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Exagen Inc. (NASDAQ:XGN) Q1 2021 Results Conference Call May 11, 2021 4:30 PM ET Company Participants Mike Cavanaugh - IR Ron Rocca - President and CEO Kamal Adawi - CFO Mark Hazeltine - COO Conference Call Participants Chris Lin - Cowen Kyle Mikson - Cantor Fitzgerald Mark Massaro - BTIG Paul Knight - KeyBanc Operator Greetings, ladies and gentlemen, and welcome to the Exagen Inc. First Quarter 2021 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I woul ...

Part I. Financial Information [Item 1. Condensed Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Condensed%20Financial%20Statements%20%28unaudited%29) This section presents Exagen Inc.'s unaudited condensed financial statements, including balance sheets, operations, equity, and cash flows [Condensed Balance Sheets](index=3&type=section&id=Condensed%20Balance%20Sheets%20as%20of%20March%2031%2C%202021%20and%20December%2031%2C%202020) Total assets and stockholders' equity significantly increased, driven by a substantial rise in cash and equivalents from financing | Metric | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | | :-------------------------- | :------------------------------ | :------------------------------- | | Cash and cash equivalents | $118,050 | $57,448 | | Total assets | $137,522 | $78,375 | | Total liabilities | $36,052 | $36,536 | | Total stockholders' equity | $101,470 | $41,839 | [Condensed Statements of Operations](index=4&type=section&id=Condensed%20Statements%20of%20Operations%20for%20the%20Three%20Months%20ended%20March%2031%2C%202021%20and%202020) Revenue increased, but the net loss widened due to higher operating expenses, particularly in research and development | Metric | Three Months Ended March 31, 2021 (in thousands) | Three Months Ended March 31, 2020 (in thousands) | | :------------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | | Revenue | $10,587 | $9,584 | | Total operating expenses | $16,154 | $14,805 | | Loss from operations | $(5,567) | $(5,221) | | Net loss | $(6,209) | $(5,563) | | Net loss per share, basic and diluted | $(0.48) | $(0.44) | - Research and development expenses significantly increased from **$634 thousand** in Q1 2020 to **$1.403 million** in Q1 2021[11](index=11&type=chunk) [Condensed Statements of Stockholders' Equity](index=5&type=section&id=Condensed%20Statements%20of%20Stockholders%27%20Equity%20for%20the%20Three%20Months%20ended%20March%2031%2C%202021%20and%202020) Stockholders' equity significantly increased due to a public offering of common stock, raising substantial capital despite a net loss | Metric | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | | :-------------------------------- | :------------------------------ | :------------------------------- | | Total Stockholders' Equity | $101,470 | $41,839 | | Additional Paid-In Capital | $288,951 | $223,115 | | Accumulated Deficit | $(187,498) | $(181,289) | - Issuance of stock in a public offering, net of issuance costs, contributed **$64.71 million** to additional paid-in capital[15](index=15&type=chunk) [Condensed Statements of Cash Flows](index=6&type=section&id=Condensed%20Statements%20of%20Cash%20Flows%20for%20the%20Three%20Months%20ended%20March%2031%2C%202021%20and%202020) Net cash increased substantially, primarily driven by significant proceeds from a public offering, offsetting operating and investing cash use | Cash Flow Activity | Three Months Ended March 31, 2021 (in thousands) | Three Months Ended March 31, 2020 (in thousands) | | :------------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | | Net cash used in operating activities | $(4,312) | $(3,301) | | Net cash used in investing activities | $(167) | $(84) | | Net cash provided by (used in) financing activities | $65,081 | $(51) | | Net change in cash, cash equivalents and restricted cash | $60,602 | $(3,436) | | Cash, cash equivalents and restricted cash, end of period | $118,150 | $68,748 | - Proceeds from the issuance of common stock in a public offering, gross, amounted to **$69.144 million** in Q1 2021[17](index=17&type=chunk) [Notes to Unaudited Condensed Financial Statements](index=7&type=section&id=Notes%20to%20Unaudited%20Condensed%20Financial%20Statements) Detailed disclosures supporting unaudited financial statements, covering accounting policies, financial instruments, and COVID-19 impact [Note 1. Organization](index=7&type=section&id=Note%201.%20Organization) Exagen Inc. focuses on autoimmune disease diagnostics, has a history of losses, but believes existing capital is sufficient for 12 months - Exagen Inc. is dedicated to transforming care for patients with debilitating and chronic autoimmune diseases through timely differential diagnosis and optimized therapeutic intervention[20](index=20&type=chunk) - The company has incurred recurring losses and negative cash flows from operating activities since inception, with an accumulated deficit of **$187.5 million** as of March 31, 2021[21](index=21&type=chunk) - Management believes existing capital resources will be sufficient to fund obligations for at least **twelve months**, but additional funding may be needed for growth and will be sought through stock sales, debt financings, or other strategic transactions[21](index=21&type=chunk)[22](index=22&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=7&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) This section outlines interim financial statement presentation, key estimates, revenue recognition, fair value, and recent pronouncements - The unaudited interim condensed financial