Q4 2023 Exagen Inc Earnings Call
Operator: Greetings. Welcome to Exagen, Inc.'s fourth quarter 2023 earnings call. This time, all participants are in listen-only mode.
Greetings and welcome to <unk>, Inc. 's fourth quarter 2023 earnings call.
At this time, all participants are in listen only mode.
Operator: The question and answer session will follow the formal presentation. If anyone today should require operator assistance during the conference, please press star zero from your telephone keypad. Please note that this conference is being recorded. Next time, I'll hand the conference over to Ryan Douglas from Vestal Relations. Ryan, you may now begin.
Question and answer session will follow the formal presentation.
If anyone today should require operator assistance during the conference. Please press star zero from your telephone keypad.
Please note that this conference is being recorded.
At this time I'll hand, the conference over to Ryan Douglas with Investor Relations Douglas You May now begin your presentation.
Ryan Douglas: Good morning, and thank you for joining us. Earlier today, Exagen, Inc. released financial results for the quarter and full year ended December 31, 2023. The release is currently available on the company's website at www.exagen.com. John Aballi, President and Chief Executive Officer, and Kamal Adawi, Chief Financial Officer, will host this morning's call.
Good morning, and thank you for joining US earlier today <unk> released financial results for the quarter and full year ended December 31 2023.
The release is currently available on the company's website at Www Dot extra Gen Dot com.
China, Barley, President and Chief Executive Officer, and small Dowie, Chief Financial Officer will host this morning's call.
Ryan Douglas: Before we get started, I would like to remind everyone that management will be making statements during this call that are 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. Therefore, 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 guidance for the quarter, potential profitability for current and future product offerings, and reimbursement and coverage, are based upon current estimates and various assumptions. These statements involve material risk 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.
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 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 guidance for the quarter potential profitability for current and future product offerings and reimbursement and coverage are based upon current estimates and various assumptions.
Yes.
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 the risks and uncertainties associated with our business. Please see the filings with the Securities and Exchange Commission.
Ryan Douglas: For a list and description of the risks and uncertainties associated with our business, please see the filings with the Securities and Exchange Commission, including our Form 10-K for the year ended December 31st, 2023, and any subsequent filings. In addition, some of the information discussed today includes non-GAAP financial measures, such as adjusted EBITDA, that have not been calculated in accordance with generally accepted accounting principles in the United States or GAAP. These non-GAAP items should be used in addition to and not substituted for any GAAP results.
Including our Form 10-K for the year ended December 31, 2023, and any subsequent filings.
In addition, some of the information discussed today includes non-GAAP financial measures such as adjusted EBITDA that have not been calculated in accordance with generally accepted accounting principles in the United States or GAAP. These.
These non-GAAP items should be used in addition to and not substituted for any GAAP results. We believe these metrics provide useful supplemental information and accessing our revenue and operating performance.
Ryan Douglas: We believe these metrics provide useful, supplemental information in assessing our revenue and operating performance. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are presented in the tables at the end of our earnings release issued earlier today, which has been posted on the investor relations page of the company's website. Information provided in this conference call speaks only to the live broadcast today, March 18, 2024. Exagen 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'll now turn the call over to John Aballi, President and CEO of Exagen. Thanks, Ryan.
Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are presented in the tables at the end of our earnings release issued earlier today, which has been posted on the Investor Relations page of the company's website.
The information provided in this conference call speaks only to the library cast today March 18th 2024 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 John of barley, President and CEO of oxygen.
Thanks, Ryan and thank you to everyone joining the call today I will review, our fourth quarter and full year 2023 results progress on our strategy to achieve profitability and touch on how 'twenty 'twenty four is starting out.
John Aballi: And thank you to everyone joining the call. Today, I'll review our fourth quarter and full year 2023 results, progress on our strategy to achieve profitability, and touch on how 2024 is starting out. I'll then hand it over to Kamal, our CFO, for further details regarding our financial performance. 2023 was a year where we implemented significant change across the organization in executing on our strategy. And it's exciting, and to be honest, a lot of fun, to see the results we were able to generate in a relatively short period of time by focusing on our core product, Advise CTD. I have to start by genuinely thanking all the team members at Exagen for putting in the hard work and effort this past year to really change the trajectory of our company.
