XGN — Exagen Inc.

Exagen Inc. Q3 2025 Earnings Call Summary

1. Key Financial Results and Metrics

• Revenue: Q3 revenue reached $17.2 million, marking a nearly 40% increase year-over-year and the highest quarterly revenue in the company’s history. Year-to-date revenue grew 19% to approximately $50 million.
• Testing Volume: Volume for AVISE CTD testing increased by 15% year-over-year, with Q3 being the highest recorded for a third quarter.
• Average Selling Price (ASP): Trailing 12-month ASP for CTD testing rose to $441, a 9% year-over-year increase. However, ASP expansion in the second half of the year has been slower than anticipated.
• Gross Margin: Gross margin for Q3 was just over 58%, up 260 basis points from Q3 2024. Year-to-date gross margin was slightly above 59%.
• Net Loss: The net loss for Q3 was $7 million, compared to $5 million in the same period last year. Adjusted EBITDA loss improved to $1.9 million from $4 million year-over-year.
• Cash Position: The company ended Q3 with $35.7 million in cash and cash equivalents, up from $30 million at the end of Q2.

2. Strategic Updates and Business Highlights

• Product Launch: Exagen launched assays for anti-PAD4 antibodies, enhancing its rheumatoid arthritis biomarker portfolio. This launch is expected to differentiate their offerings, although immediate revenue impact is anticipated to be modest.
• Sales Expansion: The company expanded its sales territories from 42 to 45, with positive contributions from new regions. The focus remains on profitable growth and effective territory management.
• Pharma Services: Revenue from the Pharma Services business reached nearly $800,000 in Q3, with a year-to-date total of $1.2 million, significantly up from $100,000 in 2024. The order backlog stands at $3.5 million.

3. Forward Guidance and Outlook

• Revenue Guidance: Exagen expects to deliver between $65 million to $70 million in revenue for the full year 2025, with the potential to be cash flow positive at the high end of this range. However, sustained cash flow positivity may be pushed to 2026 due to ASP challenges.
• ASP Expectations: The company aims to achieve ASP growth through enhanced revenue cycle management and payer engagement, though the trajectory has been slower than expected.

4. Bad News, Challenges, or Points of Concern

• ASP Headwinds: The loss of a significant high ASP direct bill account has negatively impacted current ASP levels. The transition to standard commercial insurance has introduced challenges in maintaining ASP.
• Higher Denials: The company is experiencing higher-than-expected denial rates for new biomarkers, attributed to medical policy and coding issues. This has delayed revenue recognition and ASP growth.
• Operational Challenges: While the company is optimistic about future ASP gains, the realization of these gains is taking longer than anticipated, which may affect short-term financial performance.

5. Notable Q&A Insights

• Sales Rep Productivity: New sales representatives typically take 6 to 9 months to reach full productivity. The company remains committed to expanding its sales force as opportunities arise.
• ASP Projections: The company expects to reach a target ASP of $500, with longer-term aspirations of $600, contingent on successful revenue cycle management and payer negotiations.
• Volume Growth: Despite challenges, Q3 volume growth was strong, with expectations for continued growth into Q4, although some seasonal decline is anticipated due to holidays.
• Direct Bill Account Impact: The transition from direct billing to commercial insurance for a major client initially caused a drop in volume, but efforts to restore access have shown positive results.

This summary encapsulates Exagen's financial performance, strategic initiatives, forward guidance, and challenges faced during Q3 2025, providing a comprehensive overview for stakeholders.