Exagen Inc.

Greetings. Welcome to Exogen Incorporated's fourth quarter 2025 earnings call. At this time, all participants are in listen-only mode. Question and answer session will follow the formal presentation. If anyone 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 turn the conference over to Tina Jacobson, Vice President of Investor Relations. Thank you, Tina. You may now begin.

Good morning, and thank you for joining us. Earlier this morning, Exogen released financial results for the quarter ended December 31, 2025. John Abali, our President and Chief Executive Officer, and Jeff Black, our Chief Financial Officer, will host this morning's call. The recording of today's call and the press release announcing the quarterly results can be found on the company's website at www.exogen.com. As today's call includes forward-looking statements, we encourage you to review the statements contained in today's press release and the risks 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 will discuss non-GAAP financial measures on this call. Descriptions of those non-GAAP financial measures and the reconciliations of GAAP to non-GAAP financial measures are included in today's press release. With that, I'll turn the call over to John Ibali, our President and CEO.

Good morning, everyone, and thanks for joining the call today to review our 2025 performance. Before we get into the details, I wanted to start with why what we are working toward matters so much Autoimmune disease is still diagnosed too late, too imprecisely, and too inconsistently. Consequently, it's the patient that suffers. Every delay, every misclassification, every uncertain answer shows up as real human cost. I'll put a finer point in the problem with a comparison to oncology, where it's well known how important it is to get the diagnosis right as soon as possible and at the earliest stages of the disease, when the course of action can be directed towards a cure. Significant investment has gone into improving the precision around and detection of disease in oncology. And the results show, as the median time to diagnosis is about four months, regardless of the type of cancer. And this is when measured from initial clinical suspicion to the date of diagnosis. I want to contrast that with autoimmune disease, where the diagnostic journey can be dramatically longer. For lupus, the often cited average time to diagnosis is around six years. And for rheumatoid arthritis, it's roughly two years. This diagnostic gap is at the heart of what we're working to address. Autoimmune patients are suffering in a broken system. At Exogen, we exist to solve this problem, not with more noise, but by listening to our customers and developing better solutions. And over the past few years, we've been deliberately rebuilding our company so that we have the foundation to make a profound impact on the future of autoimmune care. impact for patients who want clarity, impact for clinicians who want confidence, and impact for a healthcare ecosystem that desperately needs a better solution. As we work to address these significant unmet needs, we expect to have a meaningful impact for our investors as well. What I hope you'll come away with today is how Exogen's evolving into a company that doesn't just participate in an area of autoimmune diagnostics. We are working to own the entire space, providing more comprehensive care for the channel that relies on us and to move the field forward. Today I'll cover the progress we've made, the momentum we're seeing, and just as importantly, what we've deprioritized so we can stay focused on what truly moves the needle. Our story is about discipline, conviction, and building something durable. And that's the lens we'll maintain going forward. With that framing, and given that we've come to the end of another year, I want to start with a review of the progress made since I joined in 2022, because it highlights our ability to reshape and build a viable business. A lot of the work that needed to be done early on was behind the scenes. We have strong science and a meaningful mission, but the organization needed a healthier operating foundation to consistently translate that into durable financial performance and a platform for innovation. So we rebuilt the core of our company. deliberately and systematically. First, we advanced our revenue cycle management efforts, and I've detailed this at length, but it started with upgrading our customer service routinely, collecting clinical records, establishing a prior authorization process, and getting great at appeals so we could continue to improve reimbursement in a sustainable way. Next, we restructured our sales force pretty much from the start, reducing the team by roughly one-third managing out those that couldn't perform, along with people that didn't fit the culture we were building, while steadily upgrading the overall talent level across the entire organization. We've continued to cultivate a culture that is conducive to innovation, hard work, integrity, all with a dose of humility, and the group of folks that currently comprise Exogen certainly embody this spirit. Third, we reviewed our R&D efforts and streamlined the portfolio, discontinuing lower potential initiatives and prioritizing the opportunities our clinicians were advocating for, projects with clear commercial viability. This effort brought to the surface a significant number of challenges, including consolidating operations from multiple locations and walking away from programs with significant sunk costs. But where we sit now is at a place where we've launched three sets of innovative markers into the clinic within an 18-month period. We've educated clinicians and are having real impact on patient care. We have manuscripts pending which highlight the caliber of science we're now regularly conducting, and we're shortening the time for patients to be diagnosed correctly and treated effectively. Our impact highlighted in the most meaningful way. Lastly, we transitioned away from unprofitable customers and processes. That's always a gamble because it's challenging to estimate second and third order impacts that result from these types of decisions. but we knew they were the right decisions if we were going to succeed in rebuilding this company. None of these actions were easy, especially as a microcap public company, but they're exactly the kinds of decisions that build a business clinicians and patients can rely on to advance the field long term. The result today is straightforward, and while there remains a lot of work to do, the financial reflection of our decisions continues to materialize. I'll highlight a few of our results from last year to make the point. First, I want to highlight volume because it reflects extraordinary execution and our sales team is absolutely killing it. In 2025, we reset the volume