MDxHealth SA

Good day, ladies and gentlemen, and welcome to the MDX Health second quarter of 2025 earnings conference call. All participants will be in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press the star key and then zero on your telephone keypad. Please note that this event is being recorded. I would now like to turn the conference over to John Francis of LifeSci Advisors. Please go ahead.

Before we begin, I would like to remind everyone that the company will make forward-looking statements during today's call. Whether in prepared remarks or during the Q&A session, these forward-looking statements are subject to inherent risks and uncertainties. These risks and uncertainties are detailed in the risk factor section of the company's filings with the Securities and Exchange Commission, specifically in the company's annual report on Form 20F. I'll now turn the call over to Michael McGarrity, Chief Executive Officer.

Thanks, Jen. And thank you all for joining us for our Q2 2025 Earnings Conference Call for MDX Health. With me today is Scott McMahon, Interim Chief Financial Officer. We are quite excited to provide an update that reflects our unwavering focus on growth, operating discipline, and commercial execution. Each of these results, both individually and collectively, demonstrate our progress in becoming the growth vertical focused solely into urology in the molecular diagnostic space. We believe MDX Health has clearly established a reputation for consistent growth and execution, as demonstrated by the highlights from our Q2 results that we announced today. Our Q2 revenue of $26.6 million represents 20% growth and marks our 17th consecutive quarter of 20% or greater revenue growth. Our Q2 adjusted EBITDA of $1.4 million represents our first quarter of adjusted EBITDA profitability, which we anticipated and guided to at the beginning of 2024. Our ability to project and deliver expected results throughout our P&L demonstrate our consistent execution across our operating disciplines led by our best in class sales team. We are currently in our fifth straight year of unbroken 20% quarterly growth. In fact, we have doubled our revenue over the past three years with the same number of reps we had post the GPS acquisition in 2022. In my experience, this only happens when our sales team has full command of their territories and an understanding of the adoption profile of their customers. The result is sustainable adoption and forecast accuracy, which is difficult to establish, but powerful when institutionalized within a sales team. And finally, we are pleased to announce our pending acquisition of the ExoDx business from Biotechnic Corporation. We are confident that this will be a transformative acquisition for MDX Health that is expected to provide accelerated top-line revenue growth and immediate accretion to our EBITDA operating profitability. It is important to note that we applied the same rigor in our evaluation process for ExoDx as we did for our Resolve MDX and GPS tests, both of which continue to be highly successful in our end markets. By applying the same rationale, diligence, and business case thesis for all of our potential strategic growth opportunities, I believe MDX Health will retain its position as the sole provider of answers at every point in the diagnostic pathway of prostate cancer. While the SELECT test has been included in the MDX Health menu since well before my arrival, a number of developments have created a market shift away from this test as an ideal solution for post-PSA pre-biopsy diagnostics. These factors include SELECT's requirement for a digital rectal exam, as well as the pandemic-associated advent of home testing kits. As we assess these evolving market dynamics, we identified ExoDx as the best-in-class alternative to select, from both an accuracy and ease-of-use perspective. And we have long respected the position that ExoDx has garnered in the market. We also now have the opportunity to consider collaboration for distribution into the primary care setting, with the DRE no longer limiting the viability of this market opportunity. With the addition of EXO DX to our menu, we will significantly strengthen our pathway solution while also accelerating our revenue scale and growth potential. We expect this acquisition to be a creative to our now positive adjusted EBITDA in the fourth quarter post the closing of this acquisition, which is expected in September. In addition to the immediate benefits to our P&L, we're also excited about the broader strategic implications from this acquisition. As part of our due diligence process, we have prospectively identified multiple cross-selling opportunities made possible from this acquisition, as the existing ExoDx customer base creates overlap opportunity with our customers currently utilizing Confirm and GPS tests. We therefore believe this acquisition provides us with the opportunity to build an even higher level of strategic and comprehensive partnerships with new and existing customers. As MDX Health becomes increasingly viewed as the main provider of a full pathway of precision solutions for prostate cancer patients. Following our anticipated close in September, I plan to provide a more granular view of 2026 contributions to our P&L. But for now, I am confident in saying that we expect the additional revenue contribution from ExoDx in 2026 to exceed $20 million. Finally, as part of the acquisition, we are also bringing over a significant library of potential applications of the Exosome technology with broad IP, and clinical scientific data in multiple cancers, including prostate. We look forward to evaluating strategic opportunities from this platform, either within MDX Health or through strategic partnering opportunities as they may present themselves. Although we have not yet provided formal guidance for 2026, based on our continued momentum, an initial assessment of the impact from the ExoDx test for a full year, we believe that revenue growth for 2026 could exceed 30%, while our adjusted EBITDA margins could approach 10%. As we get additional color on customer transition, as well as organizational and operating structure detail post-acquisition, we anticipate providing more detail on the financial impact for the remainder of 2025 from the ExoDx acquisition on our Q3 results call and release in November. To summarize, I believe no other company is better positioned to help improve the patient journey through prostate cancer diagnosis and treatment, and our results continue to reflect our success in bringing value to this patient population. I will follow up with closing comments and a view forward But first, let me turn the call over to Scott McMahon for a review of our financial and operating results for the second quarter.

