Q1 2022 Exagen Inc Earnings Call
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Greetings, ladies and gentlemen, and welcome to the accident incorporated first quarter 2022 earnings conference call. At this time, all participants are in a listen only mode.
And answer session will follow the formal presentation, if anyone should require operator assistance. During this conference. Please press Star then zero.
Please note. This conference is being recorded I would now like to turn the conference over to our host Ryan Douglas of Investor Relations for extra Jim. Thank you you may begin sir.
Good afternoon. Thank you for joining us today earlier today ex Jenne, Inc. Released financial results for the quarter ended March 31 2022.
Or at least is currently available on the company's website at Www Dot X again dotcom.
Ron Rocca, President and Chief Executive Officer, smaller Dowie, Chief Financial Officer, Mark Hazeltine, Chief operating Officer will host this afternoon's call.
Before we get started I'd like to remind everyone that management will be making statements. During this call 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 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 2022 guidance the impact of the COVID-19 pandemic on our business, our current and future product offering.
Distribution and availability 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.
For a list and description of these 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, 2021, and subsequent filings the information.
Provided in this conference call speaks only to the library cast today May 11, 2022 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.
Otherwise I will now turn the call over to Ron Rocca, President and CEO of extra thanks, Ryan and thank you to everyone. Joining the call today I will discuss our first quarter business highlights and give updates on our pricing payors and pipeline.
I'll, then hand over the call to come all our CFO for details on our financial results as always we appreciate your continued support of X Gen.
In the first quarter of 2022, we achieved a record of 2175 total ordering health care providers and a record of 761 adopters for our flagship advise CTD and advised lupus test.
Our total revenue for the first quarter was $10 4 million, which included 30 903 advise CTD test delivered.
As we mentioned during our call in March our testing volume during the first half of Q1 2022 were significantly impacted by the armed across various as the quarter progressed, we saw patient referrals from primary care to Rheumatologists gradually returned to normal and in March we had an all time record month for advise CTD.
<unk> volume.
This is the seventh quarter in a row since Covid began that we achieved a high retention rate of approximately 99% stickiness.
Also during the seven quarters, we sequentially increased ordering health care providers and achieved record adopters and every quarter we.
We believe this performance speaks to the value health care providers see in our test and further strengthens our foundation for growth.
Now to provide an update on our pricing and payer reimbursement our strategy with payers has always been to apply for proprietary laboratory analysis code or P. L. A code once we began approaching $100 million in network lives I'm happy to announce that the American Medical Association has issued actually an appeal a code of 031 to you.
<unk> for advised lupus effective April one 2022.
This is a major milestone for X gene that we believe demonstrates the effectiveness and proprietary novel aspects of our CB caps technology, which drives advised lupus. We also received pricing through our Medicare administrative contractor Meridian <unk>.
Medicare reimbursement for this code is $1085, which is a significant price increase over the prior CPT code reimbursement amount of $295.
Although the P. L. A code applies to advised lupus, we believe it will have a positive effect on both our asp's and revenue as well as gross margins. Since advise CTD is comprised of advised lupus, we continued to make progress with payers and added three additional payors in the first.
Quarter, two of which take effect.
Second quarter, we believe with the addition of the PLE code and the fact that we are expected to have over $90 million in network lives on June <unk> 2022, we are well positioned to enter into additional payer agreements. We look forward to updating you on our progress throughout the year.
Turning to our buys radar platform. This platform combines over a decade worth of scientific research by Queen Mary University of London, and our AI technology over the past few months, we have made several investments, including a central bioinformatics hires and support of our AI and machine learning programs and.
Whitman to further expand on this technology driven platform.
With these continued investments advisory our development remains on schedule for our clinical experience program launch later this year.
As part of our adviser radar launch preparation, we commissioned a market research to conduct a blinded product concept study focused on radar to utility and they use a precision medicine by Rheumatologists.
From the 131 responding rheumatologists, we learned the most challenging aspects of rheumatoid arthritis treatment is the inability to predict therapeutic response.
Advise radar molecular test will provide pivotal insights and directions on how newly diagnosed patients will respond to the March like methotrexate and biologics.
Our advice radar to molecular test, we'll address those patients that have been on therapies that are no longer getting the adequate control of their disease. Both of these tests add clarity to the physicians empirical evaluation, when determining which of the very expensive therapies to prescribed to patients to.
