Exagen Inc.

Greetings and welcome to the Exogen Inc. Third Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ryan Douglas, Investor Relations. Thank you, sir. You may begin.

Good afternoon, and thank you for joining us today. Earlier today, Exygen, Inc. released financial results for the quarter ended September 30th, 2022. The release is currently available on the company's website at www.exygen.com. John Abali, President and Chief Executive Officer, Kamala Dowie, Chief Financial Officer, and Mark Hazeltine, Chief Operating Officer, will host this afternoon's call. Before we get started, I would like to remind everyone that management will be making statements during this call that include forward-looking statements within the meanings of federal security laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that are not statements of historical facts should be deemed to be forward-looking statements. All forward-looking statements, including without limitation, statements regarding our business strategy and future financial and operating performance, including 2022 guidance, our current and future product offerings, and reimbursement and coverage, a restatement of our financial statements for the second quarter of 2022, and our plan for remediation with respect to the one or more material weaknesses and internal controls of our financial reporting that we expect to identify are based upon current estimates and various assumptions. These statements involve material risk and uncertainties that could cause actual results to differ materially from those anticipated or implied by these forward-looking statements. You should not place undue reliance on these statements. For a list and description of the risk and uncertainties associated with our business, please see our filings with the Securities and Exchange Commission, including our Form 10-K for the year ended December 31st, 2021, and subsequent filings. Information provided in this conference call speaks only to the live broadcast today, November 14th, 2022. Exogen disclaims any intention or obligation, except as required by law, to update or revise any information financial projections, or other forward-looking statements, whether because of new information, future events, or otherwise. As previously announced, on October 17th, Exygen appointed a new president and chief executive officer, John Ibaldi. I'm pleased to introduce John, who will now turn the call over to him.

