidney damage are advancing. We've secured additional validation cohorts through the NIH, and these studies are progressing well. We believe the potential to combine these markers with our urine based platform could be a significant opportunity, but are also optimistic on their stand alone value long term. Lastly, and closest to commercial launch, is our efforts to expand our seronegative offering through the inclusion of the anti PAD four biomarkers. We plan to submit the clinical and analytical validation package to the New York State Department of Health in August and expect to hear back by year end.

[John Aballi, CEO, President & Director at Exagen]

We remain on track to launch commercially heading into 2026. On the financial front, and Jeff will provide more detail, but we ended the quarter with just over 30,000,000 in cash and equivalents and are approaching neutral operating cash flow on a quarterly basis. The public offering and new credit facility we completed earlier in the quarter give us the financial flexibility we need to continue investing thoughtfully in growth, both commercial and scientific, while staying disciplined with expenses. At Exagen, we're building something special. We talk about it all the time here in our building, but it's really a commitment to redefining how autoimmune disease is diagnosed and managed.

[John Aballi, CEO, President & Director at Exagen]

It's redefining the journey for the patient. We're attracting leaders who share that vision. We're launching innovations that clinicians are asking for. We're helping physicians catch diseases earlier, make better decisions, and ultimately improve outcomes for patients. Our growth this quarter in volume, revenue, ASP, clinical adoption and leadership strength is a reflection of that vision taking hold.

[John Aballi, CEO, President & Director at Exagen]

We're grateful for your continued support, and we look forward to sharing more progress next quarter. With that, I'll turn it over to Jeff.

[Jeff Black, CFO at Exagen]

Thank you, John, and good morning, everyone. As John mentioned, we delivered another record revenue quarter. It was also a busy quarter as we executed on initiatives to shore up the balance sheet. As we discussed during the last earnings call, we refinanced our debt and added additional tranches that we can utilize at our option. On the heels of the debt refinance, we tapped the equity markets with a $20,000,000 follow on offering.

[Jeff Black, CFO at Exagen]

We added several new fundamental investors with key participation from our existing investor base and continued support post offering. Our balance sheet now provides us with the flexibility to invest in growth while maintaining a clear path to positive operating cash flow. Turning to revenue, we delivered $17,200,000 in the second quarter, a 14% increase over 2024. And this growth came from an increase in volume, which was up 14% sequentially from the first quarter and 7% from the 2024, as well as continued ASP expansion. Our trailing twelve month device CTC ASP grew $27 year over year to $428, primarily driven by our new biomarkers, which are still in the early days of collection cycles.

[Jeff Black, CFO at Exagen]

We've taken a conservative approach this quarter with new biomarkers adjusting our accrual rate down to align with what we're seeing in actual cash collections. We expect to see continued expansion in the second half of the year as we see the impact of patient deductibles maxing out and the complete revenue cycle process for our new biomarkers begin to take effect. Gross margin in the second quarter was just over 60%, up from about 59% in the first quarter and 60% in the second quarter twenty twenty four. This improvement reflects the growing contribution of higher ASP and the gradual normalization of lab operations following our q one investments. We expect continued gross margin expansion throughout the year driven mostly by our expected ASP improvements.

[Jeff Black, CFO at Exagen]

Operating expenses for the quarter were $13,000,000, up from 12 and a half million in the first quarter and 11,600,000.0 in the 2024. This increase reflects the impact of some onetime expenses in the second quarter, our continued investment in r and d, including two key leadership hires, clinical studies, and pipeline advancement, as well as strategic additions to our commercial team. We expect operating expenses to remain roughly at these levels for the remainder of 2025 and increase modestly over time in absolute dollars as we scale, but should decline as a percentage of revenue reflecting growing operating leverage. And while we're now very well positioned from a balance sheet perspective to make the investments needed to support our expected growth equally important, we have the ability to modulate spend down or up and to invest opportunistically as we sit there. Our net loss for the second quarter was $4,400,000 compared to 3,000,000 in the same period last year.