statements are prepared in accordance with SEC rules and GAAP, requiring management to make estimates and assumptions[23](index=23&type=chunk)[24](index=24&type=chunk) Significant Payors as Percentage of Total Revenue | Payor | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :---------------- | :-------------------------------- | :-------------------------------- | | Medicare | 18 % | 25 % | | Blue Shield | 12 % | 12 % | | Medicare Advantage | 12 % | 13 % | | United Healthcare | *Less than 10% | 10 % | Revenue Disaggregation by Payor/Customer Category (in thousands) | Category | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Healthcare insurers | $6,027 | $6,062 | | Government | $2,009 | $2,245 | | Client | $1,965 | $1,082 | | Other | $286 | $195 | | Janssen (SIMPONI®) | $300 | $0 | | **Total revenue** | **$10,587** | **$9,584** | - The company recognized approximately **$0.3 million** in co-promotion revenue from the Janssen Agreement for the three months ended March 31, 2021, compared to no revenue in the prior year period[44](index=44&type=chunk) - Total non-cash stock-based compensation expense was **$912 thousand** for Q1 2021, up from **$431 thousand** in Q1 2020[98](index=98&type=chunk) - The company adopted ASU 2019-12 (Simplifying the Accounting for Income Taxes) on January 1, 2021, with no material impact, and elected to delay adoption of ASU 2016-02 (Leases) until January 1, 2022, as an emerging growth company[58](index=58&type=chunk)[59](index=59&type=chunk) [Note 3. Other Financial Information](index=13&type=section&id=Note%203.%20Other%20Financial%20Information) This note details prepaid expenses, property and equipment, and accrued liabilities, showing minor shifts between periods Prepaid Expenses and Other Current Assets (in thousands) | Category | March 31, 2021 | December 31, 2020 | | :-------------------------------- | :------------- | :---------------- | | Diagnostic testing supplies | $921 | $1,203 | | Prepaid maintenance and insurance | $1,892 | $2,229 | | Other prepaid and other current assets | $220 | $659 | | **Total** | **$3,098** | **$4,159** | Property and Equipment, Net (in thousands) | Category | March 31, 2021 | December 31, 2020 | | :-------------------------- | :------------- | :---------------- | | Total property and equipment | $5,506 | $5,043 | | Less: accumulated depreciation and amortization | $(3,128) | $(2,941) | | **Property and equipment, net** | **$2,378** | **$2,102** | Accrued and Other Current Liabilities (in thousands) | Category | March 31, 2021 | December 31, 2020 | | :-------------------------------- | :------------- | :---------------- | | Accrued payroll and related expenses | $3,318 | $3,589 | | Capital lease obligations, current portion | $394 | $308 | | Other accrued liabilities | $887 | $953 | | **Total** | **$5,714** | **$5,757** | [Note 4. Borrowings](index=14&type=section&id=Note%204.%20Borrowings) The company has a $25.0 million term loan with Innovatus at 8.5% interest, collateralized by assets and subject to covenants - The company has a **$25.0 million** term loan (2017 Term Loan) with Innovatus Life Sciences Lending Fund I, LP[64](index=64&type=chunk) - The interest rate is **8.5%**, with **2.0%** paid in-kind (PIK Loans) until December 2022, with an estimated effective interest rate of **10%**[65](index=65&type=chunk) - The loan is collateralized by substantially all company assets and includes covenants requiring specified revenue levels, minimum liquidity of **$2.0 million** unrestricted cash, and timely tax filings, with the company in compliance as of March 31, 2021[67](index=67&type=chunk)[68](index=68&type=chunk)[69](index=69&type=chunk)[71](index=71&type=chunk) Future Minimum Payments on Outstanding Borrowings (in thousands) | Year | March 31, 2021 | | :------------------------------------------ | :------------- | | 2021 (remaining) | $1,326 | | 2022 | $2,996 | | 2023 | $15,619 | | 2024 | $14,280 | | **Total** | **$34,221** | [Note 5. Commitments and Contingencies](index=15&type=section&id=Note%205.%20Commitments%20and%20Contingencies) The company has lease obligations, royalty payments, supply agreement commitments, and new licensing agreements post-Q1 2021 - Leases for office and laboratory space expire in **January 2026**, with rent expense of **$0.2 million** for Q1 2021, up from **$0.1 million** for Q1 2020[74](index=74&type=chunk)[75](index=75&type=chunk) - Ongoing royalty payment obligations of **2.5%** on net sales of products incorporating acquired technologies are limited to **$1.2 million** or total royalties earned through **January 1, 2024**[78](index=78&type=chunk) - Entered into an amended supply agreement in **September 2020** with minimum annual purchase commitments for reagents of **$4.1 million** for 2021 and **$6.0 million** for 2022, with a **15%** annual increase thereafter through 2025[81](index=81&type=chunk) - Subsequent to Q1 2021, the company entered into an exclusive license agreement and a master research collaboration agreement with Allegheny Health Network Research Institute (AHN), involving an initial license fee of **$0.4 million** and an annual collaboration fee of **$0.4 million**[80](index=80&type=chunk)[82](index=82&type=chunk) [Note 6. Fair Value Measurements](index=16&type=section&id=Note%206.%20Fair%20Value%20Measurements) Financial instruments measured at fair value primarily consist of money market funds, classified as Level 1 inputs Money Market Funds (in thousands) | Date | Total | Level 1 | | :---------------- | :------ | :------ | | March 31, 2021 | $107,983 | $107,983 | | December 31, 2020 | $34,507 | $34,507 | - The fair value of money market funds is based on quoted market prices, classifying them as **Level 1 inputs** in the fair value hierarchy[36](index=36&type=chunk)[86](index=86&type=chunk) [Note 7. Stockholders' Equity](index=17&type=section&id=Note%207.