Thanks, Ryan, and thank you to everyone joining the call. I'm very excited to be joining Exygen as CEO. We have developed a leadership position in one of the largest fields of medicine with our proprietary advised testing platform. Having spent the majority of my career working in labs, developing and commercializing diagnostics and oncology, I'm looking forward to bringing that same successful approach to rheumatology with the incredible team here at Exogen. Today, I will discuss my initial impressions along with our third quarter business highlights and give updates on Medicare reimbursement in addition to our pipeline. I'll then hand the call over to Kamal, our CFO, for details on our financial results. Over the past four weeks, I've started to evaluate Exogen's current business and product portfolio. Specifically, I've wanted to gain a better understanding of our competitive advantages and what can be done to enhance them. The advice platform is based on proprietary technology, and Exogen has established itself as a rheumatologist's preferred partner in navigating the differential diagnosis of connective tissue disease. The company enhances its competitive advantage by delivering high values of customer service in combination with its innovative technology. I believe we can continue to differentiate through both service and our platform. I'm working with the teams at Exogen to better define our plan in this area and anticipate speaking to it more in the coming quarters. I've grown more excited about the opportunities I see in the organization and believe that my past experiences will provide great reference for improving the company. Of specific note is my experience leading the growth of sales organizations and products, developing medical policy with Medicare on several laboratory-developed tests, recent management of four CAP and CLIA laboratories, and optimizing revenue billing operations. I expect my experiences to add value as I continue to evaluate all aspects of the company. Regarding Exogen's most recent quarterly performance, Our total revenue for the third quarter was $14.7 million, which included a record 35,569 advised CTD tests delivered. This is up 12% year over year. We also had 2,287 total ordering healthcare providers, which is a 16% increase over the prior year quarter. We have now delivered a record 101,000 advised CTD tests year to date. We finished the quarter with 63 sales territories occupied by 54 reps. While it's great to see the continued strong utilization amongst our existing healthcare provider base, I believe we can grow faster. I'm working with the management team to review, prioritize, and take action on all aspects of commercial execution to accelerate the growth of our advised products. Turning now to an update on Medicare reimbursement for advised lupus. For the past few months, we've been working with Neridian to resubmit claims, including responding to their requests for additional information. Following these efforts, Medicare resumed paying claims and has continued to do so at a rate of $1,085. We have recognized approximately $3.7 million from claims that were submitted for Q2. With respect to obtaining a formal coverage determination from CMS, we submitted our application for coverage to the Neridian Medical Directors on July 29th of this year. We received notice that Neridian has deemed our application for a local coverage determination, or LCD, to be valid on September 27th. Ultimately, receiving a favorable LCD is uncertain and may be time-consuming, but our request for Medicare coverage for advised lupus is now officially in queue. A successful LCD would improve transparency regarding Medicare support of advised lupus, which would also improve our communication of coverage for Medicare Advantage patients to commercial payers. We believe that our strong support in the rheumatology community, robust clinical validity, and proven clinical utility will help us successfully obtain an LCD for advised lupus. Our capstone study demonstrates the utility of advised lupus, which we believe will be a key component of the evidentiary review by CMS. However, we must note that the process can be unpredictable, and while we are being reimbursed for advised lupus today, reimbursement is not guaranteed throughout the process. In terms of payment levels, companies that develop new clinical diagnostic laboratory tests, such as advised lupus, can apply for a new or substantially revised CPT code. For the year in which this code is made effective, the initial reimbursement rates are assigned by the Medicare administrative contractor, and for Exogen, this is Neridian. As we previously stated, Neridian priced the advised lupus PLA code 0312U at $1,085 for 2022. CMS establishes pricing by either a crosswalk or gap flow methodology before finalizing on the clinical laboratory fee schedule, or CLFS. To determine pricing beyond 2022, the CMS pricing process resulted in a recommendation that the advised lupus PLA code be crosswalked to the Vectra CPT code at a rate of $840.65. We expect pricing to be finalized on the CLFS by the end of the year. This would then become our price with Medicare effective January 1st of 2023 and remain effective through the end of 2025 given current PAMA reporting timelines. Until an LCD is secured, we expect Meridian to adjudicate claims for advised lupus on a per-claim basis, and when determined to be medically necessary, paid at the applicable PLA rate. As is common in the specialty diagnostic area, unique laboratory-developed tests face significant commercial payer scrutiny for medical necessity. As discussed in the second quarter, we continue to see headwinds relating to commercial payer claim processing and revenue. Now that we are billing under our PLA code, we are experiencing an increase in denials due to unfavorable medical policy with select plans, and we expect this to persist. This has resulted in a reversal of revenue and a write-down of 1.7 million of accounts receivable in Q3 from prior period claims. We will continue to engage with commercial payers to obtain and maintain coverage for advised lupus. While the dossier is a key component in engaging commercial payers for medical policy, Clinical guidelines do not currently recognize the advised lupus test. We view the inclusion into guidelines as an important catalyst to expanding coverage and payment. Our approach to commercial payers remains a focus point of the company and one that has my full attention. Turning now to our pipeline. Our pipeline has several exciting projects and I'm very impressed with our team, our lab, and our scientific capabilities. As would be expected with a change in leadership, I am currently reviewing every project to assess how it fits into Exogen's long-term portfolio strategy. And I plan to bring a fresh perspective to the prioritization of our research program. My criteria for evaluation is as follows. First and foremost, does the product have the potential to deliver impactful results to clinicians and patients? Next, does it have a strong competitive advantage, which is durable or can be improved upon? And finally, Does it have a path to reimbursement with an anticipated operating profile, which makes it a viable long-term offering, thereby justifying the investment? I'll discuss some of the milestones that we have reached recently. Of specific note, under the Advise Radar program, we enrolled our first rheumatoid arthritis patients into our prospective clinical trial, known as TIGER. The aim of this trial is to amass a clinical cohort capable of validating the work performed at Queen Mary University of London. We look forward to providing updates on our commercial development of biomarkers from synovial tissue to personalized therapy for rheumatoid arthritis patients. We remain focused on and will communicate a reimbursement pathway for Advise Radar in the near future and plan to provide updates regarding our product pipeline as we continue our review. This past week, I had the opportunity to join our scientific team at the American College of Rheumatology's annual conference where they presented nine abstracts and we were honored to be selected as a featured presenter. At the conference, I spoke with several healthcare providers that use the Advise platform. They expressed to me how important Advise testing has been for them in their practice for helping diagnose connective tissue disorders, and specifically stressed the value Advise plays in the clinical management of their patients. As I complete my first month, I'm taking a holistic approach at analyzing the business and implementing changes to improve Exogen's profitability. I'm very excited about Exigen's future, and I'm looking forward to building on the solid foundation that's in place and leading the next phase of growth. I now turn the call over to Kamal for details on the finances.