Q3 2021 Exagen Inc Earnings Call
Good afternoon, and welcome to the estrogen Inc. Third quarter 2021 earnings conference call.
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Please note. This event is being recorded I would now turn the conference over to Ryan Douglas Tsao, Mark Hazeltine Investor Relations. Please go ahead.
Good afternoon, and thank you for joining us today earlier today ex Jenne, Inc. Released financial results for the quarter ended September 32021.
The release is currently available on the company's website at Www Dot <unk> Dot com.
Ron Rocca, President and Chief Executive Officer, <unk>, Chief Financial Officer, and Mark Hazeltine, Chief operating Officer will host 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 995.
Any statements contained in this call that are not statements of historical facts 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 for the year ended December 31, 2020 and subsequent filings.
The information provided on this conference call speaks only to the live broadcast today November 10th 2021 extra Gen 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 other.
I'll now turn the call over to Ron Rocca, President and CEO of <unk>.
Thanks, Ryan and thank you to everyone joining the call today as always we appreciate your continued support of estrogen.
In the third quarter of 2021, we achieved a record of 1969 total ordering health care providers and a record of 714 adopters for our flagship advise CTD and advised lupus test.
Our revenue for Q3 was $12 3 million, which included 31742 advise CTD test delivered.
As our sector has experienced sequential testing volume was impacted by decline in patient volume due to the delta variant patient referrals from primary care specialists and summer seasonality.
As a reminder, most patients are referred to specialists like Rheumatologists from primary care physicians.
Once again, we saw a very high retention rate of 99% among adopting health care providers from the prior quarter. We believe this high retention rate and continued increase in the number of ordering health care providers speaks volumes to the value our customers recognize and using advice testing to accelerate the historically slow.
And frustrating process, a politically diagnosing auto immune disorders.
We remain highly engaged and focused on payers to further expand our coverage and in network status. We recently signed an agreement with inland Empire health plan or IHT to make advice diagnostic testing available as an in network benefit to their one 4 million members.
HP is the largest not for profit Medicare Medicaid plan in the country and their membership reflects a population that is at higher risk of lupus in autoimmune diseases. This win which not only significant for X gene, but also meaningful for the new patients that now have in network access to ads.
<unk> testing.
[laughter] advice tests are now available to approximately $68 9 million in network lives across the U S.
As our increasing number of ordering health care providers illustrates our test provide a much needed service in rheumatology, we expect our in network coverage to continue to grow increasing our footprint and benefiting average selling price.
I'm also happy to announce that we have entered into a pilot agreement to supply advise MTX to a partnership between Cvs and Aetna.
The goal of the pilot is to leverage the use of advise MTX as a critical personalized medicine tool for rheumatologists to optimize methotrexate therapy for the treatment of rheumatoid arthritis or R. E D.
Despite the advent of multiple new biologic therapies for already over the past few decades methotrexate remains a cornerstone therapy pace.
Patients differ in regards to how they metabolized methotrexate.
Making the appropriate dose selection difficult and advise MTX helps keep the patients in the necessary therapeutic range.
While we own the exclusive rights to the intellectual property powering advice MTX. This quarter, we also improved our future financial position by buying out the remaining royalty.
I'd like to now switch over to our research and development initiatives.
Over the past decade, we have successfully developed and commercialized 10 test and rheumatology as part of our own the hilltop strategy.
According to our market research there remains significant unmet needs in rheumatology for advanced novel clinical test.
Through the use of proceeds raised in Q1 2021, we are focused on investments in R&D, including multi omics to develop and deliver our pipeline products and dramatically expand our total addressable market across multiple indications.
We are very proud of our World class research and development team that had eight abstracts accepted by the American College of Rheumatology as Premier Annual conference, which concluded yesterday.
We believe these are quality abstracts that will further inform our customers on the utility of our test I'd.
I'd like to highlight one of the key abstracts as we believe its future contributions to the organization that will be very meaningful.
The abstract titled the incremental clinical utility of our multi analyte assay panel with cell bound complement activation product versus traditional A&H testing strategy for the diagnosis and treatment of SLE further demonstrates the clinical utility by leveraging an electronic healthcare record day.
