Q1 2021 Exagen Inc Earnings Call
Greetings, ladies and gentlemen, and welcome to the Exterran, Inc. First quarter 2021 earnings conference call. At this time all participants are in a listen only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance. During this conference. Please press star zero.
On your telephone keypad. Please note that this conference is being recorded I would now like to turn this conference over to your host of Mr. Mike <unk> Investor Relations for oxygen. Thank you you may begin.
Good afternoon, and thank you for joining us today earlier today <unk>, Inc. Released financial results for the quarter ended March 31 2021.
The release of currently available on the company's website at Www Dot ex of Gen Dot com.
Ron Rocca, President and Chief Executive Officer, Molly Dowie, Chief Financial Officer, and Mark Hazeltine, Chief operating officer will host of this afternoon's call.
Before we get started I would like to remind everyone that management will be making statements. During this call that include forward looking statements within the meaning of federal Securities laws, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
Any statements contained in this call that are not statements of historical fact should be deemed to be forward looking statements.
All forward looking statements, including without limitation statements regarding our business strategy and future financial and operating performance.
Including 2021 guidance the impact of COVID-19, pandemic on our business, our current and future product offerings and reimbursement and coverage are based upon current estimates and various assumptions.
These statements involve material risks and uncertainties that could cause actual results to differ materially from those anticipated or implied by these forward looking statements.
Accordingly, you should not place undue reliance on these statements.
For a list and description of risks and uncertainties associated with our business. Please see our filings with the Securities and Exchange Commission, including our form 10-K and subsequent filings.
The information provided in this conference call speaks only to the live broadcast today May 11 2021.
Accident disclaims any intention or obligation, except as required by law to update or revise any information financial projections or other forward looking statements, whether because of new information future events or otherwise.
I will now turn the call over to Ron Rocca, President and CEO of <unk>.
Thanks, Mike and thank you to everyone joining the call today as always we appreciate your continued support of <unk>.
The first quarter of 2021 was important one per accident and we are very pleased with our accomplishments one of the many of highlights of the quarter was our successful follow on offering which raised over $69 million of gross proceeds and added significant additional liquidity to the market for extra in stock.
We plan to use the added capital to further build our business and position the company for sustainable long term success.
We are accelerating our investments to expand our robust pipeline, which includes our molecular and multi omics development initiatives of lab expansion and commercial organization.
We've undertaken a major expansion of our laboratory facilities in Vista, California, which will significantly enhance our testing capacity and improve our efficiencies.
With our increased investment in research and development, we seek to expand our advisory franchise of autoimmune and autoimmune related testing solutions. Our R&D team is working diligently on developing our fibromyalgia test.
This liquid biopsy test is being developed to be the first rule in rule out fibromyalgia diagnostic test.
This is a very challenging disease with a very large total addressable market.
Although it is not an autoimmune disorder is often diagnosed by rheumatologist because its clinical symptoms are so similar to those of connective tissue disease.
We are also expanding our R&D capabilities to focus of multi omics by integrating molecular technology with our protein markers.
There remains of significant unmet need for approximately 24 million patients suffering from autoimmune diseases.
<unk> commitment to provide novel differentiating testing solutions with the IP protected CB caps technology will assist in the expansion of our advice testing franchise for thrombosis, lupus nephritis and rheumatoid arthritis.
These investments uniquely position us for continued growth in this large underserved market.
Turning to the performance of our business, we recorded a strong quarter in our advice testing franchise. As you were all aware due to the ongoing pandemic. Many patients remained unable to freely visit their health care providers inhibiting the ability of patients to be tested. Furthermore, the were severe weather conditions in Q1, which impacted.
Our business. Despite these headwinds our core testing business proved to be resilient and performed very well.
We achieved several records in the quarter, including 29029 test.
1763, total ordering health care providers and 659 adopters for our flagship advise CTD and advised lupus test.
We finished the quarter strong with an all time record volume in March we.
We continue to achieve very high retention rates of 99%. Among these adopters as we have said before we believe retention rates of this high speak volumes about the value of health care providers place on the ability of advice testing to accelerate the historically slow and frustrating process of clinically diagnosing auto immune to.