run rate from roughly 30,000 tests in the first quarter to 35,000 plus in the following quarters. Q4 was the highest Q4 testing volume in Exogen's history, and this marks the second consecutive quarter that I'm able to make that claim. What's especially encouraging is we buck typical second half seasonality, which is In our view, a real testament to the durability of the turnaround efforts we've driven and a consequence of having the right team in place. To give you a sense of how impressive this is, we've averaged approximately 1% volume growth from 2022 through 2024, essentially flat, as we're rebuilding many aspects of the company. In 2025, the team delivered over 11% testing growth with strong momentum heading into 2026. Additionally, in 2025, we expanded our sales force from 40 to 45 territories, found incredible people to join our team, and we expect our new sales reps' productivity to continually improve over time as these folks get fully up to speed. We are very much on the right track in this area of our business. Now switching to ASP, and the cleanest way to measure progress here is by viewing it on a trailing 12-month basis. At the end of the year, trailing 12-month ASP was approximately $441 versus $411 at the start, up about 7%. That's meaningful execution for any diagnostics company and is being driven by the launch of our new product enhancements and the processes we've rebuilt over the last couple of years. Cleaner revenue cycle management, more effective appeals, consistent medical director engagement, and strong payer advocacy. Looking forward, there are several drivers to support further AXP expansion, including continued revenue cycle execution and the continued traction we expect from new biomarkers, now that they're roughly 12 months into commercialization. We also have the American College of Rheumatology now advocating for us, a first for our company and something that's materialized over the last three months, with specific plans to drive medical policy progress with payers. It has taken us almost two and a half years to secure solid advocacy from the ACR, and we're excited to see what may come from greater engagement with them. Progress with market access, including the local coverage determination, could be an additional catalyst, though timing is always difficult to predict with these types of things. And finally, our team continues to secure promising meetings with medical directors at various plans. We recently met with 12 different medical directors at various Blues plans, and have other scheduled meetings here in early 2026 to continue educating and advocating for patient access to the Advise franchise. This has been the core objective of our strategy over the past couple of years, and it's exciting to see the progress in a few of these areas. Our strategy works, and now it's about scaling our efforts with discipline while driving a regular cadence of innovation. Turning to our pipeline, we have five promising assets in development and are formalizing a product cadence intended to expand our addressable market opportunity by launching one product each year. That's an important evolution for us because it builds clinical relevance and reinforces discipline, steady innovation, executed reliably, aligned to the needs of our customers. I'll preview a few of the opportunities we're evaluating. First, we feel particularly good about developing a solution to address myositis, a chronic inflammatory condition that's often evaluated under suspicion of a connective tissue disorder. It's a meaningful clinical predicament within our channel where we've already earned distinction and wouldn't require heavy incremental investment to commercialize. It is easily the most requested offering amongst our clinical base, and if we can develop an offering that meets the needs of our clinicians, we believe demand could ramp quickly. We also continue to evolve important efforts with lupus nephritis and disease activity measures for both SLE and RA, but we'll refine the reimbursement pathway before committing to a timeline there. Additionally, we continue to advance our presence internationally and domestically in the autoimmune field with recent manuscript submissions that highlight solutions under development. Those manuscripts will be posted to our website once accepted. But this continues to be a positive consequence of the efforts of our scientific team to support high-quality science with a practical commercial benefit. Later this month, we're looking forward to the International Autoimmune Conference in Prague, where we expect to present seven abstracts. And even further in the year, we expect additional abstract presentations at ACR. We have lots of activity on this front. With the progress at the organization over the last couple of years, it's clear that we continue to build a company well-positioned to bring innovative products to the rheumatology community and fully expect 2026 to be another exciting year. We are therefore guiding revenue expectations for the full year to be between $70 million to $73 million. I'm going to let Jeff cover the assumptions behind that in a moment, but we believe this reflects continued progress with both volume and ASP contributing to growth, as we position the organization for long-term profitability. To close, I'm very encouraged by our progress, while mindful of the hard work that lies ahead. We've demonstrated strong execution, and that execution has fundamentally strengthened Exogen's long-term position. Today, we are very proud to distinctly serve a vast, unmet need in several autoimmune diseases by delivering timely, actionable answers that can dramatically improve patient lives and create clinical clarity. Looking ahead, we intend to expand our reach across autoimmune disease. With the organization better positioned operationally, we can build a differentiated company that through innovative diagnostic tools addresses multiple high impact clinical dilemmas in one of the largest and most underserved markets in healthcare. As we execute that vision, we're focused on delivering sustainable profitable growth by prioritizing three simple objectives. First, advancing adoption. We're driving volume growth through an upgraded and expanding sales force and generating evidence to support our innovation. Second, continuing to expand ASP. We're continuing to effectively execute our revenue cycle optimizations and market access initiatives while engaging with payers at a level we haven't in the past. And third, driving innovation. We're creating a foundation for a meaningful innovative cadence evaluating select inorganic opportunities, and prioritizing R&D efforts that can support our intent to own the autoimmune diagnostic space. I look forward to updating you on our continued progress in the future, and with that, I'll turn it over to Jeff.

