Exagen Inc.

Good morning and thank you for joining us. We're excited to report another strong quarter at Exeget, highlighted by record revenue and meaningful progress across our commercial, scientific, and operational efforts. Our focus on disciplined execution, physician engagement, and continued innovation is driving positive momentum as we look to build on our leadership in autoimmune diagnostics. Here are our highlights. Q2 revenue came in at $17.2 million. representing 14% year-over-year growth and the highest quarterly revenue in company history. Advised CTD test volume growth was substantial, and the team delivered the best quarterly volume since we made our strategic adjustments in the summer of 2023, which is a strong step in the right direction. What's especially encouraging is that this growth is being driven organically by our existing commercial team. and the growing clinical recognition of our differentiated science. For Q2, we effectively still had 40 territories, meaning our average revenue per territory reached just over $430,000 for the quarter. That's an encouraging sign of commercial leverage, especially when you consider where we were a couple of years ago, averaging $285,000 per territory. We've seen our per territory revenue grow by over 50% since I joined, and it's important to note that the expected impact of our sales expansion likely won't be felt until at least Q4, further accelerating our trajectory. Layer on top of that, the fact that we've begun to expand into areas we believe have high growth potential with team members of incredibly high character and talent, and it's hard not to get excited about the special business we are creating. The sequential revenue growth we saw in Q2 is coming from increased ordering within our physician base and expansion of our physician base and continued improvement in our revenue cycle efforts. It's great to have growth driven by multiple levers. As I've said before, we're committed to building a business that scales profitably. And the changes we've made over the past 18 months to our commercial leadership, sales processes, and operational discipline are continuing to show meaningful traction. We're seeing consistent ordering patterns from high-value clinicians and continued onboarding of new physicians, a testament to both the strength of our platform and the execution of the field team. Our biomarker launch this past January continues to go extremely well. The addition of novel T-cell and RA markers has been a meaningful catalyst in our commercial conversations. And we continue to hear enthusiasm from clinicians who are eager to learn about new science in a field that seems very little biomarker innovation in the past 50 years plus. I was out in the field a couple of times this quarter once in Arizona, and again, locally in San Diego and in San Diego, I had the opportunity to speak with a physician who shared a powerful case for why he has switched his biomarker profiling exclusively to the advice platform. This clinician had a patient present with joint pain and had a negative serological profile by conventional standards. After ordering Advise CTD with our new seronegative RA markers, the result came back positive for RA33 and subsequently he ordered a joint x-ray. The result confirmed joint erosion and a diagnosis that would have likely been missed without Avize. Additionally, we've had two very interesting examples of the impact our T cell markers can have come up in the past quarter as well. The first was a patient in Florida who had been diagnosed with lupus 20 years ago and been lost to follow-up. She went to see a new rheumatologist who uses Avize in his practice, and initially, the doctor wasn't convinced that the original diagnosis was correct. He ran the Avize CTD profile, and the traditional lupus markers weren't present. Instead, this patient was only positive for ANA, BC4D, which is unique to exogen, two of our new T cell markers, and one other non-lupus autoantibody. The clinician told us that if it weren't for the unique markers exogen provides, he would not have been convinced of the lupus diagnosis and instead taken a different path in treating this patient. The second T cell example we stumbled upon when one of our scientists noticed an interesting abstract at a conference. This was a presented case study of a very interesting patient who had a negative lupus nephritis, which is rare and at odds with the current guidelines. But nevertheless, the case study detailed how a 42 year old male presented to the hospital with lower extremity pain and swelling with mild protein area. The clinicians evaluated him for, but was negative and so the suspicion faded initially. The patient continued in and out of the hospital for a few weeks with various forms of hematuria and nephrotic range proteinuria, and continued to be treated with steroids and hypertensive medications. Ultimately, a kidney biopsy was performed, and it revealed class IV lupus nephritis. Avized testing confirmed a positive T cell profile, which was the only serological abnormalities identified consistent with lupus in this patient. The patient was subsequently treated with additional steroids, but also strong immunosuppressive therapy and discharged. Upon reevaluation, his creatinine had improved along with the symptoms, and while continued long-term follow-up is needed, this is a great example of how our efforts to bring novel biomarkers to the clinic can have such a significant impact on patients and in moving the rheumatology field forward. This is the type of clinical impact we're building for, and that's what our science is about. We also made two important additions to the Exogen team this quarter. First, we welcome Dr. Michael Mahler as our new Chief Scientific Officer. Michael is one of the most accomplished scientific leaders in autoimmune diagnostics with more than two decades of R&D experience. He's widely regarded as a key opinion leader in biomarker development and was responsible for commercializing PAD4 at Warfen, a marker we plan to launch later this year. Michael brings deep scientific credibility and cultural alignment to our team. He understands the rigorous pathway to launch and scale high-impact diagnostics and shares our vision for building a company that transforms autoimmune care through precision medicine. Second, we added Chas McConn to our board of directors. Chas is a proven executive in the life science tool space and brings a strong strategic lens to our boardroom. His addition was opportunistic and reflects our belief that when smart opportunities present themselves, we will move decisively to execute. We continue to make strong progress across our R&D pipeline. First, as it relates to lupus nephritis, both our urine and blood-based efforts are advancing well. The intended use applications are becoming increasingly clear, and we are actively working on strategies to secure reimbursement so that patients can access these tools. We're at the tail end of our first pharma engagement using the urine platform, and we expect to unlock additional partnerships moving forward. More to come, but the science is exciting. Second, our efforts to discover novel blood-based biomarkers of kidney damage are advancing. We've secured additional validation cohorts through the NIH, and these studies are progressing well. We believe the potential to combine these markers with our urine-based platform could be a significant opportunity but are also optimistic on their standalone value long term. Lastly, and closest to commercial launch, is our efforts to expand our seronegative offering through the inclusion of the anti-PADD4 biomarkers. We plan to submit the clinical and analytical validation package to the New York State Department of Health in August and expect to hear back by year end. We remain on track to launch commercially heading into 2026. On the financial front, and Jeff will provide more detail, but we ended the quarter with just over $30 million in cash and equivalents and are approaching neutral operating cash flow on a quarterly basis. The public offering and new credit facility we completed earlier in the quarter give us the financial flexibility we need to continue investing thoughtfully in growth, both commercial and scientific, while staying disciplined with expenses. At Exogen, we're building something special. We talk about it all the time here in our building, but it's really a commitment to redefining how autoimmune disease is diagnosed and managed. It's redefining the journey for the patient. We're attracting leaders who share that vision. We're launching innovations that clinicians are asking for. We're helping physicians catch diseases earlier, make better decisions, and ultimately improve outcomes for patients. Our growth this quarter in volume, revenue, ASP, clinical adoption, and leadership strength is a reflection of that vision taking hold. We're grateful for your continued support, and we look forward to sharing more progress next quarter. With that, I'll turn it over to Jeff.