[Jeff Black, CFO at Exagen]

The most significant drivers of of this change being the impact of our new debt facility, which added 600,000 in non cash interest and fair value adjustments, 300,000 for loss on debt extinguishment, and 400,000 in cash interest expense. Adjusted EBITDA loss was 1,700,000.0 in the first quarter versus 1,600,000.0 in the 2024. Profitability remains a core focus for the company with a positive adjusted EBITDA firmly in sight in the foreseeable future. As a reminder, our adjusted EBITDA excludes stock comp expense since it's a noncash item. Please refer to our earnings release issued earlier today for a reconciliation of adjusted EBITDA to net loss.

[Jeff Black, CFO at Exagen]

Shifting to the balance sheet, we ended the 2025 with cash, cash equivalents, restricted cash of $30,000,000. Operating cash burn for the second quarter was just under 3,000,000 and 2 and a half million before interest payments, positioning us for the 2025 to be at or near free cash flow positive. We're very well positioned from a balance sheet perspective with over $40,000,000 in combined cash and accounts receivable at June 30 and up to an additional 50,000,000 in available future credit capacity if and when needed. In closing, 2025 continues to shape up as another transformative year for Exagen. We delivered record revenue in the second quarter, returned Avaya CTD to volume growth, and remained on track to deliver over 17% revenue growth in 2025.

[Jeff Black, CFO at Exagen]

We're making strategic investments in our r and d pipeline and commercial expansion, all while focused on path to profitability, improving patient lives, and building long term shareholder value. We entered the 2025 with positive momentum and great confidence in our trajectory. And to that end, we're providing full year revenue guidance of between 65 and $70,000,000. And at the high end of that range, we'd expect to hit positive adjusted EBITDA in the fourth quarter and on a sustainable basis throughout 2026. We'll now open the call up for questions.

[Operator]

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue.

[Operator]

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. The first question is from Dan Brennan from TD Cowen. Please go ahead.

[William Ruby, Equity Research Associate at TD Cowen]

Hi, guys. Thanks for the question. This is William Ruby on for Dan, and congrats on the quarter. You grew volume by 7% and grew volume for the second straight quarter. I'm just wondering how sustainable you think this volume growth is.

[William Ruby, Equity Research Associate at TD Cowen]

And then on the volume growth this quarter, I heard you say it wasn't from the Salesforce expansion. But is it more just an execution of the team with the existing base, or are the markers a big contributor with new customers to this volume growth? Just wondering kinda what's contributing to it. Thank you.

[John Aballi, CEO, President & Director at Exagen]

Yeah. Good morning, William. Thanks a lot for the question. So we think the growth in sales, which was phenomenal this past quarter, is really attributed to the strong team that we've established and the caliber of individuals that we now have in place. We've talked in the past, but about a quarter to almost a third of the team is new in the last twelve months.

[John Aballi, CEO, President & Director at Exagen]

And they're getting up to speed, getting familiar with the product, our processes, and the rheumatology community. And so, as they gain that comfort level and that confidence, their clinical conversations can gain greater depth. And then so, ultimately, we become a a more consultive resource for clinicians. So we think the stability of the team, our voluntary turnover is way down compared to where it was a few years ago. We're in the single digits now, and that includes one retirement.

[John Aballi, CEO, President & Director at Exagen]

So fantastic team as far as that goes. Just caliber of individuals and then the training and and time in the seat, if you will. The new markers certainly serve as a catalyst. So that has, absolutely proven to be a valuable contribution to our progress here in the first half. It gives the our team something new to talk to clinicians about, plus the value proposition that, we've conveyed is panning out in firsthand examples.

[John Aballi, CEO, President & Director at Exagen]

And I've highlighted a few on this call and I have on prior calls as well. So, I think those two factors are are very key. You you referenced, you know, sustainability. We think this is very sustainable. You know, we have a large market, and we're, you know, around just under 10%, penetrated from our own internal calculation.

[John Aballi, CEO, President & Director at Exagen]

So, we have a ways to go. We're expanding our sales force. You're exactly right. Q two, we don't believe those results are attributed to some of the new territories, primarily because those were established towards the end of q two. And it takes us, you know, somewhere six to nine months for a new rep to get up, going and contributing.