Thank you, John, and good morning, everybody. In 2025, our team continued to structurally reposition the business for profitable long-term growth, and we're pleased to see that work translate into financial results. Namely, we achieved record top-line performance, and that was driven by both growth in testing volume and ASP. While we experienced some ASP headwinds in the second half of the year, we expect this is transitory and are encouraged by the overall momentum we're seeing in the business as we've entered 2026. I'll dive into financial results, starting with revenue. Full-year 2025 revenue reached a record $66.6 million, a near 20 percent increase over 2024, with volume up over 11 percent and training 12-month ASP up over 7 percent. Our investments to upgrade and expand the sales team drove a clear volume inflection in 2025. Quarterly volume stepped up significantly between Q1 and the following quarters, offsetting the typical second half seasonality. We've sustained that volume momentum into the first quarter of 26, underscoring the durability of the commercial improvements we're executing. As John mentioned, the new biomarkers we launched in early 2025 are earning traction. By year end, the combined T cell and RA33 ASP was approaching $80 per test, nearing the roughly $90 contribution we anticipate over time. We also expect the PAD4 biomarkers we introduced late in 2025 to contribute to at least $10 to ASP over time. We continue to focus on optimizing revenue cycle management, commercial payer engagement, and market access initiatives. Notably, in 2025, our revenue cycle initiatives continue to generate out-of-period cash collections with over $1.5 million in cash collected on claims older than 360 days. These initiatives will continue to be priorities as we drive ASP over time to our target of at least 50% of our Medicare reimbursement rate in the $600 to $650 range. The momentum of our pharma services offering continues to be robust. In 2025, the business generated $1.7 million of revenue, up significantly from roughly $100,000 in 2024. Our efforts here are bearing fruit, now with over $4 million in backlog value that we expect to realize over the next two to three years. and we expect that will continue to grow. Moving to gross margin, we reported just over 58% for the full year 2025, compared to about 60% in 2024, reflecting the ASP pressure we experienced in the second half of the year. We continue to aggressively manage COGS by streamlining workflows in the lab and continued efforts to reduce costs across our supply chain, and in fact, COGS Pre-advised CTD tests tracked well below our internal target in 2025, which was a positive offset to the gross margin impact from ASP. Over time, we remain confident the gross margin will progress to the mid-60s as we achieve further ASP expansion, generate scale and fixed cost leverage, and further optimize costs. Turning to expenses, full-year 2025 operating expenses were $53 million, up about 13% compared to 2024, a growth rate meaningfully lower than our 20% revenue growth, indicating early signs of scale in the business. We continue to exercise strong expense discipline, directing incremental spend toward commercial and R&D investments while holding the line on G&A. Breaking out our full-year OpEx, SG&A was $47 million, an increase of 13 percent compared to 2024, with most of that growth coming from our investment in commercial talent and territory expansion. R&D accounted for just over $6 million of OpEx in 2025, growing 16 percent to support the launch of our seven new markers, as well as continued pipeline development. We continue to heavily prioritize our inflection to positive EBITDA and will manage expenses through that lens without compromising the advancement of our new product pipeline. On that note, our adjusted EBITDA loss, which excludes depreciation and non-cash stock comp expense, was $9.8 million for 2025, a moderate improvement over 2024. Please refer to the press release issued earlier today for a reconciliation of our net loss to adjusted EBITDA. Turning to cash, we ended 2025 with cash, cash equivalents, and restricted cash of just over $32 million. Compared to 2024, we reduced our operating cash burn before debt service and benefited from $26 million in net proceeds from our debt refinancing, follow-on offering, and ATM utilization. In 2026, we will continue to focus on maximizing our revenue cycle, beginning the year by holding most claims. Consistent with prior years, this will lead to an increase in AR and a subsequent higher use of cash in the first half of the year, which will normalize in the second half. With over $43 million in cash and accounts receivable at the end of 2025, we expect that our balance sheet provides us the runway needed to support the business's sustainable, positive free operating cash flow. Shifting to guidance for the full year 2026, we expect total revenue of $70 million to $73 million with both volume and ASP growth contributing. The midpoint of this guide assumes high single-digit volume growth for the full year and low single-digit ASP growth from our Q4 2025 in-period ASP rate. With respect to ASP, we continue to believe that trailing 12-month ASP is the most meaningful way to measure progress. That said, we exited Q4 of 25 with an ASP slightly below the level of our trailing 12-month ASP, so we do have some ground to make up. We continue to have strong conviction in the long-term opportunity for ASP because the strategic initiatives that drove the metric from $280 to $441 per test over the last three years continue to progress. The initiatives are structurally improving our ASP profile, and we expect our contribution to become more visible late in 2026 and beyond. As a reminder, ASP expansion directly supports profitability and cash generation. We believe the business will reach break-even adjusted EBITDA and begin to generate cash at roughly an $80 million revenue run rate, with some variation depending on the mix of ASP and volumes. This revenue threshold is up moderately compared to our original target due to increased investment in long-term growth drivers, both commercial and R&D. This also implies an ASP in the high 400s to 500 range, which we now expect will generate gross margin in the low to mid-60s, given that our COGS per test is running favorable to our original target. We're confident in achieving positive adjusted EBITDA as we cross those thresholds. and this remains one of our highest priorities. In closing, we remain focused on creating, sustaining long-term shareholder value through disciplined operational and financial execution, prioritizing profitable growth and R&D innovation that will contribute to a consistent cadence of new product introductions. As John detailed, the progress we've achieved over the past few years is testament to the impact of our strategic priorities and our team's ability to execute at a high level. We intend to continue earning your confidence in 2026 and beyond. And we'll now open the call up for questions.

Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question at this time, please press star 1 on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd 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 for our first question. Thank you. The first question comes from the line of Dan Brennan with TD Cowan. Please receive your questions.

Great, thank you. Maybe just to start off, you just kind of assume now free cash flow positivity, EBITDA positivity around 89. I think the prior guide reflected 70 million. I think you just spoke to some of the issues, the investments in the business. Maybe you could speak to a little bit more now why you think it's the appropriate time to make these investments and to kind of forego a little bit of when you reach that profitability target.

Sure, Dan. This is Jeff. I appreciate the question, and thanks for being on the call. Yeah, the prior break-even revenue level was $75 million, and that was assuming a 6% margin. We've now clearly had more clarity, and we have made investments in the commercial organization, so we've done a commercial expansion. We've returned to what we'll call a thoughtful transition reinvestment in the pipeline. And so we have actually upgraded the team, added some new members on both the commercial and R&D side. So we have ticked up the OpEx a bit. I think the encouraging piece is that we now have a COGS profile that in that high 400s to 500 range, we should be in that mid 60% gross margin. So really the impact here is that we have ticked up a bit on OpEx. But the margin profile of the business, we're actually very encouraged by, particularly as we get ASP back up toward that $500.

Got it. And then maybe, John, you talked about the myositis, talked about demand would ramp quickly. It's the most requested offering. Just kind of where does that sit in terms of a potential kind of commercialization target?

Yeah, good morning, Dan. Thanks for the question. And just one other comment on the cash flow positive question you just asked. One of the reasons I think it's really the right time is primarily because when we achieve cash flow positivity, we want it to be a durable achievement. And I think one of the things we're really proud of, but also shown here in 2025, is that our investments in R&D can pay off. And we can develop enhancements or new products on a relatively reasonable investment level that end up generating revenue and ultimately profits that make a lot of sense. And the clinical impact on top of it is pretty exciting. So that, I think, gives us a lot of encouragement, the strength of the balance sheet as well. But as it relates to myositis, myositis is a very interesting clinical dilemma that quite a few patients who are under evaluation for connective tissue disease are also under evaluation for, can be under evaluation for a form of myositis. And if you have elevated levels of creatinine kinase, which is pretty frequent for these patients, the suspicion grows. And so we're developing a product there. It's been, I guess, one of the benefits of adding Our chief scientific officer, Michael Mahler, to the organization really helped frame this opportunity for us, but also set the development path for us. So we've conducted internal feasibility studies. We're on the path towards validating these assays. It's going to actually be on a few different platforms and a highly comprehensive offering, so pretty excited about the clinical value it'll bring. Our goal is, starting 2027, to have to have this offering ready for the clinic.

Okay. And let me, if I can speak one more in Jeff on the guide for the low single digit ASP increase versus 4Q and that's the annual. So what does that imply for 4Q26? Like what's the trailing 12 month ASP and has there been any more, I don't know, feedback from the field? Are there any other customers that are contemplating a move to institutional pay or do you think that's kind of just that one and done? Thank you.

Yeah, Dan, so we haven't disclosed what our expected trailing 12-month ASP is, and clearly the timing of continued gains, always very difficult to predict, but the way we think about it is that we did see a reset. We all know about that, right? So our end period ASP in the fourth quarter was slightly below what our trailing 12-month, so we have some ground to make up. The expectation is that you know, we'll see that stabilize in the first half of the year. We should start to see incremental gains in the second half of the year.

And then any more color on the institutional pay, like any other customers, or how do we think about that kind of potential risk?