Orders.
Our Q1 performance in the face of ongoing pandemic and severe weather gives us real confidence around the strength and value of our advice franchise and our path forward as we continue to expand our footprint with Rheumatologists hospital systems and payers across the country.
As many of you know autoimmune disorders are notoriously difficult and time consuming to diagnose using traditional testing.
Our CB caps technology is a true breakthrough that offers the promise of faster and more accurate diagnosis, enabling earlier intervention in the treating these chronic and sometimes deadly diseases.
This month, we announced the research collaboration with an exclusive licensing agreement with Allegheny Health Network Research Institute.
The collaboration will focus on the development and commercialization of novel patented Biomarkers for diagnosing prognosis and monitoring of autoimmune diseases.
Importantly, we are happy to be working again with key opinion leaders, Dr. Joe <unk> and Dr. Sue Manthey.
This is an extension of our R&D organization for the discovery and development of novel autoimmune Biomarkers.
Additionally, our collaboration enables access to a H N autoimmune centre of excellence, which gives us insights into the latest cutting edge academic research.
We also kicked off 2021 with progress on the reimbursement front, having recently completed covered in network agreements with Highmark. The fourth largest blue Cross Blue Shield group in the country and Tricare West we remain highly engaged and focused on payers to further expand coverage in the network status we saw.
Signed in network agreements with two prominent health care systems in Q1, Tufts Medical Center, and Boston and St. Charles Health systems based in Oregon.
Both health systems recognized of the necessity of making more accurate testing accessible to their patients and we are looking forward to long term relationships with both.
Advice tests are now available to approximately 67 million in net work lives across the U S up from approximately 59 billion at the end of 2020, and we expect this momentum to continue increasing our footprint and benefiting a S. P.
I would also like to touch one of our commercial excellence, which is crucial part of our strategy in Q1, we expanded to 63 territories. We also began to supplement our sales force by creating inside sales positions in Q1 of these new positions were added to perform multiple roles such as covering white space and augmenting.
Territories to further our reach and frequency with Rheumatologists.
May is lupus awareness month as you know lupus is often overlooked relative to cancer. However, it is a very serious disease, which we are bringing more attention to the timely and accurate diagnosis offered through our device testing I'm very proud of the ongoing support that extra gym provides to patients throughout the diagnosis and disease.
Management journey.
Whether it's through gaining clarity through their differential diagnosis with advise CTD to regain control of the disease management with with the advice of ethylene monitor or to address of the disparity in the other obstacles to optimize care, we remain focused on providing patients and their health care providers with the best possible solution for their needs.
I would now like to turn over the call to come all to discuss our financial results.
Thank you Ron and good afternoon, everyone total revenues in the first quarter of 2020, one were $10 6 million an increase of 10% over the first quarter of 2020.
Total revenues were driven primarily by testing volume for buying the T D, including our buys of the pets, which grew 7% year over year to record of 29000 29000 in the first quarter of 'twenty 'twenty. One. This also includes an all time record for volumes in March.
As Ron mentioned, the number of ordering health care providers was a record 1763 in the quarter compared with 1692 in the first quarter of 2020.
Of <unk> CTD test revenue was $8 5 million in the quarter and other testing revenue was $1 8 million.
Revenue per assembly was point $3 million in the quarter.
Once again, we're pleased with the performance of our core testing franchise in the face of headwinds from the ongoing COVID-19 pandemic and severe weather we saw in February.
Cost of revenue were $4 7 million in Q1, resulting in a gross margin of 56 per cent compared to 53 per cent and the first quarter of 2020.
Operating expenses in the quarter were $16 2 million compared with $14 8 million in the first quarter of 2020. The increase was primarily due to employee related expenses, including sales incentive stock compensation and R&D initiatives the net.
Net loss in the quarter was $6 2 million compared with $5 6 million of the first quarter of 'twenty 'twenty.
For full year 2021 we reiterate the guidance we gave in our Q4 'twenty 'twenty earnings call and expect total revenue used to be approximately 47 million to 49 million. This includes testing revenue of 46 million to $48 million representing growth of approximately 27 per cent.
Over 'twenty 'twenty at the midpoint of the range.