%20Stockholders%27%20Equity) The company completed a public offering in March 2021, raising $64.7 million net by issuing 4,255,000 common shares - On **March 25, 2021**, the company completed a public offering of **4,255,000 shares** of common stock at **$16.25 per share**, generating approximately **$64.7 million** in net proceeds[88](index=88&type=chunk) Outstanding Common Stock Warrants as of March 31, 2021 | Shares | Exercise Price | | :------- | :------------- | | 252,798 | $1.84 | | 69,176 | $1.84 | | 131 | $1.84 | | 83,778 | $14.32 | | 20,944 | $14.32 | | **Total: 426,827** | | [Note 8. Stock Option Plan](index=17&type=section&id=Note%208.%20Stock%20Option%20Plan) The company operates a 2019 Incentive Award Plan and ESPP, with increased outstanding options and RSUs awarded in Q1 2021 - As of **March 31, 2021**, **1,391,215 shares** remained available for future awards under the 2019 Incentive Award Plan[90](index=90&type=chunk) Stock Option Activity (March 31, 2021) | Metric | Number of Options | Weighted Average Exercise Price | | :-------------------------------- | :---------------- | :------------------------------ | | Outstanding, December 31, 2020 | 1,975,761 | $11.81 | | Granted | 88,750 | $18.20 | | Exercised | (3,381) | $12.94 | | Forfeited | (17,197) | $12.16 | | Expired | (2,353) | $29.08 | | **Outstanding, March 31, 2021** | **2,041,580** | **$12.06** | | Options exercisable, March 31, 2021 | 665,878 | $9.52 | - **185,000 Restricted Stock Units (RSUs)** were awarded in Q1 2021 at a weighted-average grant date fair value of **$18.20**, all outstanding and unvested as of March 31, 2021[94](index=94&type=chunk) Total Stock-Based Compensation Expense (in thousands) | Category | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Cost of revenue | $11 | $6 | | Selling, general and administrative | $791 | $422 | | Research and development | $110 | $3 | | **Total** | **$912** | **$431** | [Note 9. COVID-19](index=19&type=section&id=Note%209.%20COVID-19) The pandemic led to reduced test volumes and supply chain delays in 2020, but volumes recovered in Q1 2021, with a tax benefit - The company experienced a reduction in patient test volumes and delays in patient enrollment and supply procurement during **2020** due to COVID-19[99](index=99&type=chunk) - AVISE CTD test volume increased by approximately **7%** in Q1 2021 compared to Q1 2020, following a substantial recovery to pre-COVID-19 levels in Q4 2020[110](index=110&type=chunk) - The CARES Act resulted in a **$0.1 million** discrete tax benefit in Q1 2020 by permitting NOL carryovers to offset **100%** of taxable income[100](index=100&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Exagen Inc.'s business, Q1 2021 financial performance, and factors affecting operations, liquidity, and capital are reviewed [Overview](index=21&type=section&id=Overview) Exagen Inc. specializes in autoimmune disease diagnostics, leveraging partnerships, but remains unprofitable and relies on financing - Exagen Inc. commercializes a portfolio of innovative testing products under its AVISE® brand for differential diagnosis, prognosis, and monitoring of complex autoimmune diseases, with AVISE CTD® comprising **81%** of Q1 2021 revenue[105](index=105&type=chunk) - The company leverages its testing products to market therapeutics, including a co-promotion agreement with Janssen for SIMPONI®, which contributed approximately **$0.3 million** in Q1 2021 revenue[105](index=105&type=chunk) - Exagen has incurred net losses since inception, with an accumulated deficit of **$187.5 million** as of March 31, 2021, and expects continued operating losses[108](index=108&type=chunk) - Operations are funded primarily through equity and debt financings, including **$64.7 million** net proceeds from a public offering in March 2021, resulting in **$118.1 million** in cash and cash equivalents[108](index=108&type=chunk) [Impact of COVID-19](index=22&type=section&id=Impact%20of%20COVID-19) COVID-19 initially decreased test volumes and disrupted operations, but volumes recovered, though future uncertainty persists - AVISE CTD® test volumes decreased by approximately **5%** in 2020 but recovered to pre-COVID-19 levels in Q4 2020, with a **7%** increase in Q1 2021 compared to Q1 2020[110](index=110&type=chunk) - The pandemic has caused delays in patient enrollment for clinical studies, disruptions in the supply chain for testing materials, and limitations on in-person interactions for the sales force[110](index=110&type=chunk) - In response, the company curtailed non-essential travel, enabled remote work, implemented health protection measures for lab employees, and reduced headcount, including **18 full-time employees** in 2020[111](index=111&type=chunk) [Factors Affecting Our Performance](index=24&type=section&id=Factors%20Affecting%20Our%20Performance) Performance drivers include product adoption, reimbursement, SIMPONI promotion, new product development, and maintaining gross margins - AVISE CTD® tests delivered in Q1 2021 increased by approximately **7%** to **29,029**, with a record **1,763 ordering healthcare providers** (**4% increase**) and **659 adopting healthcare providers** (from 582 in Q1 2020)[112](index=112&type=chunk)[113](index=113&type=chunk) - Revenue growth is dependent on achieving broad coverage and adequate