I'll, then hand, it over to come off our CFO for further details regarding our financial performance.
2023 was a year, where we implemented significant change across the organization and executing on our strategy and it's exciting and to be honest a lot of fun to see the results we were able to generate in a relatively short period of time by focusing on our core product advise CTD.
To start by genuinely thanking all the team members at X again for putting in the hard work and effort. This past year to really change the trajectory of our company.
John Aballi: We've continued to serve patients in the rheumatology space with the best testing available, but we are now doing so with a healthier organization, which is much closer to operating profitably. Throughout the year, my confidence has grown knowing that many of the strategic shifts we've needed to make are behind us, and that as we continue to execute, our goals are truly within reach. Looking at our performance this past year, we are extremely proud that our full-year revenue was a record $52.5 million, with $13.8 million coming in the fourth quarter. Full-year revenue increased by 15% over 2022, while simultaneously reducing the cash needed to run the business.
We've continued to serve patients in the rheumatology space with the best testing available, but are now doing so with a healthier organization, which is much closer to operating profitably.
Throughout the year my confidence has grown knowing that many of the strategic shifts we've needed to make are behind us and that is we continue to execute our goals are truly within reach.
Looking at our performance this past year, we're extremely proud that our full year revenue was a record 52, and a half million dollars with $13 8 million coming in the fourth quarter.
Full year revenue increased 15% over 2022, while simultaneously, reducing the cash needed to run the business.
John Aballi: This resulted in a $22 million or 57% improvement in adjusted EBITDA year over year. We also improved our gross margin to 56% for the full year 2023 and to over 59% in the fourth quarter. This is fantastic progress over our 2022 performance, and we are steadily moving towards our cash flow positive target of 60% gross margin. In achieving our 2023 performance, one of the key areas we focused on was improving the average selling price of advised CTD. In many respects, we've laid the groundwork for continued progress this past year, but we have also shown that we can simultaneously generate momentum in improving the realized price of our core testing. At the end of 2022, our trailing 12-month ASP was $285 for advised CTD testing, and by the end of 2023, we were able to increase this 18% to $336.
This resulted in a 22 million dollar or 57% improvement in adjusted EBITDA year over year.
We also improved our gross margin to 56% for the full year 2023 and to over 59% in the fourth quarter.
This is fantastic progress over our 2022 performance and we are steadily moving towards our cash flow positive target of 60% gross margins.
In achieving our 2023 performance one of the key areas. We focused on was improving the average selling price of advise CTD.
In many respects we've laid the groundwork for continued progress this past year, but also shown that we can simultaneously generate momentum and improving the realized price of our core testing.
At the end of 2022 or.
Our trailing 12 month ASP was $285 for advise CTD testing and by the end of 2023, we were able to increase this 18% to $336.
John Aballi: The increase in ASP relative to 2022 becomes even more impressive when factoring in the CMS repricing of our PLA code as we transition to the clinical laboratory fee schedule at the start of the year. We are very proud to deliver a change of that magnitude without sacrificing progress in growing the business. For 2023, we delivered a record 137,000 advised CTD tests, of which approximately 30,000 were completed in the fourth quarter. From inception to date, we have now delivered over 900,000 advised CTD tests.
The increase in Asps relative to 2022 becomes even more impressive when factoring in the CMS repricing of our P. L. A code as we transition to the clinical laboratory fee schedule at the start of the year.
We are very proud to deliver a change of that magnitude without sacrificing progress and growing the business.
For 2023, we delivered a record 137000 advise CTD test.
Of which approximately 30000 were completed in the fourth quarter.
From inception to date, we have now delivered over 900000 advise CTD test and we look forward to surpassing the 1 million test Mark later this year.