Yeah, I'll take that, Dan. So from my perspective, and I want to be very clear, we view the Northwell situation that we discussed in Q3 as a one-time event. And it was a short-term setback, not a structural change to the business. We've seen no further degradation there. And we've actually gone line by line through each of our client-built business, ensured that we have very good relationships there and continue to strengthen those over time. So from our perspective, the one-time event, we wanted to be extremely transparent and with folks so that they understood the impact because it was reasonable at the time. But from our point of view, you know, our growth initiatives on the volume side have already made up for any loss volume there. And our initiatives on the ASP side continue to make up for that loss. So we feel good about the trajectory we're on. It was a one-time setback.

Terrific. Thank you.

Our next question is from the line of Kyle Mixon with Canaccord Genuity. Please receive your questions.

Hey, guys. Thanks for the questions. On the last point there about the direct bill, you know, accounts, can you first frame the volume and the revenue mix from those accounts at this point, like maybe kind of exiting like 25 or kind of early in 26? And then I think like the Northwell volume sort of like picking back up and rebounding and just sort of that whole transition process was sort of a theme that sort of affected your view on volume growth, at least when we spoke in January. So could you just provide an update on that as well? Thanks.

Yeah, good morning, Kyle. Thanks for the question. So to frame out the volume, it was 2% of overall volume at the time, okay? So that was in the middle of summer. From a revenue impact, I guess the closest we've got to say is it – It was about a $25 contributor to ASP. So we had the one-time setback of about $25. Given that we point people to a trailing 12-month number, it'll take roughly four quarters to fully flush through that metric, but that would be the overall impact to the business. I think from our standpoint, we have the best product on the market, and you see that our team's able to find ways creatively to create get clinicians what they want, which is access to the advice platform. So that's what they've been doing over the last six months. Very comfortable with how that's progressing. Still work to do, but I think we're on a great track. I mean, if you look at Q4, we had 22% volume growth when you compare it to Q4 of last year. And so from our standpoint, it was a headwind, I guess, despite that headwind, still had that type of growth. And so I don't, So very comfortable with what our team's accomplishing.

Okay. And then just on North Pole specifically, just is that kind of transitioning well and the volume's ramping up and everything?

Yeah, exactly.

Okay. All right. Sounds good. And then with the ASP tailwinds, I think you mentioned like three factors that give you some confidence for this year. I think the first was like RCM execution. Second was the new markers, continued traction there. And then the ACR is now advocating... For you guys, for VICE, I think you have some specific plans to drive medical policies with players as well, but that's been a multi-year process. Can you just kind of elaborate a bit on how ACR support is helping you now and how that kind of accelerates the business going forward?

Absolutely. So a few years ago when I joined the company, I set about trying to really understand which physician body, if you will, within this space would be the right one to advocate for us. And ACR would be the pinnacle organization, but we as an organization didn't fully understand exactly how that group operated and who the right people were to have relationships with. From then, we just set about trying to meet people, figure out the inner workings, and establish a strategy around that. And it's all culminated in in really developing deep relationships with some of the clinicians on the Committee for Rheumatologic Care. It's a sub-component of ACR, and I flew out to Kentucky, rural Kentucky, wonderful trip, actually, this past December, met with the head of that committee. Also, personally, I've met with other members of the committee here early to start the year. And really, it's an education campaign. They had familiarity with the advice platform. They know that their constituency generally prefers this platform. And so they want to help, but they didn't understand exactly how. And so those meetings were designed to figure that part out. we now, and me personally, have, I think, very strong relationships with some of the top people within ACR and have established the appropriate communication path for rheumatologists throughout the U.S. to ask for ACR advocacy into specific plans, commercial insurers. And so, over the last couple of months, we've had quite a few physicians write in, give very specific cases around which patients they're asking for help with. And ACR has confirmed to us on multiple occasions that they're now advocating into certain medical directors. And this group speaks on a regular basis with medical directors at the various commercial insurers. And so that pipeline has been established. That education has taken some time, but now people understand exactly why plans are doing what they're doing from a medical policy standpoint, and they're very willing to help. So I think that was all extremely encouraging, and we're working in concert, which is a lot of fun now. So we'll see how that impacts our business over the next year or two, but at least ACR has been willing so far to conduct that advocacy.

Okay, that was great, John. Thanks for that. And then, Jeff, I know I think Dan touched on the cash flow, the break-even targets now and stuff, but if you look at consensus estimates for some of the later quarters in 26, it's almost at $20 million or so. Now it annualized to $80 million. But now it just seems like you're guiding to not hitting break-even targets. in the second half of the year, so it's probably more of a 26 event. I mean, do you think, is there any way to kind of provide a little bit more like refined timing on when either kind of EBITDA positive or cash flow positive could occur in the next two years?