reimbursement from third-party payors, with historical challenges including proactive reductions and recovery attempts by commercial payors[114](index=114&type=chunk) - Promotion of SIMPONI® contributed **$0.3 million** in Q1 2021 revenue, but the company expects difficulties in maintaining meaningful co-promotion revenue above the predetermined baseline in 2021, with no minimum promotion fee for the second half of the year[114](index=114&type=chunk) - Maintaining meaningful gross margins is a focus, driven by increasing operating leverage through clinical studies, volume-based reagent pricing, and clinical laboratory automation, partially offset by potential challenges in co-promotion revenue[114](index=114&type=chunk) [Janssen Promotion Agreement](index=26&type=section&id=Janssen%20Promotion%20Agreement) The amended Janssen Agreement provides tiered promotion fees for SIMPONI based on incremental units, with a minimum fee for Q1/Q2 2021 - The Amended Janssen Agreement adjusted the predetermined average baseline for SIMPONI® prescribed units to approximately **28,750 per quarter** for Q4 2020, Q1 2021, and Q2 2021[116](index=116&type=chunk) - For Q1 and Q2 2021, the company is entitled to a tiered promotion fee of **$500 to $1,000 per prescription** above baseline, with a minimum fee of **$0.3 million** and a cap at **10%** above the adjusted baseline[116](index=116&type=chunk) - For the remaining term of the agreement starting **July 1, 2021**, the terms revert to the original agreement with no minimum promotion fee and no cap on predetermined baseline units[116](index=116&type=chunk) - The agreement expires on **December 31, 2021**, with an option for the company to extend for an additional **12 months**[116](index=116&type=chunk) [Seasonality](index=26&type=section&id=Seasonality) The company expects seasonal variations in financial results due to holidays, vacation patterns, climate, and patient benefit changes - Seasonal variations are expected due to year-end holidays, other major holidays, vacation patterns of patients and healthcare providers, medical conferences, climate and weather conditions, and timing of patient benefit changes (deductibles and co-insurance limits)[117](index=117&type=chunk) [Financial Overview](index=26&type=section&id=Financial%20Overview) This section details revenue and operating expense components, with expected increases in R&D and SG&A, and consistent interest expense - Revenue is primarily derived from AVISE CTD® test sales, recognized on an accrual basis based on estimated collectible amounts[118](index=118&type=chunk)[120](index=120&type=chunk) - Costs of revenue are expected to increase in absolute dollars with test volume but decrease per test due to volume discounts and efficiencies[124](index=124&type=chunk) - Selling, general and administrative (SG&A) expenses are expected to increase in **2021** due to sales force evaluation, headcount additions, and personnel costs[126](index=126&type=chunk) - Research and development (R&D) expenses are expected to increase in **2021** due to investments in existing products, new candidates, and expansion of the clinical R&D facility[129](index=129&type=chunk) - Interest expense is expected to remain consistent in **2021** and until **2023**[130](index=130&type=chunk) [Results of Operations (Comparison of the Three Months Ended March 31, 2021 and 2020)](index=28&type=section&id=Results%20of%20Operations) Q1 2021 revenue increased by 10.5% to $10.6 million, but net loss widened to $6.2 million due to higher operating expenses Key Financial Results (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change | % Change | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :----- | :------- | | Revenue | $10,587 | $9,584 | $1,003 | 10.5% | | Costs of revenue | $4,711 | $4,545 | $166 | 3.7% | | Selling, general and administrative | $10,040 | $9,626 | $414 | 4.3% | | Research and development | $1,403 | $634 | $769 | 121.3% | | Total operating expenses | $16,154 | $14,805 | $1,349 | 9.1% | | Loss from operations | $(5,567) | $(5,221) | $(346) | 6.6% | | Net loss | $(6,209) | $(5,563) | $(646) | 11.6% | - Revenue increase was primarily due to a rise in AVISE CTD® tests delivered (**29,029** in Q1 2021 vs. **27,126** in Q1 2020) and **$0.3 million** from SIMPONI® co-promotion[134](index=134&type=chunk)[135](index=135&type=chunk) - Research and development expenses increased significantly by **$0.8 million**, driven by employee-related expenses and clinical study costs[138](index=138&type=chunk) - Other income, net, decreased by **$0.2 million** due to lower money market interest rates[140](index=140&type=chunk) [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) The company has a history of losses, relies on equity and debt financing, and raised $64.7 million net from a March 2021 public offering - As of **March 31, 2021**, the company had an accumulated deficit of **$187.5 million** and incurred net losses of **$6.2 million** and **$5.6 million** for Q1 2021 and Q1 2020, respectively[142](index=142&type=chunk) - In **March 2021**, the company completed a public offering, raising approximately **$64.7 million** in net proceeds, increasing cash and cash equivalents to **$118.1 million**[144](index=144&type=chunk) - The company has a **$25.0 million** term loan with Innovatus, secured by substantially all assets, with an **8.5%** annual interest rate (**2.0%** paid in-kind for the first **36 months**)[145](index=145&type=chunk) - As of **March 31, 2021**, the company was in compliance with all covenants of the Amended Loan Agreement, including