We prioritize resources for buys testing franchise and expect $1 2 million in revenue for Symphony for the full year 2021.
Looking to our balance sheet cash and cash equivalents as of March 31, 2021 were approximately $118 $1 million with the additional capital raised in Q1, we're making further investments in R&D, including the development of molecular and multi homing capability laboratory of expansion and our.
The organization to fuel future growth.
We will now open the call for questions.
At this time, we'll be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is another question queue. You May press Star two channel move your questions on the queue of participants using speaker equipment and maybe necessary.
Sorry for you to pick up your handset before pressing the star keys, when all of that while we poll for questions.
Our first question comes from the line of Chris Flynn with Cowen You May proceed with your question.
Hi, good afternoon, Thanks for taking my questions Ron.
Ron I wanted to start with the comment you made during your prepared remarks, specifically could you elaborate on your R&D initiatives to integrate molecular technologies I'm curious what type of technology, you're looking to integrate is the sequencing PCR or micro arrays also can you talk about the process the to develop a multi omics tests.
Can you leverage your existing patient samples of our database.
Sure first of all thanks, Chris appreciate the question.
We are putting a lot of emphasis into multi omics and the reason is that we've done such a great job of proteins, but the reality is when you add markers from RNA to proteins, you should get be able to get a more sophisticated earlier diagnosis and that's where we're putting the efforts in a while we look at targets like interferon Alpha and so.
Fourth to add to our Seabee cash technology. Those studies do take time. So are we looking at Nextgen sequence, you're absolutely right. We are working in that direction and we're putting a lot of effort. There. The process is going to be one that you're probably used to when you're seeing other.
The other molecular type testing it takes sophisticated materials, you've got to have geneticists and so forth and that's why we've put a lot of effort in building out our lab to be able to enable us to do this the net effective manner. So when you think about adding CB caps two of molecular test and getting to that multi omics that really is what everybody is looking for.
Because when you're talking about autoimmune disorders, it's very complicated.
Your companies that deal with cancers, they're dealing with the tumor of none of that autoimmune is so diverse one of your body starts attacking itself. It really does lend itself to molecular type testing because of what happens as your body turns against itself. So the process is going to be very well thought out it actually is already and we have some very good.
Sultans as weather's geneticists to make sure of that process is tight so when we do have our first multi omics product out on the market it'll be one of high quality and it will enable the physicians to help them find the solution for those patients.
That's great very helpful and maybe a follow up to that how should we think about the timelines associated with this bottlenecks tasks are we talking about.
I don't know any comments he wants it provided the timelines.
Yeah, now as the CEO I'm always pushing timeline, but I'm also very cognizant of the fact, if you pushed aside just too much you may not get the product you want so I put the right amount of pressure on them, saying we have to hit these timelines that we have internally we want to make sure. We continue to progress now COVID-19 dissipating a bit so we're getting people enrolled in <unk>.
He has a lot more efficiently than we did lets say in January.
And then the end of last year. So that's one good thing is ph patients become more willing to participate in some of these studies are the the partners who were looking at are very excited about the way. We're progressing here. So while I can't give you a definitive timeline I can tell you I'm doing everything I can to get the highest quality product on the market as fast as I.
Cat, but not to the point, where they disrupt the scientist from doing the work that they do which is so important.
Okay, that's very helpful.
Just going back to the quarter I was hoping you could unpack the Q1 performance in a bit more detail can you each of where you are seeing the most success in driving of the record of ice volumes is the demand coming from existing customers or is it due to new practices coming online.
And just along these lines I'm also curious if you have seen the benefit of the catch up in volume as patients perhaps.
The business due to COVID-19 of returning to the office.
Yeah, I get the comment about the catch up in March since it was a record month, but the whole quarter was a record of 29029, so while the whole quarter really did well and that shows the the power of the solutions of these tests provide the key metric there that you're asking what's the how many position.
Across the country Road.
And the record number of ordering health care providers was an indication that the we grew around the country 1763 in the first quarter with again, 99% stickiness. So we grew everywhere you remember the Texas was shut down for what was it like two and a half weeks and in February but though.
