Exagen Inc.

Greetings. Welcome to Exigent Inc.' 's fourth quarter 2023 earnings call. At this time, all participants are in listen-only mode. The question and answer session will follow the formal presentation. If anyone today should require operator assistance during the conference, please press star zero from your telephone keypad. Please note that this conference is being recorded. At this time, I'll hand the conference over to Ryan Douglas from Investor Relations. Mr. Douglas, you may now begin the presentations.

Good morning, and thank you for joining us. Earlier today, Exygen, Inc. released financial results for the quarter and full year ended December 31st, 2023. The release is currently available on the company's website at www.exygen.com. Chana Bali, President and Chief Executive Officer, and Kamala Dowie, Chief Financial Officer, will host this morning'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 meaning of federal securities 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 guidance for the quarter, potential profitability, or current future product offerings, and reimbursement and coverage 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. Accordingly, 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 the filings with the Securities and Exchange Commission, including our Form 10-K for the year ended December 31st, 2023, and any subsequent filings. In addition, some of the information discussed today includes non-GAAP financial measures such as adjusted EBITDA that have not been calculated in accordance with generally accepted accounting principles in the United States or GAAP. These non-GAAP items should be used in addition to and not substituted for any GAAP results. We believe these metrics provide useful supplemental information in accessing our revenue and operating performance. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are presented in the tables at the end of our earnings release issued earlier today, which has been posted on the investor relations page of the company's website. The information provided in this conference call speaks only to the live broadcast today, March 18th, 2024. 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. I'll now turn the call over to John Abali, President and CEO of Exogen.

Thanks, Ryan, and thank you to everyone joining the call. Today, I'll review our fourth quarter and full year 2023 results. progress on our strategy to achieve profitability, and touch on how 2024 is starting out. I'll then hand it over to Kamal, our CFO, for further details regarding our financial performance. 2023 was a year where we implemented significant change across the organization in executing on our strategy. And it's exciting, and to be honest, a lot of fun, to see the results we were able to generate in a relatively short period of time by focusing on our core product, Advise CTD. I have to start by genuinely thanking all the team members at Exogen for putting in the hard work and effort this past year to really change the trajectory of our company. We've continued to serve patients in the rheumatology space with the best testing available, but are now doing so with a healthier organization, which is much closer to operating profitably. Throughout the year, my confidence has grown, knowing that many of the strategic shifts we've needed to make are behind us. and that as we continue to execute, our goals are truly within reach. Looking at our performance this past year, we are extremely proud that our full year revenue was a record $52.5 million, with $13.8 million coming in the fourth quarter. Full year revenue increased 15% over 2022, while simultaneously reducing the cash needed to run the business. This resulted in a $22 million or 57% improvement in adjusted EBITDA year over year. We also improved our gross margin to 56% for the full year of 2023 and to over 59% in the fourth quarter. This is fantastic progress over our 2022 performance, and we are steadily moving towards our cash flow positive target of 60% gross margins. In achieving our 2023 performance, One of the key areas we focused on was improving the average selling price of advised CTD. In many respects, we've laid the groundwork for continued progress this past year, but also shown that we can simultaneously generate momentum in improving the realized price of our core testing. At the end of 2022, our trailing 12-month ASP was $285 for advised CTD testing. And by the end of 2023, We were able to increase this 18% to $336. The increase in ASP relative to 2022 becomes even more impressive when factoring in the CMS repricing of our PLA code as we transition to the clinical laboratory fee schedule at the start of the year. We are very proud to deliver a change of that magnitude without sacrificing progress in growing the business. For 2023, we delivered a record 137,000 advised CTD tests, of which approximately 30,000 were completed in the fourth quarter. From inception to date, we have now delivered over 900,000 advised CTD tests, and we look forward to surpassing the 1 million test mark later this year. In 2023, we worked hard to focus on advised CTD and specifically to improve the ASP of our offering. As we implemented changes to accomplish this goal, as expected, we did experience a decline in VICE CTD testing in the second half of the year. As we progressed into the first quarter, we are seeing encouraging progress in building back our business from a volume standpoint and continue to expect growth in 2024 to be driven by improvements in ASP and increasing test volumes. When I joined Exogen in late 2022, I work to drive focus on AdviseCTD testing and subsequently look for ways to improve every aspect of how we offer our tests. One area we've recognized as an opportunity is in leveraging some of the unique biomarkers we already had license to in order to enhance the sensitivity of AdviseCTD. On this note, we anticipate launching new proprietary T-cell markers within the AdviseCTD platform in the fourth quarter of this year. We expect these novel markers will improve the sensitivity of our test in identifying patients with lupus. Ultimately, we anticipate being able to identify up to 50% of SLE patients who would test negative by standard of care testing or alternatives. In November of 2023, we presented an abstract at the American College of Rheumatology annual meeting, highlighting the gain in diagnostic sensitivity T-cell markers provide. and we are working to have them clinically available to better aid clinicians and patients in identifying disease. From our research, these markers are some of the most specific for SLE that have been discovered and will therefore be a true value add for clinicians and patients. Additionally, and from a competitive advantage standpoint, we have patent protection in offering these markers through 2035, which reinforces our commitment to innovating in this space and further highlights Exogen as a company that can continually bring novel biomarkers to the rheumatology community. The addition of these markers to advise CTD is also expected to be accretive to our financial performance by the end of this year. Finally, before I hand the call over to Kamal, the goal posts are as clear as ever, and I very much believe we will achieve cash flow breakeven with gross margins around 60% and revenue of approximately $75 million with our current cash balance. Execution of our strategy is demonstrating results, moving us closer to these goals, and I'm excited about the progress we expect this year. With that, I'll now turn the call over to Kamal to provide details on the fourth quarter and full year 2023. Kamal?