maintaining minimum liquidity of **$2.0 million** and achieving certain revenue targets[146](index=146&type=chunk) [Funding Requirements](index=30&type=section&id=Funding%20Requirements) Liquidity needs are driven by operations, growth, and R&D investments, with existing cash believed sufficient for 12 months, but risks remain - Primary uses of cash include funding operations, business growth, and significant investments in laboratory equipment and capital expenditures, including converting **8,000 square feet** of warehouse space into additional clinical laboratory and R&D facility space by **H1 2022**[149](index=149&type=chunk)[150](index=150&type=chunk) - Management believes existing cash and cash equivalents, along with anticipated future revenue, will be sufficient to meet cash requirements for at least the next **12 months**[151](index=151&type=chunk) - Future funding may be required through equity offerings, debt financings, or other capital sources, which could dilute stockholder ownership or impose restrictive covenants[152](index=152&type=chunk) - Key risks to liquidity include the impact of COVID-19, ability to grow sales and secure reimbursement for AVISE® testing products, costs of developing the product pipeline, and expenses associated with SIMPONI® promotion[153](index=153&type=chunk) [Cash Flows](index=31&type=section&id=Cash%20Flows) Q1 2021 saw a $60.6 million net cash increase, primarily from $65.1 million in financing activities, offsetting operating and investing uses Summary of Cash Flows (in thousands) | Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Operating activities | $(4,312) | $(3,301) | | Investing activities | $(167) | $(84) | | Financing activities | $65,081 | $(51) | | **Net change in cash, cash equivalents and restricted cash** | **$60,602** | **$(3,436)** | - Net cash used in operating activities for Q1 2021 was **$4.3 million**, primarily from a net loss of **$6.2 million**, partially offset by non-cash charges and changes in net operating assets[155](index=155&type=chunk) - Net cash provided by financing activities for Q1 2021 was **$65.1 million**, mainly from **$65.0 million** net proceeds from the public offering[158](index=158&type=chunk) [Critical Accounting Policies and Significant Management Estimates](index=32&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Management%20Estimates) Financial statements are prepared using U.S. GAAP, requiring significant estimates, with no material changes in Q1 2021 - Financial statements are prepared in accordance with U.S. GAAP, necessitating significant management estimates and assumptions[160](index=160&type=chunk) - No significant changes in critical accounting policies and estimates occurred during Q1 2021, other than those detailed in Note 2[161](index=161&type=chunk)[162](index=162&type=chunk) [Recent Accounting Pronouncements](index=33&type=section&id=Recent%20Accounting%20Pronouncements) Refers to Note 2 for a summary of changes in significant accounting policies - Refer to Note 2 for a summary of recently issued and adopted accounting pronouncements[163](index=163&type=chunk) [Off-Balance Sheet Arrangements](index=33&type=section&id=Off-Balance%20Sheet%20Arrangements) The company did not have any off-balance sheet arrangements during the periods presented - The company did not have any off-balance sheet arrangements during the periods presented[164](index=164&type=chunk) [JOBS Act Accounting Election](index=33&type=section&id=JOBS%20Act%20Accounting%20Election) As an emerging growth company, Exagen Inc. uses an extended transition period for new accounting standards, affecting comparability - As an emerging growth company, Exagen Inc. has elected to use the extended transition period for complying with new or revised financial accounting standards, which may impact comparability with other public companies[165](index=165&type=chunk) - The company expects to remain an emerging growth company until **2024**, unless it becomes a large accelerated filer, its annual gross revenues exceed **$1.07 billion**, or it issues more than **$1.0 billion** of non-convertible debt in any three-year period[166](index=166&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company states that this item is not applicable - This section is marked as 'Not applicable', indicating no quantitative and qualitative disclosures about market risk are provided[168](index=168&type=chunk) [Item 4. Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) Management evaluated disclosure controls and procedures as effective, with no material changes in internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=33&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2021 - Management, including the principal executive officer and principal financial officer, concluded that disclosure controls and procedures were effective at the reasonable assurance level as of **March 31, 2021**[171](index=171&type=chunk)[172](index=172&type=chunk) [Changes in Internal Control Over Financial Reporting](index=34&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) No material changes in internal control over financial reporting occurred during the three months ended March 31, 2021 - No material changes in internal control over financial reporting occurred during the three months ended **March 31, 2021**[173](index=173&type=chunk) Part II. Other Information [Item 1. Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any material legal proceedings, though ordinary course claims could have an adverse impact - The company is not currently a party to any material legal proceedings[175](index=175&type=chunk) - From time to time, the company may be involved in legal proceedings or claims incident to the ordinary course of business, which could have an adverse impact[175](index=175&type=chunk) [Item 1A. Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) Updated risk factors emphasize the ongoing impact of COVID-19 and inherent risks in developing new testing products and expanding labs - The COVID-19 pandemic continues to pose substantial public health challenges, affecting employees, patients, healthcare providers, and business operations, with uncertain future impacts on testing volumes, supply chain, and commercial activities[178](index=178&type=chunk) - AVISE CTD® test volume increased by approximately **7%** in Q1 2021 compared to Q1 2020, but the continued spread of COVID-19 may adversely affect future testing volumes[178](index=178&type=chunk) - Developing new testing products involves a lengthy and complex process with a high degree of risk, including failure to identify biomarkers, suboptimal performance, and difficulties in clinical validation, which may delay or prevent commercialization[182](index=182&type=chunk) - Plans to convert warehouse space into an additional clinical laboratory and R&D facility for molecular and multiomic capabilities carry risks, as the company lacks prior experience in developing and integrating molecular biomarkers[183](index=183&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No recent unregistered sales; $21.1 million of IPO proceeds used for selling and marketing, with no material change in planned use - There were no recent unregistered sales of equity securities[187](index=187&type=chunk) - As of **March 31, 2021**, approximately **$21.1 million** of the **$50.4 million** net proceeds from the **September 2019 IPO** has been used, primarily for selling and marketing activities, with no material change in the planned use of proceeds[188](index=188&type=chunk)[189](index=189&type=chunk) [Item 3. Defaults Upon Senior Securities](index=37&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company states that this item is not applicable - This section is marked as 'Not applicable', indicating no defaults upon senior securities[191](index=191&type=chunk) [Item 4. Mine Safety Disclosures](index=37&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company states that this item is not applicable - This section is marked as 'Not applicable', indicating no mine safety disclosures[191](index=191&type=chunk) [Item 5. Other Information](index=37&type=section&id=Item%205.%20Other%20Information) The company states that there is no other information to disclose under this item - This section states 'None', indicating no other information to disclose[191](index=191&type=chunk) [Item 6. Exhibits](index=38&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, stock agreements, and certifications - Exhibits include Amended and Restated Certificate of Incorporation, Bylaws, stock certificates, Investors' Rights Agreement, Stockholders' Agreement, Common Stock Purchase Warrant, Restricted Stock Unit Agreement, Lease Amendment, Executive Change in Control Severance Plan, and various certifications (31.1, 31.2, 32.1) and XBRL Taxonomy documents[194](index=194&type=chunk) [Signatures](index=39&type=section&id=Signatures) The report is signed by Fortunato Ron Rocca, President and Chief Executive Officer, and Kamal Adawi, Chief Financial Officer, on May 11, 2021 - The report was signed by Fortunato Ron Rocca (President and CEO) and Kamal Adawi (Chief Financial Officer) on **May 11, 2021**[199](index=199&type=chunk)

Exagen Inc. (NASDAQ:XGN) Q4 2020 Earnings Conference Call March 16, 2021 4:30 PM ET Company Participants Mike Cavanaugh - Investor Relations, Managing Director at Westwicke Partners Ron Rocca - President, Chief Executive Officer Kamal Adawi - Chief Financial Officer Mark Hazeltine - Chief Operating Officer Conference Call Participants Chris Lin - Cowen and Company Brian Weinstein - William Blair Kyle Mikson - Cantor Fitzgerald Vidyun Bais - BTIG Paul Knight - KeyBank Operator Greetings, ladies and gentlemen ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission File Number: 001-39049 EXAGEN INC. (Exact name of registrant as specified in its charter) Delaware 20-0434866 (State or other jurisdiction of incorpor ...

Investor Presentation Q3 2020 January 30, 2019 Draft v1 Disclaimer This presentation contains forward-looking statements. All statements other than statements of historical facts contained in this presentation, including statements regarding our future results of operations and financial position, business strategy, the impact of the COVID-19 pandemic, current and future product offerings, reimbursement and coverage, our ability to implement an integrated testing with therapeutics strategy, the expected ben ...

Exagen Inc. (NASDAQ:XGN) Q3 2020 Results Conference Call November 10, 2020 4:30 PM ET Company Participants Mike Cavanaugh - IR Ron Rocca - President and CEO Kamal Adawi - CFO Mark Hazeltine - SVP, Finance & Corporate Development Conference Call Participants Chris Lin - Cowen Kyle Mikson - Cantor Fitzgerald Mark Messaro - BTIG Paul Knight - KeyBanc Capital Markets Operator Good afternoon, and welcome to the Exagen Inc. Third Quarter 2020 Earnings Call. [Operator Instructions] As a reminder, this conference i ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 001-39049 EXAGEN INC. (Exact name of registrant as specified in its charter) Delaware 20-0434866 (State or other jurisdiction of incorporation or organization) 1261 ...