Scott? Thank you, Mike. To follow on Mike's remarks, we are very pleased to report strong performance in the second quarter of 2025, starting off with volumes. Q2 total billable volume was approximately 26,000 tests. split roughly evenly between tissue and liquid-based tests and representing total unit growth of 21% versus the prior year quarter. Volumes for tissue-based tests, which include confirmed MDX and GPS, increased approximately 26% over the prior year period. Volumes for liquid-based tests, which includes Select MDX, Resolve MDX, and Germline, increased approximately 18% over the prior year quarter. Revenues for the second quarter ended June 30, 2025, increased by 20% to $26.6 million versus $22.2 million for the prior year quarter. As we had indicated on our Q1 2025 call, our growth this quarter remained organic and was delivered without expansion of our sales organization, reflecting the leverage we continue to generate from our sales channel and the greater market penetration of our tests. Moving below the revenue line, our gross profit for the quarter was $17.6 million, an increase of 32% as compared to $13.3 million for the second quarter of 2024. Gross margins were 66% compared to 60% for Q2-24, an increase of 6 percentage points primarily attributed to our test mix and improved efficiencies in our operations. Our operating loss for the quarter declined 74% to $1.9 million compared to $7.4 million for the second quarter of 2024. primarily driven by our growth in sales and gross profit and decrease in operating expenses. Our net loss decreased 36% to $7.4 million compared to $11.5 million for the prior year, primarily driven by the decrease of $5.5 million in operating losses, partially offset by a net increase of $1.8 million in financial expenses. Finally, I am happy to report that we have achieved our positive adjusted EBITDA milestone in the second quarter and are reporting a $1.4 million positive adjusted EBITDA. Note that a reconciliation of IFRS to non-IFRS financial measures has been provided in the tables included in this press release. Cash and cash equivalents as of June 30, 2025 were $32.8 million. This concludes my overview of the results. I will now turn the call back to Mike. Thanks, Scott.

I'd like to take a moment to highlight the progress of our company, driven by the focus and execution of our operating and commercial teams. In 2019, when I joined MDX Health, we had one revenue generating test, our confirmed test, with $11 million in annual revenue. At that time, We set a goal to build out our menu and establish MDX Health as the leader in precision diagnostics focused in the urology. Our progress can be measured by a number of key milestones and initiatives we have undertaken to put us in today's leadership position. We have delivered a revenue compound annual growth rate of greater than 50%. We have taken our gross margin up from zero initially into the 30s, and now to mid-60s, through our menu expansion and operating focus on COGS and ASP accretion, fueled by our expanded coverage from payers, targeted by our market access managed care team. We have expanded our menu through a combination of MDX health-developed tests, channel growth opportunities with our resolved tests, and M&A with our acquisition of the Oncotype GPS test from Exact Sciences. We are now preparing to add the ExoDx test to accelerate our growth and cement our position in the prostate cancer pathway with an unmatched menu of clinically actionable tests. All of this has been executed with a tightly controlled OpEx structure, which is only feasible when every team in the organization is committed to growth based on focus and execution and in building a culture of performance and operating discipline. We are very proud of our growing reputation for meeting or exceeding expectations in delivering on our commitments to patients, customers, and the market. Whether in the sales force, laboratory operations, revenue cycle management, client services, patient advocacy, quality, regulatory, our entire MDX team operates under the mission that there is a patient and family on the other side of every sample we receive. That is what drives our customer base to trust MDX Health as their laboratory partner for critical diagnostic tests that inform patient pathways. We will continue to strive to deliver on our commitments of growth and value while positioning MDX Health as the leading growth precision diagnostics company focused solely into our high-growth target urology market. And as always, we carry a great deal of responsibility to provide value to all of our stakeholders, including patients, customers, payers, and shareholders. So thank you for your interest in and support of MDX Health And now I'll turn the call back over to the operator for questions.