To close out the market research, 80% of the responding Rheumatologists indicated they strongly believe personalized medicine will guide treatment decisions in the future. This further strengthens our belief that the advisor radar platform is well positioned to address the demands for therapeutic drug response beneficial for both our patients.
And physicians. We believe this will also address payers concerns of the wasted $18 billion in annual RNA therapeutic spend for our a treatment.
For our other pipeline products the better study for Fibro continues and we anticipate a readout next year for.
For the next iteration of advise SLE monitor we are expanding the indication with markers for lupus nephritis and commercially launching on 'twenty 'twenty three we continued to add necessary technology and personnel for our R&D organization to enable successful conclusion of these assets.
We continue to execute on our business strategies and are looking forward to making our test available to more patients by driving both adopting health care providers and expanding our payer coverage.
We believe actually his track record will serve as a foundation for us to develop and commercialize our innovative pipeline and intersect science and technology.
Now I will turn the call over to come off.
Thank you Ron and good afternoon, everyone total revenues in the first quarter of 2022 were $10 4 million total revenues were driven primarily by housing volumes, whereby CTD, including revised Luca which grew to $30 903, <unk> delivered in the first quarter of 2022, despite the disruption.
<unk> caused by the omicron bearing through mid February 2022.
The increase was partially offset by a decrease in average reimbursement per our buying pte tab due to payer mix.
John mentioned, the number of ordering health care providers with a record with 2175 in the quarter compared with 1763 in the first quarter of 2021.
<unk> CTD test revenue was $8 7 million in the first quarter of 2022, compared with $8 5 million in the first quarter of 2021.
Other testing revenue was $1 7 million in the first quarter of 2022, compared with $1 8 million in the first quarter of 2021.
Cost of revenue were $5 8 million in Q1, resulting in total gross margin of 44% compared to 55, 5% in the first quarter of 2021.
The decrease in gross margin percentage was primarily due to an increase in copper costs a decrease in average reimbursement for by <unk> related to payer mix and a decrease in revenue, resulting from the Janssen agreement passenger.
<unk> gross margin was 44% in the first quarter of 2022 compared to 54, 2% in the first quarter of 2021.
Operating expenses were $20 1 million in the first quarter of 2022, compared with $16 2 million in the first quarter of 2021 due to increases in employee related expenses from headcount growth, including stock based compensation and recruitment expenses cost of revenue due to the increasingly tapping volume and cost per cap research and.
<unk> costs as well as overall increases due to inflationary factors.
For the first quarter of 2022, our net loss was $10 3 million compared to a net loss of $6 2 million for the first quarter of 2021.
Looking at our balance sheet cash and cash equivalents as of March 31, 2022, or approximately $89 8 million.
As Ron mentioned, we're expecting it to be a positive impact on our ASP revenue and gross margin from tapping through Medicare going forward.
This was due to obtaining the PLD code and subsequent reimbursement amount, which was effective April one.
Medicare advantage has adopted the code, but we will not be the benefits until they fully integrate the new price.
As with all purely co transition there is the potential for disruption when working with non Medicare payer to adapt our new Coke. This may have a short term impact on non Medicare reimbursement, which could offset any positive impact that we would realize from an increase in A&P for Medicare.
For full year 2022, we are raising our guidance, we now expect revenue to be in the range of $53 million to $55 million.
We will now open the call for questions.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone, if you're using a speaker phone. Please pick up your handset before pressing the keys and to withdraw your question. Please press Star then two and at this time, we will pause mode.
Materially to assemble our roster.
Yes.
And our first question will come from Brian Weinstein with William Blair. Please go ahead.
Hey, good afternoon, guys. Thanks for taking my questions. How are you doing.
So ah congrats on the PMA code.
Just just trying to again go through come out of what you were seeing sort of at the end there just wanted to understand the practical impact of this.
Of this increase pricing so what percentage of your business with CMS now.
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That would benefit from this.
I'm also curious about.
How this pricing impacts discussions that you have with other payers going forward.
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<unk> come out can you just repeat what you were saying about the practical impact here I understand that as youre transitioning that there could be a little bit of disruption, but are you, suggesting that you will not see any kind of net benefit from this this year or is that the reason for the guidance range. It wasn't clear to me. So just a few questions on that and then I'll have some more after.
Sure, Brian I'm going to take the first part of that question and then Ross is going to take the second part of that question. So approximately 20% of our revenue is coming through Medicare and so Ron will talk about the short term disruption and the long term positive impact. This will have an answer the last part of your question.