Financial Data and Key Metrics Changes - Total revenues in Q2 2020 were $8.9 million, a decrease from $12.5 million in Q2 2019, primarily due to the impact of COVID-19 [17] - AVISE CTD test revenue was $5.4 million in Q2 2020, compared to $8.1 million in Q2 2019, reflecting a decline in testing volumes [17] - Gross margin improved to 63% in Q2 2020 from 52% in Q2 2019, driven by higher SIMPONI revenues [20] - The net loss for Q2 2020 was $3.4 million, compared to a net loss of $2.8 million in Q2 2019 [22] Business Line Data and Key Metrics Changes - AVISE testing volumes recovered from a low in April, with 18,522 tests performed in Q2 2020, compared to 26,993 tests in Q2 2019 [17] - Revenue from the SIMPONI co-promotion agreement was approximately $2.1 million, benefiting from an amended prescription baseline [18] - The number of ordering healthcare providers was 1,442 in Q2 2020, slightly down from 1,450 in Q2 2019 [17] Market Data and Key Metrics Changes - AVISE CTD test volumes increased sequentially by approximately 45% in May and 52% in June 2020 compared to April [19] - The company experienced geographic irregularities in Q3 due to a resurgence of COVID-19 cases, impacting recovery [13] Company Strategy and Development Direction - The company aims to expand its product offerings and remains committed to investing in R&D, including a blood test for fibromyalgia and a prognostic test for lupus [14][15] - The amended SIMPONI co-promotion agreement allows for a potential contract renewal through 2022, indicating a strategic focus on long-term partnerships [11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery of testing volumes, noting that patients with serious diseases like lupus will continue to seek care despite COVID-19 [26] - The company refrained from providing formal guidance for 2020 due to uncertainties related to COVID-19 [22] Other Important Information - The company has secured an agreement with Humana Military, expanding coverage for AVISE tests to 6 million lives [12] - Operating expenses were reduced to $12.4 million in Q2 2020 from $14.8 million in Q1 2020 due to cost-cutting measures [21] Q&A Session Summary Question: What was the testing volume in June? - Management indicated that testing volume was about 95% of normal in June, with expectations for continued recovery as states reopen [25] Question: How much pent-up demand is expected? - Management estimated that approximately 50% of patients were missing due to COVID-19, anticipating a significant return as restrictions ease [28] Question: What drove the improvement in gross margin? - The improvement was largely due to the high gross margin from SIMPONI revenue and aggressive cost-cutting in the lab [31] Question: What is the outlook for SIMPONI revenue? - Management expects to achieve a range of $1.3 million to $1.6 million in future quarters based on the new agreement [40] Question: How is the company addressing the impact of COVID-19 on sales? - The company has adjusted its sales force and is focusing on telehealth and telemarketing to maintain engagement with healthcare providers [42][45] Question: What is the status of the fibromyalgia test development? - The company is actively working on the fibromyalgia test and is committed to quality science, although timelines are still being established [73]

Part I. Financial Information [Item 1. Condensed Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Condensed%20Financial%20Statements%20(unaudited)) The company reported decreased H1 2020 revenues and increased net loss due to COVID-19, maintaining significant cash [Condensed Balance Sheets](index=3&type=section&id=Condensed%20Balance%20Sheets) | Balance Sheet Highlights (in thousands) | June 30, 2020 (Unaudited) | December 31, 2019 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $63,700 | $72,084 | | Accounts receivable, net | $7,263 | $5,715 | | Total current assets | $73,463 | $81,250 | | Total assets | $80,513 | $88,310 | | **Liabilities & Stockholders' Equity** | | | | Total current liabilities | $5,755 | $5,895 | | Borrowings-non-current portion, net | $26,249 | $25,854 | | Total liabilities | $32,672 | $32,651 | | Total stockholders' equity | $47,841 | $55,659 | | Total liabilities and stockholders' equity | $80,513 | $88,310 | [Condensed Statements of Operations](index=4&type=section&id=Condensed%20Statements%20of%20Operations) | Statement of Operations (in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $8,948 | $10,474 | $18,532 | $19,734 | | Costs of revenue | $3,338 | $4,992 | $7,883 | $9,434 | | Selling, general and administrative expenses | $8,276 | $7,302 | $17,902 | $13,481 | | Loss from operations | ($3,417) | ($2,410) | ($8,638) | ($4,284) | | Net loss | ($3,363) | ($2,785) | ($8,926) | ($5,489) | | Net loss per share, basic and diluted | ($0.27) | ($78.87) | ($0.71) | ($155.33) | [Condensed Statements of Cash Flows](index=6&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) | Cash Flows (in thousands) | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | ($8,057) | ($4,118) | | Net cash used in investing activities | ($237) | ($75) | | Net cash (used in) provided by financing activities | ($90) | $7,266 | | Net change in cash, cash equivalents and restricted cash | ($8,384) | $3,073 | [Notes to Unaudited Condensed Financial Statements](index=7&type=section&id=Notes%20to%20Unaudited%20Condensed%20Financial%20Statements) - As of June 30, 2020, the company had cash and cash equivalents of **$63.7 million** and an accumulated deficit of **$173.5 million**. Management believes existing capital resources are sufficient to fund operations for at least the next twelve months[20](index=20&type=chunk) - The AVISE® CTD test remains the primary revenue driver, accounting for **72%** of total revenue for the first six months of 2020, down from **83%** in the same period of 2019[28](index=28&type=chunk) - The company has significant payer concentration, with Janssen, Medicare, Blue Shield, and United Healthcare each representing over **10%** of revenue or accounts receivable in various periods[27](index=27&type=chunk) - The COVID-19 pandemic significantly impacted operations, causing AVISE® CTD test volumes to decrease by approximately **31%** in Q2 2020 compared to Q2 2019. The company received a **$0.7 million** grant from the CARES Act Provider Relief Fund, recognized as other income[92](index=92&type=chunk)[96](index=96&type=chunk) - The company's 2017 Term Loan requires it to meet a specified revenue level. The company believes it is reasonably possible it may fail to meet this covenant in Q3 2020 due to the impact of the COVID-19 