Debase, consisting of approximately 22000 advice tested patients and 22000 patients tested with traditional anti nuclear antibody testing.
In the study described in the abstract advised lupus was shown to be significantly more clinically actionable than the traditional anti nuclear antibody testing approach.
In this paper patients testing advised lupus positive where approximately five times more likely to be diagnosed with lupus and two times more likely to start when our lupus medications than patients testing positive with the traditional M&A testing approach.
Cohort for this study was more than 100 times larger than our prior clinical utility studies and should further strengthen our position with payers as it continues to reinforce the efficacy of our testing portfolio.
Our scientific team has also been hard at work on several initiatives and.
In regards to the launch of our fibromyalgia and thrombosis test the better study, which we announced last quarter is estimated to be fully enrolled by early 2022.
We look forward to sharing more details with you in the future. We can tell you that the patient population for fibromyalgia has been historically underserved due to the lack of reliable diagnostic test and consist of approximately 12 million patients representing a massive opportunity to improve patient outcomes and deliver cost benefits saving.
<unk> to the health care system.
We are also working to enhance our SLE monitoring test with additional lupus nephritis markers to address the approximately 50% of SLE patients that progress to developing potentially deadly lupus nephritis.
Recently, GSK with balloon the Mab and <unk> with <unk> received FDA approval for lupus nephritis indication, we feel enhancing our SLE monitoring test will assist the physician in regards to when to move the patient and how to monitor the patient on these expensive therapies.
Our clinical lab expansion continues on schedule and is expected to be completed by Q1 2022, and our R&D lab expansion is expected to be completed by Q2 2022.
Important to note that our clinical lab will include molecular and multi omics capabilities, which will further increase our R&D efforts in molecular and multi omics.
We continue to grow our scientific team with exceptional talent, including the recent hire of <unk> <unk> Phd who previously worked at Archer Dx Dr. Lee as our Chief Technology Officer and has extensive history in developing molecular diagnostic test. We are pleased to have Dr. Lee join us as he leads the.
Development of our RNA pipeline initiatives.
I'll now turn over the call to our CFO <unk> to discuss our financial results.
Thank you Ron and good afternoon, everyone total revenues in the third quarter of 2021 were $12 3 million an increase of 14% over the third quarter of 2020 total revenues were driven primarily by testing volumes, whereby CTD, including <unk>, Lucas, which grew approximately 21% year over year to <unk>.
<unk> 1742 test delivered in the third quarter of 2021.
As Ron mentioned, the number of ordering health care providers was a record with 1969 in the quarter compared with 1665 in the third quarter of 2020.
<unk> CTD test revenue was $9 9 million in the third quarter of 2021, compared with $7 4 million in the third quarter of 2020.
Other testing revenue was $2 million in the third quarter of 2021, compared with $2 1 million in the third quarter of 2020.
Other testing volume generally correlates with our buying CTD volumes, however year over year. Other testing products did not have the same positive ASP impact than we thought with the <unk> CTD.
As Ron stated, we are working on adding the lupus nephritis markers to the advice alcohol Lee monitor test, which we believe will increase our reorder rate for monitor patients and increase the ASP of the annuity product our advise CTD and other testing revenue resulted in testing revenues of $11 9 million in the third quarter of 2020.
One compared with $9 5 million in the third quarter of 2020.
In accordance with the mutual termination of the Symphony agreement revenue related to Symphony was zero point $4 million in the third quarter of 2021.
Cost of revenue were $5 $5 million in Q3, resulting in total gross margin of 55% compared to 60% in the third quarter of 2020. The decrease in gross margin percentage was primarily due to the decrease in the Symphony co promotion revenue recognized in Q3 2021 as compared to Q3 2020.
Operating expenses in the quarter were $18 8 million compared to $14 6 million in the third quarter of 2020.
The increase was primarily due to the employee related expenses, including stock based compensation associated with the overall increase in head count and an increase in the cost of revenue due to the increase in testing volumes and an increase in R&D expenses.
The net loss in the quarter was $7 2 million compared with $4 3 million in the third quarter of 2020.