Doctors came back as well as all of the other doctors in the country. So what we're finding now Chris is that doctors understand CB cash technology. They understand they have a real issue with giving a definitive diagnosis to especially diseases like lupus and that our test as kind of is very convenient one blood draw that tells you whether they got loops.
And what other connective tissues. They may have that overlap. So we're hitting the doctors with the very convenient high caliber test for the autoimmune patients and it's coming from all over the country.
Okay, Great last question for me.
I think he talked about this in your prepared remarks, but.
Can you just provide us a bit more detail on the expanded sales force and the inside sales team how are those tracking relative to your expectations. Thank you.
Yeah, Oh no problem. So yeah, we expanded the sales force. So we now have 63 territories as of March 31st.
And that allowed us to split actually some pretty big geographies that are they've got a little unwieldy for one rep and that's of high class problem. When you had to have two reps in the city and it also shows the growth of it. So those representatives are having impact now we used to say it takes five months to have the pay for yourself, what we're seeing now because of people.
No of about the test that that could be a lot faster. So in two quarters. After we hired the new reps, we anticipate that they should be paying for themselves and then expanding it. So that's a really good thing about the the expanded territory gives us enough reach and frequency out there to cover most of the territories that we wanted to cover at this point.
Inside sales force is new to us and I'll tell you, Chris I was suspicious about how well they could be and I don't know, if it's COVID-19 or what but they've really been able to capture a lot of physician calls doctors that are just too busy right now with the bolus of patients coming back our inside sales force is able to reach them make sure. They had the kits the samples.
Whatever they need to be able to conduct their practice, we will continue to monitor that but early indications say that this probably will not go away post COVID-19 because they are having a great extension of our existing sales force and reaching into these white spaces that quite frankly, you know youre not going to put a representative perhaps in Alaska for us.
Now or some other places, but they can reach there and they can reach there and hit a lot of volumes of call and deliver really strong core message. So early success, we'll continue to monitor it but I don't think it's going to go away, Chris I think even post COVID-19 companies have now learned of just as a very cost effective way to increase the reach and frequency of your sales.
Team.
Great very helpful. Thanks for taking my questions.
Thanks, Chris.
Our next question comes from the line of Kyle Nixon with Cantor Fitzgerald You May proceed with your question.
Thanks, Hi, guys. Thanks for taking the questions. Congrats on the of nice quarter. So I want to start with the the all time record volume in March just want to understand if that's like a run rate or if you saw that in April and May and just look for the background and I'm thinking is like last week on the reading is heard in this call. They mentioned that 60% of Rheumatologists intends to incur.
<unk>, they're prescribing all of the box.
Classroom in the next three months of itself.
Im wondering if youre setting of the kind of same level of increasing activity of the back end of the year and even the second quarter as well. Thanks.
Yeah.
So yes, we are seeing consistency in April were very pleased with our April number I'm looking forward to being able to share the that in more detail for you. So it did carry through as far as just continuing doctors can continuing to write the product and come back into practice the 15% for I believe you said that it was full up for <unk>.
Born of course, Theyre coming off of a zero, so or close to it. So the percentages are a little wonky.
For them versus us so that does 29000 the orders.
But we are gonna see more doctors coming back to work and practices opening up I did read the report just recently that said that not all offices are open. There's one thing really important to remember about these rheumatologists to they have of capacity limit you know 10 patients per day.
You know maybe 11, but that's the capacity limits. So when these bolus of patients come back what they really need is the most convenient way to test them and get them out of the office and render decision as quick as possible in their disorder, and I think that's where we come in the best because that's what the doctors really liked they can write one CTD test and get the best lupus.
First 11 generic markers and instead of doing share it'll testing and having that patient come back over and over again, so I am expecting us to continue to do well throughout the year. It's it's there's no doubt we have of solution here I think the real key metric here, Kyle 99% stickiness that means when the doctors radar.
Product of 11 times or more of the chance of them writing again is 99% that's an important metric because doctors don't write something that they truly do not see the value of so we think we have the right solution and we expect it will continue of COVID-19 or not the <unk>.
All of it does not cure of lupus. These patients will be back in the office and they'll need of tests to make sure. They have the disorder before they put them on these expense of biologics.