John Aballi: And we look forward to surpassing the one million test mark later this year. In 2023, we worked hard to focus on Advise CTD and specifically to improve the ASP of our offering. As we implemented changes to accomplish this goal, as expected, we did experience a decline in VIVE CTD testing in the second half of the year.
In 2023, we worked hard to focus on advise CTD is specifically to improve the ASP of our offering.
We implemented changes to accomplish this goal as expected we did experience a decline in advise CTD testing in.
In the second half of the year.
John Aballi: As we've progressed into the first quarter, we are seeing encouraging progress in building back our business from a volume standpoint and continue to expect growth in 2024 to be driven by improvements in ASP and increasing test volume. When I joined Exagen in late 2022, I worked to focus on advised CDD testing and subsequently look for ways to improve every aspect of how we offer our tests. One area we've recognized as an opportunity is in leveraging some of the unique biomarkers we already have a license to in order to enhance the sensitivity of advised CTD. On this note, we anticipate launching new proprietary TESOL markers within the Advise CTD platform in the fourth quarter of this year. We expect these novel markers will improve the sensitivity of our test in identifying patients with lupus.
As we progressed into the first quarter, we are seeing encouraging progress in building back our business from a volume standpoint, and continue to expect growth in 2024 to be driven by improvements in asps.
And increasing test volumes.
When I joined <unk> in late 2022.
Work to drive focus on advise CTD testing and subsequently looked for ways to improve every aspect of how we offer our tests.
One area, we have recognized that as an opportunity is leveraging some of the unique biomarkers, we already had license to in order to enhance the sensitivity of advise CTD.
On this note, we anticipate launching new proprietary T cell markers within the advise CTD platform in the fourth quarter of this year.
We expect these novel markers will improve the sensitivity of our test and identifying patients with lupus.
John Aballi: Ultimately, we anticipate being able to identify up to 50% of SLE patients who would test negative by standard of care testing or alternatives. In November of 2023, we presented an abstract at the American College of Rheumatology annual meeting highlighting the gain in diagnostic sensitivity T cell markers provide, and we are working to have them clinically available to better aid clinicians and patients in identifying disease. From our research, these markers are some of the most specific for SLE that have been discovered and will therefore be a true value add for clinicians and patients. Additionally, and from a competitive advantage standpoint, we have patent protection for offering these markers through 2035, which reinforces our commitment to innovating in this space and further highlights Exagen as a company that can continually bring novel biomarkers to the rheumatology community. The addition of these markers to advise CTD is also expected to be accretive to our financial performance by the end of this year. Finally, before I hand the call over to Kamal...
Ultimately, we anticipate being able to identify up to 50% of SLE patients, who would test negative by standard of care testing our alternatives.
In November of 2023, we presented an abstract at the American College of Rheumatology annual meeting highlighting the gain in diagnostics sensitivity T cell markers provide.
And we are working to have them clinically available to better aid clinicians and patients and identifying disease.
From our research. These markers are some of the most specific for <unk> that have been discovered and will therefore be a true value add for clinicians and patients. Additionally.
Additionally, and from a competitive advantage standpoint.
We have patent protection and offering these markers through 2035, which reinforces our commitment to innovating in this space and further highlight tecogen is a company that can continually bring novel Biomarkers to the rheumatology community.
The addition of these markers to advise CTD is also expected to be accretive to our financial performance by the end of this year.
Finally, before I hand, the call over to come off.
John Aballi: The goal posts are as clear as ever, and I very much believe we will achieve cash flow break even with gross margins around 60% and revenue of approximately $75 million with our current cash balance. Execution of our strategy is demonstrating results, moving us closer to these goals, and I'm excited about the progress we expect this year. With that, I'll now turn the call over to Kamal to provide details on the fourth quarter and full year 2023.
The goalposts are as clear as ever and I very much believe we will achieve cash flow breakeven with gross margins around 60% and revenue of approximately $75 million with our current cash balance.