Looking at our balance sheet cash and cash equivalents as of September 32021 were approximately $106 8 million.
We continue to make investments into the company to fuel growth.
We recently announced the refinancing of our debt with antibiotics capital partners. The amended agreement to refinance our existing $27 $2 million of debt to a loan at 8% interest of which tumors that is paid in kind and extend the term for five years. This lowers our interest rate and <unk>.
Out the interest only payments.
As previously stated we mutually terminated the Janssen agreement for Symphony and have a remaining <unk> 2 million in revenue to be recognized in Q4.
For full year 2021, we reiterate our revenue guidance of approximately 47 million to $49 million and now anticipate coming in at the lower half of the range.
We will now open the call for questions.
Yes. Thank you at this time, we will begin the question and answer session.
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At this time, well pause momentarily to assemble the roster.
And the first question comes from Kyle Mckesson with Canaccord.
Thanks, Hi, guys. Thanks for taking the questions. Congrats on the nice results. So Ron I just wanted to start with a bigger picture question.
Could think back to the years before Covid. So 2019 to $18 17, 16 could you just reflect on how activity and behavior. Among Smriti will just has changed I guess and specifically I'm wondering if you've seen any systemic kind of long term changes due to the pandemic that may have affected ordering of your test and how you might mark.
Going forward I guess, thanks, Rick Great question, and we did a survey, which really illustrates what I'm about to share with you.
Pre two pre Covid, if you will the doctors would the primary care doctors would refer their patients to specialists like Rheumatologists and I think every specialists that you cover the diagnostic company will say the same thing with Covid. The primary care became a bottleneck in other words, if 90% of the patients.
Our rheumatology are from referrals from primary care, it's slowed down at the primary care level. It's important to note COVID-19 does not cure lupus or connective tissues as patients are still there. They were just separated in time as they didnt want a lot of people in their waiting room and they were putting a lot more time in between seeing patients. So I would say the difference between two.
<unk> thousand 19, and during the pandemic here would be that bottleneck and primary care on those referrals against once those patients come in as you saw with our doctor level. They brighter test, but it is a patient flow activity that we noticed was most impacted by the pandemic.
Okay makes sense, thanks for the color and how does your questions about the new partnership with the pharmacy chain in the large payer congrats congrats on that I guess Cvs Aetna.
First could you just remind us how you view that market opportunity for the advise MTX test and then.
If you could provide any more details on the how Cvs now and that will interact I guess in this collaboration with <unk>.
And then assuming the pilot is successful would you shift your strategy away from <unk> and maybe you'll focus on these types of partnerships going forward rather than therapeutics.
Yeah I'll take the latter part of the last question first I don't think he's our mutual exclusive we're built to be able to do the both it's not one or the other we got the capital we are well capitalized we got the products to do both on the first part of your question. We love This pilot with Aetna Cigna.
It's a terrific theyre looking to control cost of these expensive biologics and obviously methotrexate, which keeps patients in the therapeutic range.
Great vehicle for them to accomplish their task. It is a one year pilot, but we already kind of know how good. This test is.
And by the way so to the people at Cvs they fully recognize that they just need to train the doctors better to be able to use MTX appropriately. This is truly personalized medicine call. Our test will tell you whether youre not you can metabolize this product in the right way and if you can for really a couple of pennies a day you can take care of that patient adequate.
<unk> for quite a long time before you have to or even need to put them on a biologic. So really excited about this the downward streams success of this is really nice because as the pilot opens up obviously at <unk> being a very very big.
HMO theres going be a lot of patients that will be attributable to this also the doctors that are in our pilot of really getting familiar with the asset where it makes us even better as we don't have to worry about the phlebotomy charge, we're just doing the test and as well as the fact that this also as an entry into a whole different population within Cvs.
Aetna for the MTX products, so excited about it and see a lot of upside, but we will not shift strategy.
We can do both.
Okay, great it sounds really promising.
And I guess just one last question for me staying on this kind of payer front.
It was great to see that the number of covered lives now I guess the network allows us to that 70 million or so just looking ahead a bit.
Do you think that you'll add anymore.