[John Aballi, CEO, President & Director at Exagen]

So we expect to see the results of that expansion transpire later in the year. We'll have more additional markers on the seronegative front. So the effect that we're seeing here at the start of the year, we believe, should continue. The headwind there would be some traditional seasonality in the back half of the year, but, you know, our team is motivated, and we'll kinda see how it plays out. But long term, we believe this is absolutely sustainable.

[William Ruby, Equity Research Associate at TD Cowen]

Thank you. And just one follow-up. On the ASP progress towards that $90 increase in ASP, it seems like maybe the trailing twelve month increase is a little bit more modest this quarter versus the first quarter, understandably. But just is that $90 increase to trailing twelve month ASP still seem reasonable to get to by the 2025? Just wondering how that stands.

[John Aballi, CEO, President & Director at Exagen]

Yeah. That's a great question. Thanks for the chance to elaborate. So, you know, in any given quarter, there's likely gonna be things that both positively and negatively impact our ASP, and that's why we pointed folks to a trailing twelve month number. As you noted, that did continue to climb here in q two.

[John Aballi, CEO, President & Director at Exagen]

The pace of climb has been something that I've always struggled with, providing a temporal component to. You know, knowing the exact exact pace relative, to the magnitude there is difficult, to forecast. So I am very bullish on our ability to continue to drive this number higher over time. We have a lot of opportunity relative to our clinical lab fee schedule, and we're executing the right strategy there. But I do wanna address your your question.

[John Aballi, CEO, President & Director at Exagen]

So we recognize revenue on accrual basis, which takes actual testing volume build out in a quarter and multiplies it by an anticipated accrual rate. That rate is based on long term expectations, post appeal cycle, and and what we think we're going to cross the finish line with. In q two, we did make some adjustments to a few accrual rates, which brought them closer to what we're seeing from a cash collection standpoint real time. And the reason for that is, really, we don't wanna get several quarters down the line and have to take a potential write down of some sort. We do still feel very bullish that the 90, potentially even higher than that, is absolutely where we should sit.

[John Aballi, CEO, President & Director at Exagen]

We just thought it would a prudent measure that, given the the progress on those markers, we should we should adjust closer to cash right now and, then recognize that increase in future quarters. So, that's kinda how we, viewed it. Hopefully, that's, provides a little extra color, but we're tracking very well operationally. We continue to make progress on, many of our revenue cycle operations, and, we're seeing very good collections there.

[William Ruby, Equity Research Associate at TD Cowen]

Thank you very much. Appreciate it.

[John Aballi, CEO, President & Director at Exagen]

Yeah.

[Operator]

The next question is from Kyle Mixon from Canaccord. Please go ahead.

[Kyle Mikson, Managing Director & Senior Research Analyst at Canaccord Genuity - Global Capital Markets]

Congrats on the great quarter. Just to put a finer point on the volume question and that theme, the second quarter, that's typically a pretty strong quarter seasonally for you guys. Maybe just, like, talking about what kind of a step down you would expect in the in the third quarter. And then, again, like, maybe fourth quarter trends as well. And I think the key is, you know, you have the same physician base, and that's probably growing nicely, like, sequentially, I I guess, if you're further penetrating this market.

[Kyle Mikson, Managing Director & Senior Research Analyst at Canaccord Genuity - Global Capital Markets]

But the the ordering, you know, the tests per physician is probably declining, you know, quarter to quarter. So just could you talk about that a bit? Thanks.

[John Aballi, CEO, President & Director at Exagen]

Yeah. Good morning, Kyle. Thanks for the question. So we don't guide volume on a quarter by quarter basis, but the way we think about it is we had a fantastic q two, and that was, you're right. Q two tends to be our, our best quarter of the year, but this outperformed, what we've seen in terms of historical performance.

[John Aballi, CEO, President & Director at Exagen]

So, this was a fantastic quarter. The team deserves a lot of credit. They really, have prepared. And like I said, I think we've got, high caliber folks that gained some confidence in standing in their seat and are really adding value to clinicians, and that's reflected in in the performance there. So, we expect that to continue to improve, through the back half of the year, plus we have begun our sales expansion.

[John Aballi, CEO, President & Director at Exagen]

So, the traditional seasonality that we would expect, we're we're anticipating with the sales expansion to have some, tailwinds there, to counter that. So exactly how we see q three, q four, like I said, we don't guide on a on a quarterly basis, but the aim here would be to continue to grow.