Execution of our strategy is demonstrating results moving us closer to these goals and I am excited about the progress we expect this year.
With that I'll now turn the call over to <unk> to provide details on the fourth quarter and full year 2023.
I'm off.
Kamal Adawi: Thank you, John, and good morning, everyone. As John mentioned, total revenues for the full year 2023 were $52.5 million, an increase of 15.3% over 2022. Total revenues in Q4 were $13.8 million, which was an increase of 7.2% over fourth quarter 2022. Total revenues for the full year were driven by a combination of record volume from a strong first half of the year and ASPs from our flagship product of ICTDE, increasing 18% for the year. Testing volumes from Aviv CTD were 137,650 tests for the full year and 30,438 tests for the fourth quarter.
Thank you John and good morning, everyone.
As John mentioned total revenues for the full year 2023 were $52 5 million an increase of 15, 3% over 2022.
Total revenues in Q4 were $13 8 million, which was an increase of seven 2% over fourth quarter 2022.
Total revenues for the full year, we returned by a combination of record volume from our strong first half of the year and Asps from our flagship product <unk> CTD, increasing 18% for the year.
Testing volumes from a buying CTD were 137650 task for the full year and $30 438 for the fourth quarter. We had 2383 ordering health care providers in Q4 2023 compared with.
Kamal Adawi: We had 2,383 ordering healthcare providers in Q4 2023 compared with 2419 for Q4 2022. The slight drop in healthcare providers is also a direct result of provider-facing changes we made that impacted volume. Again, this decrease was expected and necessary as we look to build a profitable business. The breakout of $52.5 million in full-year total revenue is $46.3 million in buying CTD revenue with other testing revenue at $6.2 million. For the fourth quarter, total revenue of $13.8 million, of which iCTD testing revenue was $12.1 million, and other testing revenue was $1.7 million.
<unk> 2400, <unk> 19 for Q4 2022.
The slight drop in health care providers is also a direct result of provider facing changes we made that impacted volume again. This decrease was expected and necessary as we look to build a profitable business.
The break out of $52 5 million and full year total revenue is $46 3 million and are buying CTV revenue with other testing revenue at $6 2 million.
For the fourth quarter total revenue of $13 8 million Avaya CTD testing revenue was $12 1 million and other testing revenue was $1 7 million.
Kamal Adawi: The changes made to the Revenue Cycle Management Department at the start of the year are continuing to yield results. In the fourth quarter, for tests that were older than 12 months and were not in accounts receivable, we collected and recognized $1.4 million, of which the majority came from a commercial payer. We continue to make improvements to the billing processes and strive to collect the maximum amount per task. For the full year 2023, costs of revenue were $23.1 million with a gross margin of 56.1% compared to $24.2 million and a gross margin of 46.9% for the full year 2022. The increase in gross margin was due to the increase in AFP we saw throughout the year. Costs of revenue were $5.6 million in Q4 2023, resulting in a gross margin of 59.2%, compared to 50.9% in Q4 2022. Again, the increase in gross margin percentage was driven by an increase in ASP. Operating expenses excluding COGS for the full year 2023 were $52.3 million compared with $67.4 million in 2022. Year-over-year decreases were primarily due to decreases in employee-related expenses due to decreases in headcount and reduced R&D expenses.
The changes made to the revenue cycle management Department and the start of the year is continuing to yield results in the fourth quarter for <unk> were older than 12 months and we're not in accounts receivable, we collected and recognized $1 4 million of which the majority came from a commercial payer.
We continue to make improvements to the billing processes and strive to claw back the maximum amount per test.
For the full year 2023 cost of revenue were $23 1 million with a gross margin of 56, 1% compared to $24 2 million and gross margin of 46, 9% for the full year 2022. The increase in gross margin was due to the increase in A&P, we saw throughout the year.
Cost of revenue were $5 6 million in Q4, 2023, resulting in a gross margin of 59, 2% compared to 59% in Q4 2022 again the increase in gross margin percentage was driven by an increase in ASP.
