10-Q: Exagen Inc. Reports Third Quarter 2024 Financial Results, Revenue Down 6.8% Year-Over-Year

Exagen Inc. reported a 6.8% decrease in revenue for the third quarter of 2024 compared to the same period in 2023, alongside a net loss of $5.0 million.

Summary

• Exagen Inc. reported a net loss of $5.0 million for the third quarter of 2024, compared to a net loss of $5.4 million in the same period of 2023.
• Revenue for the third quarter of 2024 was $12.5 million, a decrease of 6.8% compared to $13.4 million in the third quarter of 2023.
• The decrease in revenue was primarily due to a $1.2 million decrease related to revenue and accounts receivable adjustments.
• Excluding these adjustments, revenue increased $0.3 million due to improved average selling price, partially offset by decreased test volume.
• The number of AVISE CTD tests delivered declined by approximately 6% year-over-year.
• For the nine months ended September 30, 2024, the company reported a net loss of $11.4 million, compared to a net loss of $18.1 million for the same period in 2023.
• Revenue for the nine months ended September 30, 2024, was $42.0 million, an increase of 8.3% compared to $38.8 million for the same period in 2023.
• The company's cash and cash equivalents were $22.0 million as of September 30, 2024, with an accumulated deficit of $290.6 million.
• The company anticipates achieving positive cash flows within a year of launching both the T-Cell Biomarkers and the RA Sub-Profile Biomarkers.

Sentiment

Score: 5

Explanation: The document presents mixed results with a decrease in quarterly revenue but an improvement in net loss. The company is also planning to launch new products and expects to achieve positive cash flow in the future. However, the company has an accumulated deficit and is dependent on external funding.

Positives

• The net loss for the third quarter of 2024 improved compared to the same period in 2023.
• Revenue for the nine months ended September 30, 2024, increased by 8.3% compared to the same period in 2023.
• The company is planning to launch new biomarkers that are expected to improve diagnostic sensitivity and financial performance.
• Gross margin as a percentage of revenue increased to 58.7% for the nine months ended September 30, 2024, compared to 54.9% for the nine months ended September 30, 2023.
• Selling, general and administrative expenses decreased by $4.0 million for the nine months ended September 30, 2024 compared to the same period in 2023.

Negatives

• Revenue for the third quarter of 2024 decreased by 6.8% compared to the same period in 2023.
• The number of AVISE CTD tests delivered declined by approximately 6% in the third quarter of 2024 compared to the same period in 2023.
• The company has an accumulated deficit of $290.6 million.
• The company has incurred recurring losses and negative cash flows from operating activities since inception.
• The company is dependent on two key suppliers for diagnostic testing supplies.

Risks

• The company's revenue is dependent on achieving broad coverage and reimbursement for its tests from third-party payors.
• Changes in estimated reimbursements for tests performed in prior periods can impact revenue in the current period.
• The company is subject to risks related to commercial payor claim processing and revenue.
• The company may not be able to obtain additional financing on acceptable terms.
• The company is subject to legal proceedings that could have an adverse impact on its business.
• The company's ability to achieve positive cash flow is dependent on the successful launch of new biomarkers and increased average selling price per test.

Future Outlook

The company anticipates achieving positive cash flows within a year of launching both the T-Cell Biomarkers and the RA Sub-Profile Biomarkers, assuming an increase in average selling price per test.

Management Comments

• Management believes that its existing capital resources will be sufficient to fund the company's obligations for at least twelve months following the issuance of these condensed financial statements.
• Management anticipates progressive incremental improvements in demand for AVISE CTD over time, as physicians are educated about the benefits of new markers.
• Management expects that costs of revenue will increase in the near-term due to the addition of T-Cell Biomarkers and RA Sub-Profile Biomarkers to AVISE CTD.
• Management expects that selling, general and administrative expenses will increase in the near-term due to expected additions to headcount.

Industry Context

The company operates in the diagnostics industry, specifically focusing on autoimmune diseases. The addition of new biomarkers and the pursuit of partnerships with pharmaceutical companies and research centers are consistent with industry trends of personalized medicine and targeted therapies.

Comparison to Industry Standards

• Exagen's focus on rheumatology and autoimmune disease testing is a niche market compared to broader diagnostic companies like Quest Diagnostics or LabCorp.
• The company's reliance on a single test, AVISE CTD, for a significant portion of its revenue is a risk compared to companies with more diversified product portfolios.
• The company's efforts to secure reimbursement and coverage for its tests are common challenges faced by diagnostic companies, particularly those offering novel tests.
• The company's research and development efforts to develop new biomarkers are similar to other companies in the diagnostics space that are focused on innovation.
• The company's financial performance, with recurring losses and negative cash flows, is not uncommon for early-stage diagnostic companies.

Legal Proceedings

• The company is involved in a legal proceeding related to a qui tam lawsuit, with motions still pending.
• The company resolved an investigation with the U.S. Attorneys Office for the District of Massachusetts in October 2023.

Stakeholder Impact

• Shareholders may be impacted by the company's financial performance and potential need for additional capital.
• Employees may be impacted by changes in headcount and personnel costs.
• Customers (rheumatologists and patients) may benefit from the launch of new biomarkers and improved diagnostic sensitivity.
• Suppliers may be impacted by the company's minimum purchase commitments.

Next Steps

• The company plans to incorporate T-Cell Biomarkers and RA Sub-Profile Biomarkers into its AVISE CTD test by the end of 2024.
• The company intends to commercialize the rheumatoid arthritis assay once conditional approval is received from the New York State Department of Health.
• The company will continue to pursue additional partnerships with leading pharmaceutical companies and academic research centers.
• The company will continue to submit Medicare claims for AVISE Lupus, appeal denials and respond to requests for additional information.

Key Dates

Keywords

AVISE CTD, rheumatology, autoimmune disease, diagnostics, biomarkers, revenue, net loss, reimbursement, cash flow, clinical testing