[Kyle Mikson, Managing Director & Senior Research Analyst at Canaccord Genuity - Global Capital Markets]

Alright. Thanks, Shah. That was great. And then, you know, it sounds like you're gonna be launching new new tests or at least one or two, like, in the next, you know, six to twelve months, let's say. As you do those rollouts, is that just could you clarify if that's a headwind to ASP as you're doing this whole, you know, ASP same situation with the new markers on the of ITGV side?

[Kyle Mikson, Managing Director & Senior Research Analyst at Canaccord Genuity - Global Capital Markets]

And then just generally on pipeline efforts, I mean, could you just remind us of what the the current, you know, snapshot of the strategy is to, you know, just generate some ROI off the r and d effect or investment?

[John Aballi, CEO, President & Director at Exagen]

Yeah. Absolutely. So the first one, we plan to launch, just for everyone's benefit, we plan to launch, two additional markers. They're the anti PAD antibodies. These are useful in the seronegative RA space.

[John Aballi, CEO, President & Director at Exagen]

So it continues to strengthen our value proposition as it relates to rheumatoid arthritis. And as we've seen with our launch here this past January, that is adding real clinical value for clinicians and having meaningful impact as we've detailed. So I would expect that to further strengthen the value proposition while identifying more seronegative patients in this context. Should actually be a tailwind to ASP. It won't be as meaningful as what we launched in January, namely the $90 impact we expect.

[John Aballi, CEO, President & Director at Exagen]

However, it will be it will be some impact. So it should be a tailwind, actually. On the pipeline efforts, we have what we've talked about publicly, a few very exciting programs in development. One is a urine program looking at lupus nephritis markers. And the intended use here would be in the diagnosis, but also prognosis aspects of managing that disease.

[John Aballi, CEO, President & Director at Exagen]

So understanding which patients are higher risk, which patients need escalated therapy, but also helping to diagnose those patients which can best benefit from treatment. That's a a pretty challenging disease to diagnose, requires kidney biopsy, etcetera. So we think high clinical needs, and we're working with some of the top KOLs in the field there. Additionally, we, took the approach of if we're gonna study the kidney in the context of lupus, and we're gonna run some clinical trials, as well, You know, one is taking a look at biomarkers which relate to active inflammation, and that's the treatable aspect of this condition. But others are taking a look at biomarkers which denote, true damage to the kidney so that you get a feel for how much of the kidney is left and, and what can be done.

[John Aballi, CEO, President & Director at Exagen]

So our damage markers are blood based program. Those are novel biomarkers that we've discovered ourselves and validated in multiple cohorts. We're working with the NIH to secure additional cohorts for further validation, but that's progressing nicely. We expect some combination of these two platforms to have meaningful impact in lupus nephritis. That would be our first goal here over the medium term.

[John Aballi, CEO, President & Director at Exagen]

And what I've said in the past is we'll look for Medicare reimbursement prior to launching a commercial product. And as as multiple folks know on the call, that can take some time. We're looking for creative ways to approach that, but I don't have anything meaningful to convey at this time. So right now, the science is looking very attractive, continues to be very interesting and validate, and we've completed our first biopharma project. So we'll see exactly how this, those two efforts progress.

[John Aballi, CEO, President & Director at Exagen]

Additionally, we're looking at indicators of disease activity, both in rheumatoid arthritis and in lupus, and those are progressing as well. But, I've tried to very consciously stick with the current company performance, and I think that that's exciting, in and of itself while we continue to develop on the pipeline front. So, you know, we brought in Michael Moeller this past quarter, our new chief scientific officer. He has extensive experience in biomarker development. And, again, we're just looking at creative ways to create clinical value for patients and clinicians, but then also be very shareholder minded in creating value as well. So I think we'll be successful with that.

[Kyle Mikson, Managing Director & Senior Research Analyst at Canaccord Genuity - Global Capital Markets]

Alright. That's perfect. And then just on on your last point there, John, about, you mentioned biopharma. Could you talk about the the pipeline for that business and and how that how that kind of, progressed or performed in this in the second quarter, especially? And then as you think about going forward, how do you think about some of the new, modalities kinda get like, cell cell therapies, for example, getting into autoimmune more and more, become more prevalent?