Alright, Thanks, Ron that was helpful.
One of the also asked two questions about the the Alleghany partnership.
First of all I was wondering if.
Basically just why those patents were in the originally acquired by oxygen from royalty pharma in Cyprus of the years ago, I'm, just kind of thinking like what's the Atlanta and Pittsburgh just work on these patents like the whole time and.
Just kind of independently and then of circa.
Of note I wanted to ask was on all of these potential assays, they're going to develop the got they're gonna be run using flow cytometry or that is that kind of like part of the multi omics strategy or put another of our detection platform be used for those.
Great question, we are really excited to work with Alleghany. They are a huge center of excellence for autoimmune. So you want to partner with these huge centers of excellence and for US Alleghany is ideal.
<unk> eight Hearn is just an amazing scientist Dr. Sue Manzi again, just the key opinion leader for around the world really so being able to partner with these thought leaders and with an institution that is so focused on autoimmune is really key for us. These new markers that he's finding because he's always tinkering finding new thing.
<unk> have different utility we.
We are examining each one of those for what these fragments will mean.
And whether we use flow cytometry or some other technology or even something even more advanced AR. That's all the things we're looking at at this point with these assets.
Will it be part of the multi ohmic.
Processes that we're putting together.
Could be call because what we're looking at is adding the the RNA marker to any of our protein markers. RNA tells you what's going to happen protein makes it happen. So when you have the two together. It just gives the doctor of more complete story of where that patient is so centre of excellence outstanding key appear.
And leaders love it and the fact that they have new technology, and they're always tinkering with the new stuff. So it's good for us to be with of the center of excellence because we're getting the first look of everything that's new that's coming one more thing that comes out of Alleghany, which I got to tell you we live with well characterized blood bank samples that's important for <unk>.
Any diagnostic company cover so working with the Allegheny, We feel we'll get very pristine biobank samples for us to run our test on and had the most accurate test with the highest sensitivity and specificity needed for the doctors.
That was great because of all of them on thanks, a lot two really quick questions for me.
With the multi omics being should we be expecting any milestones this year like studies or partners essentially announced I mean, obviously you don't get too detailed to don't want you to go there, but just should we be on the lookout for anything upcoming.
Well, we're pushing hard to get a lot done youre right theres not so the I got a I can't share every detail with you I can tell you that our team we've ramped up our R&D team. We've got all of the rate of equipment, we're working with the right partners and stay tuned call Youre going to hear good news, while I can't lunar lander on a day really.
Confident with everything I'm seeing there and if you want to think of the time of timeframe, where maybe some of the stuff will come out you know ACR. The American College of Rheumatology is one possible area of the other possible could be early next year.
And while I can't lunar Lander date, again, I'm not going to force my scientists to do anything that's going to hurt the asset.
I'm pushing as fast as I can without hurting the asset, but I'm really excited about the team we put together and what I've seen so far so stay tuned call you'll get more information on that as it rolls out.
Perfect. Thank you Ron and commodity.
Testing revenue guidance.
How are you thinking about the mix between the of ICD. Other testing revenue just to the extent that you could share.
Yeah, <unk> CTD continues to be our flagship product.
It it makes up approximately 85% of the testing revenue so going forward, we anticipate monitor to continue to grow because of that that's an annuity so that one might grow at a little bit of a faster pace because you have patients that might take at 468 times of year.
But the CTD continues to be our flagship, especially with new writers that we bring onboard. So as you know we did add a we had a record for a number of ordering health care providers. They usually start off with our <unk> CTD test.
Okay that was a that was.
Thanks, guys for taking the questions.
Thanks Carl.
Our next question comes from the line of Mark Massaro with beats. The Iga you May proceed with your question.
Okay, especially the baby.
Thanks for taking the question.
Hum.
Okay.
Per wins last quarter, just wanted to see if you could touch on any updates on the commercial payer traction.
And what it is that some of the big outstanding claims.
Perhaps the new papers the publication.
Okay, great. Thanks Vivien.
We continue to work on that as you know we got the fourth largest blue high Mark We got Tricare and now we've got truck your east and Tricare West, which completes the story there and we picked up obviously, the fossey's in California, as well as the deal which the northwest out of Arizona. So we continue to move the ball forward. We're also doing a lot with these major hospital.
