Exagen Inc.

Ladies and gentlemen, good morning and welcome to the exergent third quarter 2024 earnings conference 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 and 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. Please go ahead.

Good morning, and thank you for joining us. Earlier today, Exogen, Inc. released financial results for the quarter ended September 30th, 2024. John Abali, President and Chief Executive Officer, and Jeff Black, Chief Financial Officer, will host this morning's call. A recording of today's call and the press release announcing the quarterly results can be found on the company's website at www.exygen.com. As today's call includes forward-looking statements, we encourage you to review the statements contained in today's press release and the risk and uncertainties described in our SEC filings, which identify certain factors that may cause the company's actual events, performance, and results to differ materially from those contained in the forward-looking statements made on today's call. In addition, we'll discuss non-GAAP financial measures on this call. Descriptions of these non-GAAP financial measures and reconciliations of GAAP to non-GAAP financial measures are included in today's press release. I'll now turn the call over to John Abali, President and CEO of Exygen.

Good morning, and thanks to everyone for joining the call today. We had an exciting quarter at Exygen where we've continued to make substantial progress in executing our strategic plan. Today, I'll provide detail relating to our near-term goals and cover a few financial highlights for the quarter. But first, I want to officially welcome Jeff Black to the team as our new Chief Financial Officer. Jeff joined us on September 1st and has done a fantastic job jumping in and adding value, and has quickly become a key member of the team. Welcome again, Jeff. Our performance in the third quarter came in line with our expectations as we continued to execute our strategic plan of delivering profitable growth. We have set ourselves up well to achieve overall cash flow positivity, which we now believe will occur by the end of next year. Our total revenue for the third quarter was $12.5 million, which includes the net negative impact of $1.2 million in one-time adjustments. These adjustments slightly change our outlook for the year, but I continue to be very excited about the long-term potential of our business and the near-term inflection we anticipate. Jeff will provide additional detail on our financial performance and the one-time adjustments later in the call. In looking at the advised business, testing volume was in line with internal expectations, down slightly quarter over quarter due to seasonal factors, including an uptick in out-of-office time for physicians and weather-related events towards the end of the quarter, impacting our southeast territories. Our trailing 12-month advised ASP improved for the seventh consecutive quarter, up to $404 per CTD test and inclusive of the net negative one-time adjustments, further demonstrating the strength of our efforts in growing ASP. Our adjusted EBITDA loss was approximately $4 million for the quarter, and we are well on track to deliver a 30% improvement for the full year. Looking back at the progress over the last two years, I'm extremely proud of our continued ability to grow revenue while reducing total operating expenses, both in SG&A and R&D. Additionally, we're on the cusp of launching new products, which will deliver significant near-term profitable growth for our organization. Comparing our financial results for the first nine months of 2024 to the same period in 2022, we have grown revenue by nearly 30%, expanded ASP by 45%, improved gross margins by over 1,300 basis points, reduced OpEx by almost 20%, and improved adjusted EBITDA loss by over 70%. At the same time, we've nearly doubled our Salesforce productivity and brought an intense focus to our R&D investments. resulting in a nearly 50% reduction in related expenses and prioritization of near-term pipeline opportunities. Most notably, we are now in the final innings of our new biomarker launches, our first new product offering in almost five years, which we expect will accelerate gains in ASP and margin expansion and increase demand while positioning us for profitability. I'm extremely excited about the pace of progress we're making. One of the key developments this quarter relates to our efforts to bring new proprietary markers to the rheumatologists through our Advise CTD platform. Our teams have worked extremely hard and been heavily focused on completing our validation studies while expanding the capacity of the lab for the anticipated demand increase. We've successfully built and optimized these tests to deliver valuable insights to clinicians at our high-quality standards. We are eager and excited, given that we've submitted to the New York State Department of Health and now await final approval. I'm especially proud of our team, and we can't wait to launch these offerings commercially. Additionally, we had five abstracts accepted for the annual American College of Rheumatology, or ACR, societal meeting being held in Washington, D.C. this month. Three of these abstracts detail the benefits and performance of our new markers. We plan to leverage the ACR meeting and the presentation of these abstracts as the ideal time and place to kick off our commercial launch and educational campaigns. We expect the assays to be available commercially by year end, and we will start marketing the enhancements later this week as our team attends ACR. While our laboratory and clinical teams have been working to ensure our assay is robust, validated, and approved, our commercial team has been preparing to educate the rheumatology community on the value these new markers can bring to their clinic. Our marketing team has spent considerable time in the field preparing for launch. including meeting with over 50 clinicians, one-on-one and in-person, and we've conducted an advisory board to best position the enhanced advised tests. Additionally, we held roundtable discussions with over 70 clinicians, educating them on the new markers and getting their perspective on our revised requisition and how we plan to interpret and report the test results. With their input, we've created a completely new test report to improve the clinician experience and streamline workflow for their practices. We are highly confident that we've done the work required to ensure these new markers are understood and presented in a way which enhances rheumatologic care. It's an incredibly busy and fun time in our company. People within the organization are energized by how far we've come and know that we're on the cusp of launching the first meaningful changes to our product portfolio in the last several years. Our progress is reflected in our ACR presence, with all five abstracts being relevant to our commercial efforts, a significant and meaningful change from just a couple years back. Our ASP continues to climb and will accelerate with the launch of these new assays. Our commercial team is working hard, and the makeup of the team has evolved since I've come on board to one that I feel better personifies that of a true consultant to the clinician. I believe this will pay dividends for us with our new product launch later this year and look forward to closing the year out strong and the exciting 2025 we have ahead of us. With that, I'll turn it over to Jeff to detail our financial performance this past quarter.