pandemic[68](index=68&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses COVID-19's negative impact on H1 2020 revenue and net loss, noting liquidity and potential loan covenant breach [Overview](index=22&type=section&id=Overview) - The company's strategy is to integrate its portfolio of AVISE® testing products with the marketing of therapeutics to rheumatologists, exemplified by its co-promotion agreement with Janssen for SIMPONI®[101](index=101&type=chunk) - The lead product, AVISE® CTD, accounted for **72%** of revenue for the six months ended June 30, 2020. The SIMPONI® co-promotion contributed approximately **$2.1 million** in revenue during the same period[102](index=102&type=chunk) [COVID-19 Impact](index=25&type=section&id=COVID-19%20Impact) - The COVID-19 pandemic led to a significant reduction in patient flow and test volumes. AVISE® CTD test volumes decreased by **12%** from March 15-31 and by **31%** during Q2 2020, compared to the same periods in the prior year[112](index=112&type=chunk) - Test volumes showed signs of recovery, with a **2%** YoY increase from July 1-24, 2020, and sequential monthly increases of **45%** in May and **52%** in June from the April 2020 low[112](index=112&type=chunk) - In response to the pandemic, the company terminated temporary employees and **17 full-time employees**, halted travel, and increased the use of virtual sales tools[113](index=113&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) | Financial Performance (in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $8,948 | $10,474 | ($1,526) | -14.6% | | Costs of Revenue | $3,338 | $4,992 | ($1,654) | -33.1% | | SG&A Expenses | $8,276 | $7,302 | $974 | 13.3% | | Loss from Operations | ($3,417) | ($2,410) | ($1,007) | 41.8% | | Net Loss | ($3,363) | ($2,785) | ($578) | 20.7% | | Financial Performance (in thousands) | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $18,532 | $19,734 | ($1,202) | -6.1% | | Costs of Revenue | $7,883 | $9,434 | ($1,551) | -16.4% | | SG&A Expenses | $17,902 | $13,481 | $4,421 | 32.8% | | Loss from Operations | ($8,638) | ($4,284) | ($4,354) | 101.6% | | Net Loss | ($8,926) | ($5,489) | ($3,437) | 62.6% | - The decrease in Q2 and H1 2020 revenue was driven by lower diagnostic test volumes due to COVID-19, partially offset by increased revenue from the SIMPONI® co-promotion, which grew to **$2.1 million** in H1 2020 from **$0.4 million** in H1 2019[134](index=134&type=chunk)[142](index=142&type=chunk)[143](index=143&type=chunk) [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) - As of June 30, 2020, the company had **$63.7 million** in cash and cash equivalents and an accumulated deficit of **$173.5 million**[151](index=151&type=chunk)[152](index=152&type=chunk) - The company's Amended Loan Agreement with Innovatus has covenants requiring minimum liquidity of **$2.0 million** and achievement of certain minimum revenue amounts[154](index=154&type=chunk) - Management believes it is reasonably possible that the company may fail to meet its financial performance covenant in Q3 2020 due to the adverse impact of the COVID-19 pandemic on testing volumes[154](index=154&type=chunk) - Based on the current business plan, management believes existing cash and cash equivalents will be sufficient to meet cash requirements for at least the next 12 months[159](index=159&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is not applicable for the reporting period - The company has indicated that this disclosure is not applicable[175](index=175&type=chunk) [Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of June 30, 2020, with no material internal control changes - Based on an evaluation as of the end of the period, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level[178](index=178&type=chunk) - There were no changes in internal control over financial reporting during the three months ended June 30, 2020, that have materially affected, or are reasonably likely to materially affect, internal controls[180](index=180&type=chunk) Part II. Other Information [Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any material legal proceedings - The company reports that it is not currently a party to any material legal proceedings but may be involved in ordinary course of business proceedings from time to time[182](index=182&type=chunk) [Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) Key risks include COVID-19's impact on test volumes, potential loan covenant breaches, and challenges in promoting therapeutics - The COVID-19 pandemic poses a significant risk, having already caused AVISE® CTD test volumes to decrease by **31%** in Q2 2020 YoY. The ongoing pandemic could disrupt facilities, supply chains, and commercial activities[184](index=184&type=chunk) - The company's term loan contains restrictive covenants, and it is considered 'reasonably possible' that the company may fail to meet the financial performance covenant in Q3 2020 due to COVID-19, which could trigger an event of default[188](index=188&type=chunk) - Future growth is dependent on the successful promotion of therapeutics like SIMPONI®. The agreement with Janssen was amended due to COVID-19, and Janssen can terminate the agreement with **30 days'** notice, posing a risk to the company's strategic investment[190](index=190&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=41&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered equity sales occurred; $10.5 million of $50.4 million IPO proceeds used for selling and marketing - The company's September 2019 IPO generated net proceeds of approximately **$50.4 million**[197](index=197&type=chunk) - As of June 30, 2020, approximately **$10.5 million** of the IPO proceeds have been used, primarily for selling and marketing activities[198](index=198&type=chunk) [Defaults Upon Senior Securities](index=41&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section is not applicable - Not applicable[200](index=200&type=chunk) [Mine Safety Disclosures](index=41&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable - Not applicable[201](index=201&type=chunk) [Other Information](index=41&type=section&id=Item%205.%20Other%20Information) No other information was reported for this item - None[202](index=202&type=chunk) [Exhibits](index=42&type=section&id=Item%206.%20Exhibits) Exhibits include Janssen co-promotion agreement amendments and CEO/CFO certifications required by Sarbanes-Oxley Act - Key exhibits filed include Amendment 2 to the Co-Promotion Agreement with Janssen Biotech, Inc., dated June 18, 2020, and officer certifications pursuant to Sarbanes-Oxley Act Sections 302 and 906[204](index=204&type=chunk)