[John Aballi, CEO, President & Director at Exagen]

Yeah. That's actually a very interesting question. So, yeah, from a biopharma's biopharma standpoint, historically, the company, did, you know, maybe maybe a couple $100,000 of biopharma business on an annual basis. And now it's a concerted effort with a dedicated team. Is being led by our chief medical officer, Mike Nurnberg, who, doctor Mike Nurnberg, has done this in the past and set up similar institutions at other companies.

[John Aballi, CEO, President & Director at Exagen]

And I'm very pleased with the progress that we've had. We've, continued to strengthen relationships with, prior collaborators and then brought on, a few new programs. As I'm sure you're aware, some of that revenue is can be lumpy. And, meaning, you know, in any given quarter, you can have outsized performance. And then, it's all relative to when projects and programs are finished and when some of those revenue milestones as defined in statements of work actually get completed.

[John Aballi, CEO, President & Director at Exagen]

So I think we have great partnerships in some of the more cutting edge areas of, pharmaceutical development in this space. We're sought after because of our high quality and unique markers, and I think that that's, you know, a combination that would be difficult to replicate. So I expect that to lead to future business. And then as our pipeline brings more novel biomarkers in adjacent disease areas, I could see this growing, you know, fairly substantially. So the biopharma revenue for q two is in the other testing line, and I'll leave it to Jess to comment on some of those details.

[John Aballi, CEO, President & Director at Exagen]

But like I said, it can be lumpy. We'll have to see how it materializes throughout this year, but we do expect that to be a contributing factor in the back half. And then you mentioned a little bit of, or asked a little bit of as we develop additional modalities, how does it play in here? And we view this as a a way to derisk some of our r and d development. Meaning, you know, if we can partner with a pharma organization and specifically take a look at well characterized clinical samples, which help us with our validation efforts, what a win for us.

[John Aballi, CEO, President & Director at Exagen]

And if you do it in a manner which has reasonable margins and, is accretive on a revenue basis, I think you're really setting yourself up, well there. So that's our objective. We've done it in a few areas. I think we'll continue to do it in the lupus nephritis area, but more to come there. Anything else you wanna add, Jeff?

[Jeff Black, CFO at Exagen]

I I think you covered it. And, you know, to your question, it it's we're running about, you know, anywhere from a 100 to $200,000 a quarter. That's what we saw in the second quarter. But as John said, depending on timing, there's a real opportunity and a nice setup in the second half to see expansion. And just to reiterate, that expansion, this business is is generally margin accretive.

[Jeff Black, CFO at Exagen]

So it'll be a nice contributor to our path to profitability as well.

[Kyle Mikson, Managing Director & Senior Research Analyst at Canaccord Genuity - Global Capital Markets]

Great. Great color, guys. Thanks a lot. Appreciate it.

[John Aballi, CEO, President & Director at Exagen]

Thanks.

[Jeff Black, CFO at Exagen]

Thank you.

[Operator]

The next question is from Andrew Brackman from William Blair. Please go ahead.

[Maggie Boeye, Equity Research Associate at William Blair]

Hey, guys. This is Maggie Bowie on for Andrew Brackman. Thanks for taking our questions. I just wanted to further expand upon your efforts to expand your territories. Can you just remind us of where you are at today?

[Maggie Boeye, Equity Research Associate at William Blair]

I think I believe you mentioned that you added a few territories towards the end of the quarter. And where do you expect to be at by year end? And then just looking ahead, how are you thinking about further investing in territories in 2026 and beyond?

[John Aballi, CEO, President & Director at Exagen]

Yeah. Good morning, Maggie. Thanks for the question. So just to level set, we started the quarter right around 40 territories. We had just initiated our expansion, but 40 territories is certainly where we started the year.

[John Aballi, CEO, President & Director at Exagen]

And then kind of around the beginning of q two, we initiated some expansion. We got to 42. So we went from 40 to 42 over the course of the quarter. So we had two, net addition of two territories. And we have a line of sight to two more additions here, call it q three, early q four.

