Exagen Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Exagen is a commercial-stage diagnostics company focused on autoimmune disease testing, primarily its AVISE product portfolio. Financial statements are unaudited.
Financial performance
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | $14.4 million | $11.2 million |
| Gross profit / margin | $8.6 million / 59.6% | $5.3 million / 47.2% |
| Operating expenses | $17.4 million | $18.9 million |
| Loss from operations | $3.0 million | $7.7 million |
| Net loss | $3.4 million | $7.7 million |
| Net loss per share | $0.19 | $0.44 |
| Cash used in operations | $9.0 million | $9.7 million |
Revenue rose 28.4%, mainly from improved average selling prices and cash collections for tests performed in prior periods; AVISE CTD test volume fell to 30,263 from 37,312, a decline of about 19%. AVISE CTD represented 90% of revenue, versus 87% a year earlier. Revenue included a $2.5 million increase from revised estimates for prior-period performance obligations, compared with $0.3 million in Q1 2023.
Gross margin improved as revenue increased and materials costs declined. SG&A fell 11.3%, primarily reflecting lower employee-related costs following reduced headcount. R&D decreased 6.0%. Interest income declined to $0.2 million from $0.7 million, mainly because cash balances were lower.
Financial position and liquidity
- Cash and cash equivalents were $27.3 million at March 31, 2024, down from $36.5 million at December 31, 2023. Cash, cash equivalents and restricted cash totaled $27.5 million.
- Accounts receivable increased to $10.9 million from $6.6 million. Management attributed the increase and operating cash use in part to delayed claim submissions under revenue-cycle initiatives.
- Total assets were $50.8 million and stockholders’ equity was $20.0 million. Accumulated deficit was $282.6 million.
- Borrowings were $19.5 million, net of discounts and issuance costs, including $0.3 million current and $19.3 million non-current. The Innovatus term loan has an effective interest rate estimated at approximately 11%, matures December 31, 2026, and is secured by substantially all assets, including intellectual property. The company reported covenant compliance at March 31.
- Management believes available resources and anticipated revenue can fund obligations for at least 12 months from the filing date, but says additional funding may be needed to execute its plans. The company has a $150 million shelf registration and a $50 million ATM sales agreement; no ATM shares had been sold as of March 31.
Outlook, risks and notable items
- No specific revenue or earnings guidance was provided. Management expects continuing losses in the near term; it expects near-term costs of revenue and R&D to remain relatively consistent year over year, while SG&A is expected to increase year over year due to planned headcount and personnel costs.
- Management plans to add TC4d, TIgG and TIgM biomarkers to AVISE Lupus and new seronegative-RA biomarkers to AVISE CTD toward the end of 2024. It expects these additions to support test differentiation and demand, but the expected financial benefit is not quantified.
- Reimbursement and collections remain key uncertainties. Medicare coverage for AVISE Lupus is not assured; CMS’s January 2024 coverage article places multi-analyte proteomic testing in the MolDX technical assessment process. The company also reported denials under certain commercial payor policies.
- The company said it planned to hold claims in the first half of 2024, which it expects to raise receivables and accelerate cash declines, with working-capital levels expected to return to typical levels by year-end.
- FDA’s final rule on laboratory-developed tests was released April 29, 2024, after quarter-end. The company is evaluating the potential effect; compliance could require additional regulatory submissions or clinical work and could disrupt sales. The implementation timeline and any legislative or litigation changes remain uncertain.
- Supply concentration is material: about 92% of testing supplies in Q1 came from two suppliers. A supplier agreement includes minimum reagent purchases of $8.0 million in 2024 and $9.2 million in 2025.
- A relator’s motion to amend a qui tam complaint remains pending, along with other motions. Exagen previously paid $0.7 million plus interest under a DOJ settlement concerning historical specimen-processing arrangements; the company says its participation in federal healthcare programs is unaffected.
- An April 12, 2024 fourth amendment to the loan agreement is listed as an exhibit, but its terms are not described in the filing text provided here.
Important facts for investors to verify
- Whether the revenue increase is sustainable given lower AVISE CTD volume and the $2.5 million prior-period estimate adjustment.
- How claim-submission timing, reimbursement denials and collections affect receivables and cash burn through the rest of 2024.
- Coverage and reimbursement developments for AVISE Lupus, including the MolDX assessment and commercial payor policies.
- Implementation requirements and potential commercial impact of the FDA’s LDT final rule, as well as the timing and results of planned biomarker launches.
- The terms and implications of the April 2024 loan amendment, and the company’s ability to meet debt covenants and fund operations without dilutive financing.
- Developments in the pending qui tam litigation and the company’s ability to maintain continuity of supply from its concentrated supplier base.