Thank you, sir. Ladies and gentlemen, we will now be conducting the question and answer session. If you would like to ask a question, please press star and then one on your telephone keypad. A confirmation turn will indicate that your line is in the question queue. You may press star and then two to leave the question queue. For participants making use of speaking equipment, it may be necessary to pick up your handset before pressing the star keys. We will pause a moment while we wait for the question queue to board. Our first question comes from Thomas Flatton of Lake Street. Please go ahead.

Thank you. Good afternoon, guys. Congrats on the quarter and the deal. Mike, just to follow up on a comment you made about cross-selling opportunities, could you maybe dive in a little deeper into what those Venn diagrams look like between your customer base and the customer base that ExoDX has?

Yeah, Thomas. I think it's very similar to our our view on the GPS acquisition. So our view with that was that there were a number of GPS customers that were not currently or at the time using confirm and vice versa. And I think what you've seen and we've demonstrated is our ability to leverage that mix of customer base. So new, you know, I think access to that customer base that came over as well as being able to drive cross utilization for our current customers, we view the same opportunity in front of us with ExoDx. So they've built a significant customer base. And as you would anticipate, the crossover match is not exact, right? So as we look at the opportunity to build full adoption of our menu, which is the focus of our sales organization, Thomas, I think we see significant opportunity there for our reps. from an access relationship perspective to really build on what we've done with GPS and confirm. When you look at the growth of our tissue-based test, that's clearly been proven to work within our sales channel. We see the same in driving that same effort and growth acceleration with our liquid and tissue now crossed over with what we believe to be the best in class test in each of the categories.

Got it. And then kind of picking up on something you mentioned there with respect to sales reps, are there, is there a commercial team coming with the test or is it literally just the test itself?

Yeah, so we, part of the acquisition, you know, we're acquiring the CLIA laboratory based in Massachusetts and we'll provide more detail on the full integration of potential sales reps coming over, but we're very confident that in my statement related to the leverage it provides on the top line while also continuing to drive and develop our EBITDA accretion as we go forward. So we want to get to close in September and provide more detail on that. But you can assume that we will take over a number of sales reps that will fit right into our channel opportunity. And the acquisition, unlike the GPS, we're acquiring the CLIA lab. So we will not have some of the challenges over time with integration were related to the TSA agreement we have with Exact Sciences and the fact that they ran the test for us for a period of two years and we had to transfer and bring up live in our laboratory. We see this as a much more straightforward and seamless acquisition and integration and we'll follow up on the structural details as we proceed through close in September and release our Q3 results.

Got it. And then just one quick final one. Will Select continue to be offered or will you discontinue that at some point?

Yeah, we'll comment more on the transition there as we go forward as well, Thomas. So we're very confident that our current Select users as well as the current XODX users match very well, as I stated, with our current customer base and the growth opportunity in front of us. And we'll provide detail as far as how we see that developing with that liquid biopsy-based test post-PSA pre-biopsy.

Got it.

I appreciate you taking the question. Thank you. Thanks, Thomas.

The next question comes from Andrew Brackman of William Blake & Co. Please go ahead.

Hi, guys. This is Kate on for Andrew. Just as it relates to the quarter in particular, You mentioned the transaction should be accretive to adjusted EBITDA. Could you talk just to us a little bit more about the underlying assumptions for that from a gross margin and OPEX perspective? Thanks.

Yeah, Kate. You know, we want to provide detail, as I noted, with expectations updating our view for Q4 and full year 26 on the other side of closing. But what we're confident in in our diligence and the financial analysis associated with this acquisition is that the top line growth will be clear. I'll comment more as we go forward on the gross margin impact, but you can assume, and I think that would be a reasonable assumption, that we have favorable margin accretion with the addition of this test. And our OpEx discipline that we've demonstrated, we expect to continue with the absorption of some of the people coming over from ExoDx and Biotechni as well. So very confident that that all fits in with our current positive adjusted EBITDA that we reported for this quarter and that it's sustainable through closing integration and as we head into 2026. So, you know, we're very excited about the fact that from the top to the bottom of the P&L, we think this is really transformative to our business. But most importantly, in the field with our customer base, we think it really, as I noted, cements our position as the sole provider from beginning to end of the diagnostic pathway of prostate cancer. So you can imagine our diligence was rigorous around the full P&L. and very confident that it sets up very well going forward.

Okay, great. Thanks. And then just as my follow-up, as it relates to the quarter, the tissue-based volumes continue to grow nicely. How should we think about the levers there, both on a per-test basis, but also perhaps on a customer account basis as well? Thanks.