[John Aballi, CEO, President & Director at Exagen]

So we've, likely gonna be in the 44 range. There may be opportunity for another one, potentially two, territories as well, but near term. But, we're always evaluating The US, taking a look at various metrics. You know, we we look at age demographics. We look at rate of diagnosis.

[John Aballi, CEO, President & Director at Exagen]

We look at, prescriptions for some of the more common therapies in this space. And so we're triangulating all of those factors when we identify a potential territory. And then we actually go kind of scout it out, if you will, see what the rheumatology clinic dynamics are in in that area and, see if it justifies actually having someone in the clinic. What we have learned is that, actually having that face to face interaction is essential, for this, for this clinical practice. So having a field based rep is gonna be the way that we're growing, over time.

[John Aballi, CEO, President & Director at Exagen]

We've tried other methodologies inside sales and what have you, but I think, you know, having that field based presence is, certainly the most effective way to grow. And so we should end up, somewhere around 45, 44 to 45 by the end of the year, and then we'll just do what's smart. You know? I I think it's, I've made a very conscious effort to not, not do a sizing exercise, which tells us, you know, we need x amount, call it 50 or something to satisfy The US, demand because I think that those exercises can be extremely sensitive. And if you're off by a couple parameters, you can hire the wrong number of people, and in some cases, substantially wrong number of people as we've seen.

[John Aballi, CEO, President & Director at Exagen]

So, from our case, we just do it empirically, you know, identify a few territories, add those folks, support them as best we can, get them performing at the level that we do expect, and then move on. But we're we have a ton of opportunity in some of the large metropolitan areas. You know, I'll give you one example. In Manhattan, for example, this is a territory that is is not a meaningful contributor to our organization, and you know the number of people that are present in Manhattan. And so this is a focus of ours.

[John Aballi, CEO, President & Director at Exagen]

We're starting with one individual there, and then we'll that's been a territory, but it's just been one where we've needed to find the right person. And so we think we have that now, and, we'll see where it goes. But there's opportunity in some of these large areas for, for more than one territory. So we'll see long term.

[Maggie Boeye, Equity Research Associate at William Blair]

Great. That's super helpful. Thank you. And then just on ASPs, outside of that $90 increase from the new new markers you're expecting for trailing twelve months ASPs, Just as we think about that for the rest that outlook for the rest of the year, what levers can you pull to further increase those trailing twelve months ASPs? And then how should we be thinking about those increases for 2026 and beyond? Thanks for taking our questions.

[John Aballi, CEO, President & Director at Exagen]

Yeah. Great question. I know ASP is so critical and likely the most sensitive lever that we have to transforming our business. And we've done a pretty good job over the last several years in in boosting this, and that's all been on the base business. That should continue.

[John Aballi, CEO, President & Director at Exagen]

And what I've, worked to explain for folks is, you know, our clinical lab fee schedule rate for the existing advised CTD profile is, $1,299. Our blended ASP now here, excuse me, at the end of q two is $428. So we have some meaningful opportunity, substantial opportunity, for continued improvement there. And both of those numbers are inclusive of the current new markers. And so our expectation is that through our appeals efforts and what we're doing on the revenue cycle side, we'll continue to drive those numbers up.

[John Aballi, CEO, President & Director at Exagen]

And we have opportunity with the major blues organizations and are making progress on a quarter by quarter basis. There's large national payers that we're working with to better understand our science and the value proposition we bring. And then there's other smaller regional plans that we target as well. We have a very strong market access team that's been strengthened over the last, call it, eighteen months, And they're working diligently from a top down standpoint to talk to various medical directors and, really engage and bring our offering top of mind so that we can, ultimately get covered and then work on an appropriate rate down the line. So we continue to make meaningful progress.

[John Aballi, CEO, President & Director at Exagen]

I highlighted a few, wins in the last call, namely TRICARE, some of the ALJ wins we had, organizationally. Those have continued, the ALJ specifically. So we've had multiple now in, many of the claims we have with Humana. So the those will pay dividends over time. It's, you have to be diligent.

[John Aballi, CEO, President & Director at Exagen]

You have to be relentless, really, and, work through the system, you know, conduct the right prior auth, submit medical records, and and really show that your your offering is being used appropriately in clinical practice, which ours absolutely is, and that it's adding significant value. And then over time, we do expect that progress to occur.