Yes. This is part of the reason why we're taking our guidance up from 51 to 53% to 53% to $55 million.
Yes.
The disruption of BLA code as well establish what it is Brian its a unique identifier on your asset. So what are you doing CPT code stacking, which is what company should do until they get to a third of the nation and we followed that pretty much. The letter we're approaching a 100 million lives. So now is the time to get that Pls code and we wrap.
Thirdly got a significant price of $1085. Now this is what happens while you get into the Medicare strict Medicare.
The advantage Medicare takes longer you have to do basically hand to hand combat you have to go to each payer and talk about the carve out and get them to increase the price there, but you now have a unique identifier for any payer and if you can keep in mind what happens there is the bill goes in some administrative fees that code 031 and so.
As well, we don't pay for that they'll pay for all the other markers that we have that we stack, but not for that one.
Our job of course is to get more payer coverage with this this is an important factor, though because even though you have the long term successes, there obviously with a price over $1000 is significant and it really speaks to the value that an iridium put on the asset when you see that but we'll have to keep in mind that when any company does this.
The first thing is happening as you got a unique identifier for payers to target you for non payment that will go away over time and adjust but it really is an ebb and flow.
Anything else you need there Brian .
No I think.
And Theres no question that that CTG has covered this because.
Lucas markers are kind of buried inside of that so there's no issue on that correct.
Correct, yes, the other markers get paid the lupus product itself with the algorithm will have the $1085 and of course that is inside and surrounded by the other 12 markers that surround the asset for CTD.
Okay and then.
You guys continue to make progress with ordering clinicians and.
And doctors all of those are turning in the right decision. Just curious if you have any insight on how kind of.
The share that you're getting inside of clinicians offices is at this point, so you're adding new docs or getting better adoption.
But what's the overall penetration.
Do you do you see an average typical or do you want to talk about the extremes at the high end at the low end what kind of penetration are you getting inside of each of these offices at this point.
Yeah, Great question now unlike pharmaceuticals, there is no market research syndicated data I can buy from Walter's floor IMS. It just doesn't exist for testing and the reference labs of course, you're not going to share that with you either but what we do know is that we've done well over 600000 orders since launch and Thats substantial.
We know that nobody does 600000 of anything, especially in a tight market like rheumatology unless you are adding significant value and you are being adopted as the second part of this is that not every rheumatologist is created equal there is a group within that 4500, that's self annoyed them. The apologists now theres no such thing as an a M. A loop hologic.
But that's all they want to do is see those lupus patients we feel like we have the adopters because there's such strength over 35 peer reviewed published studies on our asset and a lot of Kols support so while I can't give you a market share number because one does not exist that I can actually stand behind on a day to day basis from.
<unk> data I can tell you that we are dominant force within the <unk> and we have really grown in the general Rheumatologists as well now there is also that group that.
They want to do is infusions in RA, and we'll be able to address them with their advisors radar asset.
Understood. Okay, and then last one for me.
We have revenue guidance, but can you give us some thoughts about how we should be thinking about spending through the year and cash burn. Thank you.
Yeah, So as Ron mentioned in the prepared remarks, we have a lot of exciting stuff in the pipeline. So R&D expenses will continue to increase quarter after quarter sequentially as we continue to invest in the personnel and other items in R&D to advance these products.
The pipeline for our SG&A, we really do have the infrastructure build as we've mentioned on the past several calls we're at 63 territories and we did supplement that with a inside sales team that's been in place for a while and those costs have been fully annualized. So if you look at pre current quarter.
Order you can pretty much use that for the next few quarters. So it's just the in flight inflationary increases that are going to incur this year for SG&A.
Okay. Thank you.
Thank you Brian .
Again to ask a question. Please press Star then one our next question will come from Carl Mixon with Canaccord. Please go ahead.
Hey, Thanks, guys for the questions and congrats on always updates today and congrats on the quarter.
Maybe just thinking about the guidance I guess I mean, just was wondering any commentary on like year over year volume of revenue growth and in March specifically I know it was like a record month.
Just looking at the guide it implies year over year growth of like 18% for the period between the second quarter and the fourth quarter and obviously I know the first quarter, how does that 15% growth. So clearly impacted by omicron. It would just be helpful. If you could provide any commentary on like I said year over year volume or revenue growth exiting March or maybe for the four months itself.
Yes.
