Business Context and Reporting Period
Company: Exagen Inc. (XGN)
Filing Type: Form 10-K (Annual Report)
Reporting Period: Fiscal year ended December 31, 2025
Business Overview: Exagen is a medical technology company focused on the design, development, and commercialization of testing products under the AVISE® brand for the differential diagnosis, prognosis, and monitoring of complex rheumatic and autoimmune diseases, including Systemic Lupus Erythematosus (SLE) and Rheumatoid Arthritis (RA). The company operates a single reporting segment and performs all testing in its CLIA-certified laboratory in Vista, California.
Key Financial Metrics
| Metric (in thousands) | 2025 | 2024 |
|---|---|---|
| Revenue | $66,575 | $55,641 |
| Cost of Revenue | $27,776 | $22,529 |
| Gross Profit | $38,799 | $33,112 |
| Gross Margin | 58.3% | 59.5% |
| Operating Expenses | $52,869 | $46,748 |
| Net Loss | $(19,951) | $(15,115) |
| Cash and Cash Equivalents (Year End) | $32,220 | $22,036 |
| Accumulated Deficit | $(314,282) | $(294,331) |
Debt and Liquidity: As of December 31, 2025, the company held a senior secured delayed draw term loan facility with Perceptive Credit Holdings IV, LP. An initial tranche of $25.0 million was funded in April 2025, with $19.7 million used to repay prior debt. The facility allows for up to an additional $40.0 million in tranches subject to revenue milestones. The company maintains a minimum unrestricted cash balance covenant of $3.0 million.
Material Changes vs. Prior Period
- Revenue Growth: Revenue increased 19.7% to $66.6 million, driven by an 11% increase in testing volume and a 7% increase in Average Selling Price (ASP) to $441 per test.
- Product Enhancements: In 2025, the company added eight new biomarkers to the flagship AVISE® CTD panel, including T-Cell Biomarkers for SLE and specific biomarkers for seronegative RA, enhancing clinical utility.
- Expense Increases: Operating expenses rose 13.1% due to increased sales commissions, salaries, and R&D costs associated with validating new biomarkers. Interest expense more than doubled to $4.3 million due to the new Perceptive Term Loan Facility.
- Debt Restructuring: The company fully repaid its prior loan agreement with Innovatus Life Sciences in April 2025, incurring a $0.3 million loss on extinguishment of debt.
- Capital Raises: The company raised approximately $18.6 million in a public offering in May 2025 and $3.4 million through an At-The-Market (ATM) program.
Guidance, Outlook, and Risks
Management Commentary: Management reports a successful operational turnaround initiated in late 2022, resulting in revenue growth and gross margin expansion. The company expects to deliver continued revenue growth and positive Adjusted EBITDA within the next 12-18 months. Q3 and Q4 2025 volumes were the highest ever recorded for those periods.
Outlook: The company anticipates continued investment in R&D and salesforce expansion. It expects cost of revenue to increase in the short term due to the addition of new biomarkers to the AVISE® CTD test.
Risks and Contingencies:
- Reimbursement: Revenue depends heavily on third-party payor coverage. The company faces challenges with commercial payor claim processing and denials. Medicare coverage for the AVISE® Lupus test under a new PLA code is pending a Local Coverage Determination (LCD).
- Profitability: The company has a history of losses and an accumulated deficit of $314.3 million. It expects to incur additional losses in 2026.
- Supply Chain: The company relies on sole suppliers for critical reagents and equipment. Approximately 49% and 40% of diagnostic testing supplies in 2025 were purchased from two suppliers.
- Regulatory: While the FDA's final rule on Laboratory Developed Tests (LDTs) was vacated by a federal court in March 2025, uncertainty remains regarding future federal oversight.
Investor Verification Checklist
- Reimbursement Status: Verify the status of the Local Coverage Determination (LCD) application for the AVISE® Lupus test with Medicare and the success rate of appeals with commercial payors.
- Debt Covenants: Confirm compliance with the Perceptive Term Loan Facility covenants, specifically the quarterly net revenue milestones required to draw additional tranches.
- Supplier Concentration: Assess the risk mitigation strategies regarding the two suppliers that provided 89% of diagnostic testing supplies in 2025.
- ASP Sustainability: Evaluate whether the 7% ASP increase is sustainable given payer headwinds and the gradual ramp-up of new biomarker reimbursement.
- Liquidity Runway: Review the company's cash burn rate against the $32.2 million cash balance to validate the 12-month liquidity runway assertion.