Yeah, and I'll let John chime in here as well. So Kyle, I think you're clear, we said 80, we've guided to 70 and 73. So it would certainly apply for the full year. We wouldn't get there, but ultimately, Depending on how successful we are and continue to drive ASP closer to that high 400s, 500s, that'll dictate the timing of when we inflect. Not saying it's not in the realm of possibility for this year. The idea would be that we would get closer to that high 400s, high 500s as we enter 2027 and inflect sometime during 2027. If we are more successful in driving ASP higher or we get more traction on volume, that we could pull that in earlier.

Maybe what I'll add, Kyle, is we've seen volume growth exceed our expectations. On the ASP side, it's always been challenging to project or forecast the trajectory of that metric, both in timing and magnitudes. So we've remained conservative on that aspect. So the guide incorporates, as Jeff mentioned, low single-digit growth on the ASP side and high single-digit growth on the volume side. We're tracking ahead of that to start the year. But we think that right now where we're sitting, it's a pretty good balance of ambition and prudence in the guide. And we'll have to see how the year plans out. And generally, we're pretty decent at trying to beat expectations, but it's always tough to know. Yeah. Okay. All right. Thanks, guys. Appreciate the time.

Our next question is from the line of Bill Vanilla with Craig Helm. Please proceed with your questions.

Hey, guys. Thanks a lot. I'm going to push a little more on some of the things that were talked about, just the The ASP, I know you like to talk about it on a trailing 12 basis, and I get that, but with the changes that have been happening, it's really hard to get a true sense of the trend when you do it that way, and you don't give enough data in the release to sort of calculate a Q4 ASP. You also sort of use that as a basis for thinking about guidance. So with all that in mind, can you tell us a couple of things? Maybe what is the actual calculated ASP in the fourth quarter, and then do we think this is the low point?

Yeah, Bill, thanks for the call, or thanks for the question. We don't want to get in the habit of disclosing in-period ASP, but completely understand the challenge here. There was a reset. We saw the in-period ASP really drop starting in Q3 in that kind of 430 range. That sustained into the second half of the year, or through the second half of the year. So the way we think about it is that we've seen a reset right to about that 430, and then we expect that we'll grow it from there. So hopefully that's helpful. Like I said, we're not really gonna get in the habit of disclosing in period ASP because there are quarter to quarter fluctuations that can drive it up or down any given quarter. But we understand the question, we understand the need for clarity. So I think the assumption is we ended right around 4.30 and we'll grow it from there.

Okay, and I guess Just is it safe to say then there wasn't a dramatic decline from Q3 to Q4 sequentially?

Very safe to say that, Bill. In fact, when you take a look at the client bill loss that we talked about, as we talked about, that was around a $25 annual impact. But in the training 12-month ASP, you only see a $6 or so impact every quarter, so it's cumulative. So we won't see the full effect of that really until the end of the second quarter. So it's encouraging that we didn't see additional degradation in Q4 because we've seen gains in other areas.

Okay, that's helpful. And then just, I guess, trying to understand the the guide a bit better. So first of all, just want to make sure I heard what you said so that I can get the numbers to tie. When you say that the midpoint is high single digit volume and then low single digit ASP, you're talking about low single digit ASP relative to sort of the Q3, Q4 level or trailing 12 or what is the metric there?

Yeah, that's right. Great question, Bill. It's relative to where we ended, so relative to the second half ASP level.

Okay. Okay. And, okay, that's helpful. So probably all in, I mean, the guide, the mid-point 7%, if you're high single-digit, assuming all in on a year-over-year basis, we're still talking about ASP being down for the year then?

Yeah, no, I think if you were to apply this low single digit to the exit rate, and I think, you know, like I said to Dan, we didn't disclose our expected trailing 12-month ASP, but I think it's safe to assume that we would end the year with a trailing 12-month ASP that is comparable, hopefully slightly above where we ended 2025. Okay.

And then the last thing is just trying to understand on the gross margin pressure. I mean, from a trailing 12-month basis or even an absolute basis, the ASP is really you know, not down. It's up on a trailing 12-month basis, and it's, you know, flat to up on an actual basis versus Q4 of last year, and yet the, you know, the margin is down, you know, almost 700 basis points. I guess I'm just... I'm assuming that what's happening there is you added a bunch of biomarkers, and because you're not getting paid what you hope to get paid on those biomarkers, that even though your cost is better than your expectations, that's kind of what is causing the gross margin pressure, because the ASP alone just doesn't seem to make sense to explain it.

Yeah, Bill, I think you're spot on, right? So we added seven new biomarkers. That added incremental costs. Our COGS per test is still running, you know, well below what our target was. So that ASP pressure had less of an impact on the gross margin because we overperformed on the COGS. But we did increase our COGS per test relative to the seven new biomarkers that we added. So you're absolutely right.

Okay, that's really helpful. Thank you so much for all of that. Thank you.

Our next question is from the line of Mark Massaro with BTIG. Please proceed with your question.