Yes. Thanks for the question Kyle we feel great about the volume trends as we mentioned March was an all time record so with guidance. It really becomes more of a asps story is the long term impact from the PLO code is a great opportunity, but we're going to have that short term.
Term disruption potentially from the insurance payers, we're going to work with those payers to minimize the disruption in the short term, but long term. This is a great outcome, but there are many organizational systems, we're going to have to work through and this might take some time, but as we mentioned long term that this is a good outcome and this is <unk>.
Part of the reason why we're taking our guidance up this quarter.
Yeah.
Alright, alright, thanks, that's helpful.
And I guess on that note actually wanted to talk about Asps.
And tests per provider in the quarter I mean, it looks like.
Both declined year over year, which I guess understandable on the ASP side, you mentioned payer mix test per provider I'm not it's not clear to me what happened there I guess can you walk through why these I guess decreases occurred in maybe about the explanations for the full year like the cadence kind of as we go go ahead here and just maybe on ISP like obviously it was like $2 80 in the quarter.
Given all these dynamics with the new <unk> and things like that.
Do you think that this could remain to 80 or maybe fall below because obviously, we want to get back to like 300, or so right. So that would be helpful.
Sure. So in Q1 of 'twenty, one are <unk> CTD was around $294. We saw a $13 decreased to Q1 of 'twenty two to $281 and as you mentioned in your question. Yes. This was in regards to payer mix. So there is obviously a wide range of A&P between Payor.
So larger volumes are smaller volumes from any payers could have that swing to cause that 13 dollar decline.
To address the second part of your question, Yes, we do anticipate our ASP to increase during the Pls code as we mentioned the.
<unk> for Medicare's going to 1085, Medicare allowable prior to them was $295 now that's further advice Lukas tab keep in mind as Ron was mentioning the 12 additional markers to make it a buying CTD and their install additional 200 approximately $200 reimbursement on those additional 12 <unk>.
Occurred.
Through Medicare So we do anticipate that in each quarter, we should see our A&P increase and the reason why I say each quarter is because of the short term disruption with the commercial payers.
Okay.
Sounds good to me, let me just ask a final one I guess, maybe for Ron and you were just mentioning this a moment ago.
Around the whole the impact from the peer like code on maybe your ability to obtain new payer coverage. I think this is this was I think this was asked but look I'm not sure. If the answer was totally clear is this a sign of maybe market validation for Levi's lupus test and maybe that could push over the finish line with some of these payers and you've used the CBT stock for years, we'll make sure. The most excited.
The new code.
Yes.
This is very meaningful because not only is that a PLE code, which is important but getting price as fast as we can from our Mac and meridian at the $1085 is significant and really shows.
It shows the value of that test when they took it to that price and of course now obviously the next step is the LCD. So this as though this is a path that we know really well and we're monitoring it.
As we should so the impact.
Packed with other Payors is an endorsement, but we call them payers, but they you got to get to them you've got to be able to get them. There have the discussion. We think that this helps us along with our current studies again over 35 published peer review studies in top journals and more studies coming.
We think we have all the evidence necessary to prove them when it comes to diagnosing lupus correctly and accurately we should be part of the story for these physicians, we do have the physician support what excites me. The most about it is we're continuing to do exactly what we said, we would do and even in the face of omnicom, which slowed us down as far.
Is getting everything done it did show the fact that we continued to grow volume we hit our mark of roughly a third of the nation before we filed and we did get a price that we really appreciate so now now as we approach these payers.
We do have this going in our favor it can only help us they're not going to be fast to make these changes because they are traditionally of witnesses they can get away with paying 300, theyre going to try to have it as long as they can but theyre going to have to answer a lot of questions. Since we do have the pricing from Medicare.
Okay perfect. Thanks, Ron Thanks come off.
Thanks Carl.
This.
Our question and answer session I would like to turn the conference back over to Ron Rocca for any closing remarks. Please go ahead.
Sure. Thanks, Chuck I would like to point out that May is lupus awareness month every year, we partnered with the Lupus Foundation of America out of Washington, DC, and we dedicate each week of the month to a different initiative to help promote the awareness of this terrible disease and the work being done by the lupus community I think it's always important to remember that the work we do.
As a patient on the back end of it and that's really what we're focused on we know the numbers the dollars and everything will follow as long as we put patients first that were discovered driven company, but we're a patient first company <unk>. Thank you everyone for your time and effort really do appreciate your support of Exterran.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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