Like tuffs, and Brigham women's as well as the Emory and St. Charles So we're working on all fronts. We feel the dossier tells the story of a better test that can more timely accurately diagnose these patients as well as be cost effective. So we feel the dossier really tells the.
And we're getting in front of as many of these payers as we can this year.
As you know they have certain allotments at times, where they look at different assets. So we're in queue with a lot of the payers and we continue to push that forward, what they're really looking for for US is longitudinal studies and we're putting we got we got a very good portfolio of if you will of information to share with them. Once we have our meetings with them.
So the keys there are we're continuing to gain momentum.
We have what we feel as of the REIT asset and something I'll share with you Vivien as this COVID-19, if you're going to look at something that came from that was this disparity issue really got elevated as far as our women and people of color well eight out of 10 lupus patients are female.
In lupus affects women of color disproportionately higher and more aggressively than anglos. So we think that along with the fact that we got the right test should help us with these payers that so they can help more patients and solve this disparity issue that's taking place right now.
Awesome. Thanks, so much.
Just a quick follow up.
Maybe for small.
You could potentially unpack the 2021 guidance a little bit.
Is that back half weighted at all.
Yeah, what we've said in the past is we do anticipate to continue growing so I would anticipate that every quarter builds upon itself. So based on your comment yes, it would be more heavily weighted towards the back half because we're going to continue growing in every quarter should be larger than the preceding quarter.
I think that's all that's all for me. Thanks, so much for taking my question.
For the.
Our next question comes from the line of Paul Knight with Keybanc. You May proceed with your question.
Okay.
You might be of mutual.
Yes, sorry the.
67 reps was that the total here at the end of Q1.
Okay.
63, so that was the end of the the.
The expansion went from 60 to 63 territories and we have 60.
We have 60.
The 66 to 63, sorry, we're a 56% to 63 representatives inventory territories.
Keep them all 56 of the end of the December correct.
Yes, that's correct for the number of territories that we had we announced an expansion of territories that of 63 in Q1 and that was an announcement we started to hire them in Q1. So we ended Q1 with 60 reps.
Okay, covering 63 territories.
Correct.
And then with this multi omics.
Research the ear embarking upon Ron.
Does that ultimately mean in R&D could there be of the possibility of of companion diagnostic as well or does that makes sense.
Yeah. It certainly does I mean, there are products in the pipeline for auto immune that our interferon based if you will so could it be eventually down the road I think what youre seeing from pharma, though theyre moving away from companion diagnostics and they're talking about things that are complementary diagnostic no pun intended since were.
The company, but that means that it doesn't have to be in the package insert but there can be studies alongside that show how our test can identify the right patients where that product that will work the most efficiently without having to put it in the packaged in search of it means you have to do the studies and go back to the FDA and so forth. So I'm seeing more companies move toward that.
Complement rather than companion diagnostic for their test, but to answer your question.
We're going to do is we're going to develop the best multi omics test and as you can tell farmers working on these highly sophisticated products too. So it should be very well dubbed entail with the with their launches as we are able to identify the right patients for these expense of biologics.
Okay. Thank you.
Okay. Thanks, Paul.
Ladies and gentlemen, we have reached the end of today's question and answer session I would like to turn this call back over to Mr. Ron <unk> for closing remarks.
Yeah, Thanks, everybody for joining the call and your continued support of actually and we really feel like we're doing a great job here, helping patients and I think that's the part we always have to remember our philosophy is if you put patients first the quarterly the numbers and the dollars of come together and that's our focus as we always say here. If you help one autoimmune patient you may not change the world, but youll.
The world for that one of auto immune patient and Thats, what we stay focused on we of high quality science, great IP and quite frankly, we have of channel here, which we dominate and that's the autoimmune channel, which is very big and with Rheumatologists really preferring us versus any other company that they work with that makes us feel outs.
Standing and we're right position again, thank you for the call. We appreciate it we look forward to having this again for Q2 earnings call take care have a wonderful day.
This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation of enjoy the rest of the evening.
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