Exagen Inc. is a commercial-stage diagnostics company that provides clarity in autoimmune disease decision-making with the goal of improving patient outcomes. The company has developed and commercialized a portfolio of innovative testing products under its AVISE® brand, which allow for the differential diagnosis, prognosis, and monitoring of complex autoimmune and autoimmune-related diseases.

Exagen's flagship product, AVISE® CTD, enables differential diagnosis for patients presenting with symptoms indicative of a wide variety of connective tissue diseases (CTDs) and other related diseases with overlapping symptoms. The AVISE® CTD test, which includes the proprietary AVISE® Lupus test, accounted for 90% of the company's revenue in the first quarter of 2024.

Financials

For the full year 2023, Exagen reported annual revenue of $52.5 million and a net loss of $23.7 million. The company's annual operating cash flow was -$14.5 million, and its annual free cash flow was -$15.3 million. These financial results demonstrate Exagen's continued investment in its business to drive long-term growth and profitability.

In the first quarter of 2024, Exagen reported total revenue of $14.4 million, a 28.4% increase compared to the same period in 2023. This strong revenue performance was driven by a significant improvement in the average selling price (ASP) of the AVISE® CTD test, which increased by 35% year-over-year to $377 per test. The company's gross margin also expanded to 59.6% in the first quarter of 2024, up from 47.2% in the same period in 2023.

Exagen's net loss in the first quarter of 2024 was $3.4 million, a significant improvement from the $7.7 million net loss reported in the first quarter of 2023. The company's adjusted EBITDA, which excludes non-cash stock-based compensation expense, was a negative $2 million in the first quarter of 2024, compared to a negative $6.2 million in the same period in 2023.

Outlook

For the full year 2024, Exagen has raised its revenue guidance from approximately $54 million to at least $55 million. The company has also updated its adjusted EBITDA guidance, now expecting it to be better than negative $18 million, an improvement from its prior guidance of better than negative $20 million.

Exagen's management believes the company's existing cash and cash equivalents, which totaled $27.3 million as of March 31, 2024, are sufficient to meet its anticipated cash requirements into 2026.

Enhancing the AVISE® CTD Offering

Exagen is planning to enhance its AVISE® CTD offering by adding three new T-cell markers for systemic lupus erythematosus (SLE) and additional new markers for rheumatoid arthritis (RA) in the fourth quarter of 2024. These new markers have been clinically validated and are expected to significantly improve the diagnostic sensitivity of the AVISE® CTD test.

The addition of the T-cell markers for SLE will provide enhanced intellectual property protection and offer some of the most sensitive markers to aid in the diagnosis of SLE. The new RA markers will allow Exagen to correctly identify up to 83% of total RA patients, including approximately one-third of the traditional seronegative RA population, which currently lacks commercially available diagnostic biomarkers.

Management believes these enhancements to the AVISE® CTD test will lead to increased adoption over time and be accretive to the company's financial performance, both in terms of top-line revenue and bottom-line profitability.

Regulatory Landscape and Competitive Positioning

The recent finalization of the FDA's rule to regulate laboratory-developed tests (LDTs) is expected to create a barrier to entry for competitors in Exagen's market, as it increases the resources required for the commercialization of LDTs. Exagen's laboratory is already CLIA, CAP, and New York State certified, and the company has experience with several FDA-approved assays, which should position it well to handle the additional regulatory requirements.

Exagen's focus on the rheumatology market, combined with its commitment to excellent customer service and support, has allowed the company to establish a strong position in its target market. The company's specialized sales force, with backgrounds in rheumatology, provides unique insights to rheumatologists, further strengthening Exagen's competitive advantage.

Risks and Challenges

Exagen faces several risks and challenges, including its ability to achieve broad coverage and reimbursement for its tests from third-party payors, the company's reliance on a limited number of commercial payors for a substantial portion of its revenue, and the potential impact of changes to the regulatory landscape for LDTs.

Additionally, Exagen's success will depend on its ability to continue to expand its base of ordering healthcare providers, increase its penetration with existing healthcare providers, and develop additional testing products to diversify its revenue sources.

Conclusion

Exagen is well-positioned to capitalize on the growing demand for innovative diagnostic solutions in the autoimmune disease market. The company's focus on improving the clinical utility and performance of its flagship AVISE® CTD test, combined with its strong financial position and commitment to operational excellence, suggest a promising path towards profitability and long-term growth.

As Exagen continues to execute on its strategic initiatives, investors should closely monitor the company's progress in driving increased test volumes, expanding its reimbursement coverage, and delivering on its enhanced product offerings. The successful integration of the new SLE and RA markers into the AVISE® CTD test will be a key catalyst for the company's future performance.