Yeah, Kate, you know, we're very – encouraged by the continued sustainable growth of our, of our tissue-based tests. And as I always comment while we group GPS and confirm together, when we report, um, unit growth on the tissue side, we're seeing, you know, very consistent growth there, right? So it's not that one of them is carrying the day and it's really reflected in the way our adoption profile is setting up, right? Where we want to be the provider post biopsy, whether that biopsy is negative or positive. we're the only company or sales representative that can partner with our urology customers with that answer on the other side of initial biopsy. And that adoption is clearly taking hold as you've seen over the last number of quarters with our tissue-based growth. Very, very confident that that is sustainable. And we view the liquid side being significantly bolstered with this acquisition. And so now we look forward to providing very balanced growth within each segment, tissue and liquid, and our sales team continuing to drive that 20% or greater growth rate in a very sustainable way as we go forward for the foreseeable future. And my view of next year that our revenue could accelerate to 30% or greater We have good visibility and confidence in that as well. So hopefully that answers your question, Kate. I'm very excited about what this does for our business and really for our customers and ultimately the patients as the sole provider of these answers.

Yes, very helpful. Thanks for the questions.

Thanks, Kate.

The next question comes from Bill Bonello of Craig Hallam. Please go ahead.

Hey, guys. Thanks a lot. A handful of follow-up questions here. Where does XODX fit sort of in terms of market leadership for this kind of test? And then maybe you can just talk to us about reimbursement and guidelines. I know Select has, you know, an LCD and is in some guidelines. Does that hold for this test, too?

Yeah, Bill. So we're very... confident in the position that XODX has taken both in the market as well as from a guideline. And I think I would say that they, you know, the data and clinical scientific data associated with the XODX probably surpasses that of SELECT and as well as guideline inclusion. To your point, as far as reimbursement goes, so the laboratory is based in Massachusetts, so we're in the NGS MAC. But I think it would be safe to assume that as we go forward that the Medicare reimbursement rate is similar to our select test, albeit in a different Medicare MAC.

Okay. And I guess I just wasn't clear, sorry, on the guidelines. Are you saying it is in the guidelines or the data is there that you could get it in the guidelines?

No, it is in the guidelines, both in and anyway. OK, so it's it's probably, you know, it's stronger, arguably a stronger position than select currently has in the market. And, you know, sorry, because embedded in your question was from a from a market share or penetration or leadership position in that sector. We we, as I noted, have really long respected their position. And the progress they've made over the past few years, you know, candidly, they've been successful in some of our select accounts based on some of the dynamics that I made clear with the lack of a DRE requirement and their, you know, opportunistic capture of the viability of home testing kits for their tests without the DRE requirement. This is something that we've seen in the market over the past number of years, and the fact that we were able to capitalize on this opportunity I think puts us in a very, very strong position.

And just on the reimbursement front, just so I'm crystal clear here, I mean, I assume that they've been getting paid by Medicare, so you know what the Medicare reimbursement experience for them has been?

That is correct. Okay. And that's what I'm saying. So it's very similar to our slide for our reimbursement rate. And that was my comment as far as the contribution to the P&L. I didn't comment specifically on the gross margin profile, but we're confident it's accretive.

Okay. That's really helpful. And then just a question. I know you're going to give more on the financials, you know, once you close the deal and whatnot, but you did You threw out this 20 million plus revenue contribution. Should we think of that as sort of a, you know, is that a net contribution after any select revenue might roll off? Or are you saying, you know, more like this is a 20 million revenue run rate product?

We expect the EXO DX contribution to our revenue to exceed 20 million next year.

Okay, maybe I'll follow up .

No, I don't want to duck your question. If you're asking is that select and EXO combined, or do we expect an incremental contribution from EXO-DS revenue of $20 million or more? Right. It is the latter.

Okay, perfect. That's really helpful. And then just, you know, I know you take a while to think about synergies and whatnot, but you are acquiring a lab. You know, over time, is there opportunity for lab consolidation, or do you really need multiple labs to perform all your tests?

Well, I won't comment on that. I don't think either is necessarily the case, right? Whether we need multiple labs to run our tests is not the question. We believe that we have now three laboratories that are world class, that operate in a setting that allows for reimbursement, customer service. Our laboratory in Texas was somewhat designed around the required turnaround times for Resolve. Irvine is our legacy laboratory here at MDX Health, and we view the ex-MDX lab at Massachusetts as operating to that same standard, so we don't see any need to change that.

Excellent. Thank you very much. Bill, thank you.

Ladies and gentlemen, we have reached the end of the question and answer session, and this concludes today's event. Thank you for attending, and you may now disconnect your lines.