Hey, guys. Thank you for taking the questions. Yeah, there's been a lot asked about ASP. I do appreciate you quantifying the lost client bill account as a $25 million full-year impact to ASP's. But I wanted to just maybe dig in on that last topic you guys just hit in the Q&A, which is on the new biomarkers. Can you just give us a sense for where are you now in terms of trying to get paid on those new biomarkers? Obviously, the cost is there, but what I don't know is how well you've been making traction to get paid on the new markers, or is this something that you think is really a 2026 or 2027 initiative?

Sure, Mark. Yeah, thanks for the question. So, yeah, when we launched the new biomarkers at T-cell and RA33 beginning of January, our expectation, and we still have this expectation, is that we'd be at about a $90 ASP. That was our accrual in Q1. We We, based upon actual cash collection throughout Q1 and Q2, as you recall, we brought that accrual down to the mid-70s. We've since, through revenue cycle management, have been successful in continuing to drive that up. And so now it is approaching that $80 range. So we still think that, you know, throughout the course of 2027, that we'll be able to drive that up to the $90 range. The other piece of it is the anti-PADD4 biomarkers that we released in the fourth quarter, or actually late third quarter. We expect that will have at least a $10 contribution. We would expect that to grow even beyond that throughout the course of 26.

Okay, that's helpful. And then I believe there are, I think there's a local coverage determination in progress. for rheumatologic disease. Can you just speak to any visibility you have on where that is and what that could look like if it does go through? How do you think that might impact your ASPs going forward?

Thanks for the question, Mark. So we maintain regular contact with the team at Moldex. That would be the group that's currently constructing and ultimately will issue a draft LCD related to our product. Our understanding is similar to what you just framed out, and that is that it'll be more broad than specific to our test alone and likely cover testing and rheumatologic conditions. That will be a long time coming. Our original submission was in the summer of 2022, and there's been some nuances there that I won't bore people with. But from our perspective, it remains in the queue, on track, and we don't have a ton of clarity as to when the draft ultimately comes out. We maintain our reimbursement from Medicare and Meridian, our home MAC, we've had no disruption there and continue a great relationship with that group as well. So just waiting for that to come out. Ultimately, the language that is specifically in that LCD will be very important and critical to us as it relates to the advice platform, but also future products in our pipeline. Because if it's a more broad LCD, I think we're one of the best positioned companies to develop new products underneath that umbrella. And so, you know, again, the language will really matter. And if it covers portions of rheumatoid arthritis, if it takes a look at other aspects of SLE and maybe even other conditions, I think we've got the right pipeline to feed into that.

That's great. Maybe just to clarify that last point, do you think it's fair to say that if the LCD does go effective that you're effective pricing for what you're billing will stay the same?

That is true. The LCD will only relate to basically memorializing our coverage in a public document and so that will likely help us with Medicare Advantage. It may even help us with some commercial insurers having that. out there, but pricing is independent of that, and we have our own PLA code. It's on the clinical lab fee schedule, so pricing will not change as a result of the LCD.

Okay, that's great, and then maybe just last one. You know, you've talked about having some conversations with health plans, and you've got meetings scheduled. I'm just curious, are any of these conversations around perhaps needing to furnish additional data, or is this more perhaps a discussion around in-network pricing? I'm just curious what some of the factors might be, you know, when you're having conversations, can you give us a flavor, high level of just what these plans are asking about?

Yeah, thanks for the opportunity. So, Specifically, medical directors, at least the calls that I've been on, and I've been on, I believe, almost every single one of them, they want to know how badly do the clinicians want the test and how much is it impacting their clinical care. Are they changing decisions, right? And are patients experiencing improved outcomes as a result? So we have the data that demonstrates positive impact in each of those areas, and it's tying it all together for them. We also recognize that Some of the data was published as far back as 2012, 2014. And so expecting medical directors to do a 10-year look back on your data is probably, we can make it easier. And so we've actually developed and submitted now a systematic review tying together what we believe is one of the largest evaluations of diagnostics in the systemic lupus community, tying together the performance of the VISE across around 10 different studies. So that manuscript took us about a year of working on. It basically builds the chain of evidence for everything that question-wise we're hearing from medical directors and has been submitted for publication. But, you know, I think medical directors are looking for contemporary data that continually shows the utility for patients and clinicians. And we need our... R&D team is very aware of that right now and continues to develop manuscripts that address that. So we don't get specific asks for studies right now, but we're not waiting either.

Understood. All right, guys. Thanks for the time.

Our next question is from the line of Matthew Parisi with KeyBank Capital Markets. Pleasure to see you with your questions.

Hi, yes, this is Matthew Parisi on for Paul Knight at KeyBank Capital Markets. I was wondering if you could give a bit more detail on the recent Salesforce ramp, how that's coming along, and when we can expect to see the full impact of the additions.