Thank you, John, and good morning, everyone. As John mentioned, we delivered another record revenue quarter. It was also a busy quarter as we executed on initiatives to shore up the balance sheet. As we discussed during the last earnings call, we refinanced our debt and added additional tranches that we can utilize at our option. On the heels of the debt refinance, we tapped the equity markets with a $20 million follow-on offering. We added several new fundamental investors with key participation from our existing investor base and continued support post-offering. Our balance sheet now provides us with the flexibility to invest in growth while maintaining a clear path to positive operating cash flow. Turning to revenue, we delivered $17.2 million in the second quarter, a 14% increase over 2024. And this growth came from an increase in volume, which was up 14% sequentially from the first quarter and 7% from the second quarter of 2024, as well as continued ASP expansion. Our trailing 12-month devised CTD ASP grew $27 year over year to $428. primarily driven by our new biomarkers, which are still in the early days of collection cycles. We've taken a conservative approach this quarter with new biomarkers, adjusting our accrual rate down to align with what we're seeing in actual cash collections. We expect to see continued expansion in the second half of the year as we see the impact of patient deductibles maxing out and the complete revenue cycle process for our new biomarkers begin to take effect. Gross margin in the second quarter was just over 60 percent, up from about 59 percent in the first quarter and 60 percent in the second quarter of 2024. This improvement reflects the growing contribution of higher ASP and the gradual normalization of lab operations following our Q1 investments. We expect continued gross margin expansion throughout the year, driven mostly by our expected ASP improvements. Operating expenses for the quarter were $13 million, up from $12.5 million in the first quarter and $11.6 million in the second quarter of 2024. This increase reflects the impact of some one-time expenses in the second quarter, our continued investment in R&D, including two key leadership hires, clinical studies, and pipeline advancement, as well as strategic additions to our commercial team. We expect operating expenses to remain roughly at these levels for the remainder of 2025 and increase modestly over time in absolute dollars as we scale, but should decline as a percentage of revenue reflecting growing operating leverage. And while we're now very well positioned from a balance sheet perspective to make the investments needed to support our expected growth equally important, we have the ability to modulate spend down or up and to invest opportunistically as we sit there. Our net loss for the second quarter is $4.4 million compared to $3 million in the same period last year. The most significant drivers of this change being the impact of our new debt facility, which added $600,000 in non-cash interest and fair value adjustments, $300,000 for loss on debt extinguishment, and $400,000 in cash interest expense. Adjusted EBITDA loss was 1.7 million in the first quarter versus 1.6 million in the second quarter of 2024. Profitability remains a core focus for the company with a positive adjusted EBITDA firmly in sight in the foreseeable future. As a reminder, our adjusted EBITDA excludes stock comp expense since it's a non-cash item. Please refer to our earnings release issued earlier today for a reconciliation of adjusted EBITDA to net loss. Shifting to the balance sheet, we ended the second quarter of 2025 with cash, cash equivalents, and our shifted cash of $30 million. Operating cash for the second quarter was just under $3 million and $2.5 million before interest payments, positioning us for the second half of 2025 to be at or near free cash flow positive. We're very well positioned from a balance sheet perspective with over $40 million in combined cash and accounts receivable at June 30 and up to an additional $50 million in available future credit capacity if and when needed. In closing, 2025 continues to shape up as another transformative year for Exogen. We delivered record revenue in the second quarter, returned advised CTD to volume growth, and remained on track to deliver over 17% revenue growth in 2025. We're making strategic investments in our R&D pipeline and commercial expansion, all while focused on path to profitability, improving patient lives, and building long-term shareholder value. We entered the second half of 2025 with positive momentum and great confidence in our trajectory. And to that end, we're providing full year revenue guidance of between sixty five and seventy million dollars. And at the height of that range would expect to hit positive adjusted in the fourth quarter and on a sustainable basis throughout twenty, twenty six. We'll now open the call up for questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. The first question is from Dan Brennan from TD Cowan. Please go ahead.