[Maggie Boeye, Equity Research Associate at William Blair]

Great. Thank you.

[John Aballi, CEO, President & Director at Exagen]

Yep.

[Operator]

The next question is from Ross Osborne from Cantor Fitzgerald. Please go ahead.

[Ross Osborn, Director & Lead Research Analyst - MedTech & Diagnostics at Cantor Fitzgerald]

Good morning. Congrats on a strong quarter. So starting off and following up on your previous response. With an improved and improving product supported by the right team now at the company, what market access initiatives are in place to accelerate adoption to drive your 10% penetration higher? Is it simply a function of getting more feet on the ground, or do you have larger marketing campaigns in place? Anything to drive broader awareness?

[John Aballi, CEO, President & Director at Exagen]

Yeah. Good morning, Ross. So you're you're talking specifically relative to volume growth.

[Ross Osborn, Director & Lead Research Analyst - MedTech & Diagnostics at Cantor Fitzgerald]

That's correct.

[John Aballi, CEO, President & Director at Exagen]

Correct?

[John Aballi, CEO, President & Director at Exagen]

Okay. So as it relates to volume growth, our marketing campaigns continue to improve. We have digital campaigns bringing awareness. You know, we're we're bringing novel new markers to the clinical practice, and this is in a field where the conventional serological evaluation leverages technology and and biomarkers, which were from the late eighteen hundreds to the mid nineteen hundreds. Right?

[John Aballi, CEO, President & Director at Exagen]

So, you know, fifty years of of innovation, call it, in the early nineteen hundreds. And so to bring that type of change, to folks is, takes time. Right? And you have to have trust and, be valued from a consultative standpoint. And so that is really our primary focus, but we've launched significant marketing campaigns.

[John Aballi, CEO, President & Director at Exagen]

We're doing, clinical research to routinely validate the utility of these markers, and I think those publications, help. They serve as some form of marketing. So, that's where our marketing efforts, are. The we've invested quite a bit in training on the team. I think, you know, you have to be able to handle the clinical questions that you're gonna get from clinicians around sensitivity, specificity, patient populations, when's the what's the appropriate patient and when's the appropriate time for leveraging these biomarkers?

[John Aballi, CEO, President & Director at Exagen]

Do they change over time? You know, all these questions come up, and having our team adequately prepared and informed is essential. And I think our our sales team along with our marketing and clinical affairs teams have done a fantastic job, in doing that. We've also been looking at how to partner more with KOLs, specifically in this space, and you'll probably see that, or we can point you to that with the the PAD four launch coming up. We've already had KOLs, comment on, the utility of some of these markers and, how they'll impact clinical practice. So, that's that's primarily our approach.

[Ross Osborn, Director & Lead Research Analyst - MedTech & Diagnostics at Cantor Fitzgerald]

Great. Thanks for taking our question.

[Operator]

Thank you. No further questions at this time. I would like to turn the floor back over to Jon Abali, president and CEO, for closing remarks.

[John Aballi, CEO, President & Director at Exagen]

Fantastic. Thanks, everyone, for joining the call today. It was a pleasure to present the results and, really a fun quarter from our standpoint. We'll see how the back half of the year, progresses. But as I said, we are building something special, and I I think it's apparent in the numbers.

[John Aballi, CEO, President & Director at Exagen]

I especially wanna thank the Exagen team for the incredible dedication and effort they continue to put in on a daily basis. I mean, this team is truly fantastic. It's energizing. There's a lot of of really talented people here focused on clinical and patient care, and it's fun to see that coming together, really in an efficient and effective manner. We appreciate your partnership and look forward to future updates. Thank you.

[Operator]

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Participants

Executives

• Ryan Douglas, Director - IR
• John Aballi, CEO, President & Director
• Jeff Black, CFO

Analysts

• William Ruby, Equity Research Associate at TD Cowen
• Kyle Mikson, Managing Director & Senior Research Analyst at Canaccord Genuity - Global Capital Markets
• Maggie Boeye, Equity Research Associate at William Blair
• Ross Osborn, Director & Lead Research Analyst - MedTech & Diagnostics at Cantor Fitzgerald