Yeah, good morning, Matthew. Appreciate the question. So where we sit right now is we have 45 sales territories across the U.S. This is up from 40 basically at the start of 2025, middle of 2025. So we've expanded a little over 10%. And the challenging thing here is finding the right people. That's incredibly critical to us. We're in a service industry. The folks who represent our product actually become part of the product. And it's highly impactful on our brand and reputation. So we take our time there. We have a very nice pipeline of candidates, but it can be our process is very thorough, right? We meet people in person, multiple folks engage with the candidate. I meet with every single candidate myself. So that process has generally worked out for us. And what we've seen are five additions to our team that are just superb individuals, really high caliber folks that have come in and done exactly what we expected, which is conduct themselves very professionally and learn the product and get after it. What we've seen is some folks, just given their background and experience, have a shorter learning curve, whether they know rheumatology or diagnostics specifically. And so those folks hit the ground running. Others come from different walks of life and may take a little bit longer. Learning curve may be a little bit steeper there. We're very patient as long as you have the character traits we're looking for. So over the second half of last year, we've really worked and invested in training those folks. In the last training session, we flew everyone here back to San Diego for a second phase of training after they've been in the field for a little bit, had familiarity with the product, and we really worked through that next level of clinical consultation and how you can be a true partner to the clinic. So that really occurred as recently as December. we expect at least to become proficient with the lupus portion of the clinical consultation. That to happen within about a six-month period of time. So I would expect you really start to see people hitting their strides here in the spring. But more broadly to our entire sales organization is the rheumatoid arthritis component to selling here. And given that we now have last year we launched two waves of product innovation related to rheumatoid arthritis. Our whole team has had to adapt in this sense. And so we've continued to build marketing material. There's obviously a feedback loop here, but that's a growing opportunity for us that, to be honest, I'm a little unsure exactly how long it will take us to recognize the full opportunity. I hope it's a ways out because we're getting some very positive feedback and these patients really need help. So we'll see over time. But I would expect spring to summer, you really start to see those territories become more independent. And then at that point, those new territories it is, at that point, we'll look to our next wave of expansion.

All right. Thank you. So then we can expect, well, maybe not more territories being added in 26. We could expect potential more additions to the sales force itself.

No, those are one and the same to us. And I think the way I view it is, is just I'm not going to commit to an exact expansion plan, especially because we want to find the right people. We want to find the right opportunity throughout the U.S. And once we feel that we have adequately supported the folks we added recently, then we'll move forward. So it's really predicated on those factors internally.

All right, yeah, that sounds great. And then if I could just squeeze in one more. I was just wondering, you previously provided the full year test volume number, and I'm wondering if you guys could give that today.

Yeah, very proud of how the full year progressed. It's 137,004 advised CTD tests. So we broke the 137,000 mark. And, again, a lot of that based on second-half momentum. Very proud of the team there.

Thank you. I appreciate the questions. And congrats on the quarter.

Thanks, Matthew. The next question is from the line of Andrew Brackman with William Blair. Please proceed with your questions.

Hey, guys. Good morning. Thanks for taking the questions.

Maybe just pick up on some of the volume commentary there. Any way to sort of break out the growth that you saw in Q4 and for the full year 2025, just in terms of new account ads versus maybe utilization increases or same-store sales? On the volume side there, I'm just trying to sort of get a sense of the specific drivers. And then I guess somewhat related to that, I would assume that you have some sort of halo effect from these new markers that you launched throughout 2025. So I know you probably can't be all that specific, but any sort of way to sort of estimate how much of the growth that you saw for the full year came from sort of this increase in engagement that those new markers provided for you? Thanks.

Good morning, Andrew. Thanks for the question. So to try to give you some precision here, we finished 2024 with 2,370 ordering physicians. That was our run rate, if you will, which was relatively flat from 2023, about the same. Here in 2025, we finished the year with 2,690, basically. So we're up you know, several hundred, growing our physician base. Our orders per physician are up. So we're seeing growth by expansion of the number of physicians utilizing the test, but also greater penetration within each account. So very happy with those metrics. And, again, that's part of the reason why I'm saying I think our sales team is killing it because they're really doing a fantastic job working extremely hard, but also the test is – is providing strong clinical value. And I think that's great evidence of it. As it relates to the halo effect, great question. So the way to answer this, I believe, is really through the conversations I've had with the team. And from what I can tell, I think we're very early innings in terms of selling into the rheumatoid arthritis space. Clinicians have had positive interactions generally across the board, across the U.S., but it's still something that they're using for those tough to find patients, patients where they have a high suspicion of multiple disorders, that type of thing. And I think what it'll take is more and more experience with the product, identifying patients that have this condition and then ultimately treating them and ending up with a positive outcome. So I think more to be seen there. I think the halo effect gets you in the door But I think we're still very early innings in terms of actual growth related to it.

Okay, I'll leave it there. Thanks, guys.

Thanks, Andrew. Thank you. This now concludes our question and answer session. I'd like to turn the floor back over to John and Bali for closing comments.

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