The end of the year here or maybe you could comment on the payer pipeline or funnel heading into 'twenty, two and reimbursement decisions, obviously seemed to slow down in 'twenty. One I'm. Just wondering if you thought there could be a bounce back next year.
Yeah again, great question, Carl So reimbursement, we have been in Q with a lot of the major payers and they've got impact to us they haven't canceled the meetings they postponed them because they have to worry about these COVID-19 test that they need to look at as well some other COVID-19 related assets. So we understand that that's a big priority for the payers, but we've done ever.
They've asked us to do as far as fulfilling the dossier the clinical utility clinical validation. We have over 35 published studies in peer reviewed journals with Kols support there is really little or no evidence into what some of these doctors are doing today. So it's recognized by the payers that.
The solution to be able to control a little bit of the cost and and even the behaviors that they are seeing that the physician level is to put a product like ours on there. So we're excited about it we got the work done I am fully confident we will continue to move forward with the payers as we offer them a true solution for this demographic.
Speaking of the demographics, what's been an upside to Covid as you will see the awareness of the diversity.
The disparity that happens with women of color well lupus 910 of women and it does affect women of color disproportionately high.
No.
We want to make sure that that's that the payers are aware of that.
This is a great way to make sure that this disparity issue at least for lupus and connected tissue can be handled by the payor upfront and proactively by them. So very confident we'll continue to move forward with more and more payer contracts IHT by the way was a big win for US that was a good one it's a Medicare Medicaid plan and it.
Really illustrates the fact that this product offers a lot of value to these payers.
Yes, it seems like you've got some momentum heading into next year.
Thanks for the time congrats again.
Great. Thanks Carl.
Thank you and the next question comes from Paul Knight with Keybanc.
Hey, Ron Congratulations.
Thanks, Paul.
We've heard from other companies in the diagnostics that <unk> was of a little more pronounced seasonally do doctor holidays et cetera.
What did you see in <unk> I mean, it was a great fit.
Physician ad.
Total ordering but what you see seasonally.
I mean, we had a good quarter I mean, if you really look at the volume we had our year to date number you can see we're on track to really do well versus a pandemic year last year and versus 2019, I mean, we're well positioned to do that the seasonality that occurred. This year again, we did a survey and what came back loud and clear was the fact that doctors for the first time in two years.
Two years could take a vacation and they did it the patients too.
August was a big vacation month for a lot of doctors as they had the first time the window of opportunity to do that.
But I want to Paul Covid does not cure lupus those patients are still there and they're going to come in and see that physician now they may come in a little bit more severe than they would have otherwise, but theres still there and they come in again very proud of our Q3 numbers. The fact that we had two pretty important records there with.
The number of riders and the adopter level and that illustrates the power and the efficacy of the asset.
And then on the IH.
Agreement.
Did you say they were the biggest Medicare Medicaid payer and how does that cover light number compare to where we were in <unk>.
Well it added $1 4 million and the records show that it is the biggest Medicare Medicaid provider. There. There's obviously the some of the other plants have carve outs with their plans.
Ihop's important for a couple of reasons one is the inland Empire is disproportionately. Hispanic and these are the people that could really benefit from the asset I think they recognize the disparity in treatment.
And that was good there is also a hospital linkage there with Loma Linda.
Those physicians were adamant with IH P that they needed to give coverage to this asset in order to help these patients. So it's a bellwether plan at $1 4 million, but more importantly every other plan that has a carve out for Medicare Medicaid now knows that IHT put it on so what it does is it softens up.
Road for future discussions with other payers.
Thank you.
Thanks, Paul.
Thank you.
And this concludes our question and answer session I would like to return the floor imagine for any closing comments.
Great.
We look we built a strong specialty franchise for sustainable success of our current brands have proven out the ability to address connected tissue in rheumatology needs keep.
Keep in mind that our robust pipeline will build on our current momentum as we continue to drive the science to be able to take on the challenges and issues facing doctors when they have to diagnose prognose in monitor CTD in rheumatology patients, we're pleased with the quarter and how we're doing so far this year and we look forward to updating you.
Full year during the next earnings call. Thank you for your participation and your support.
Thank you the conference.
<unk> has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
Thanks Keith.