Operating expenses, excluding Cogs for the full year 2023 were $52 3 million compared with $67 4 million in 2022.
Year over year decreases were primarily due to the decreases in employee related expenses due to decreases in head count and reduced R&D expenses.
Kamal Adawi: Operating expenses excluding COGS in Q4 2023 were $13.3 million, compared with $21 million in Q4 2022. The $13.3 million included a $1.6 million write-off from leasehold improvements from a lease we were able to exit. We were very happy to exit this lease in a very difficult commercial real estate market, resulting in significant cash savings into 2027. As a reminder, operating expenses in the fourth quarter of 2022 include a one-time impairment in the amount of $5.5 million from goodwill associated with the purchase of the Medical Diagnostics Division of Cypress Bioscience in 2010. The net loss in Q4 2023 was $5.6 million, compared with $14.4 million in Q4 2022. For the full year 2023, the net loss was $23.7 million, compared to $47.4 million in 2022.
Operating expenses, excluding Cogs in Q4, 2023 were $13 3 million compared with $21 million in Q4 of 2020 to the $13 3 million included a $1 6 million write off from lease hold improvements from our leads were able to exit we are very happy to exit those.
And a very difficult commercial real estate market, resulting in significant cash savings into 2027.
As a reminder, operating expenses in the fourth quarter of 2022 include a one time impairment in the amount of $5 5 million from goodwill associated with the purchase of medical Diagnostics Division of Cypress Bioscience in 2010.
The net loss in Q4, 2023 was $5 6 million compared with $14 4 million in Q4 of 2022.
For the full year 2023, the net loss was $23 7 million compared to $47 $4 million in 2022.
Kamal Adawi: Adjusted EBITDA was negative $3.9 million for the fourth quarter of 2023 compared to negative $13.4 million for Q4 2022. For the full year, adjusted EBITDA was negative $17.1 million for 2023 compared to negative $39.8 million during the full year of 2022. As a reminder, our adjusted EBITDA excludes stock comp expense since it is a large non-cash expense for the organization.
Adjusted EBITDA was negative $3 9 million for the fourth quarter 2023, compared to negative $13 4 million for Q4 2022.
For the full year adjusted EBITDA was negative $17 1 million for 2023 compared to negative $39 8 million during the full year of 2022.
As a reminder, adjusted EBITDA excludes stock comp expense since it is a large noncash expense for the organization.
Kamal Adawi: Please refer to our earnings release issued earlier today for reconciliation of adjusted EBITDA and net loss. Looking at our balance sheet, I'm very happy with how we ended the year in regard to cash management. Cash and cash equivalents as of December 31, 2023 were approximately $36.5 million, up from $28.4 million at the end of September.
Refer to our earnings release issued earlier today for a reconciliation of adjusted EBITDA and net loss.
Looking to our balance sheet I'm very happy with how we ended the year in regard to cash management.
Cash and cash equivalents as of December 31, 2023 were approximately $36 5 million up from $28 4 million at the end of September.
Kamal Adawi: Our counter-sillable balance at the end of 2023 was $6.5 million. As we continue to improve revenue cycle management, we plan to hold claims in the first half of the year, which will result in an increase in accounts receivable and an accelerated decrease in our cash, both returning to normal levels by year's end. We anticipate a similar cadence in 2024 with our cash balance and AR as we did in 2023. I'm pleased with the continuing improvements made to the organization and the progress we've seen on our financial statements. As John stated, we continue to target cash flow breakeven at revenues of $75 million and gross margins of 60%. As I previously shared, our gross margins were just shy of 60% this past quarter on the strength of improving ASP. For full year 2024 revenue, we're providing guidance of approximately $54 million.
Our accounts receivable balance at the end of 2023 with $6 5 million.
As we continue to improve revenue cycle management, we plan to whole claims in the first half of the year, which will result in an increase in accounts receivable and an accelerated decrease in our cash both returning to normal levels by year is that we anticipate a similar cadence in 2024 with our cash balance and as we do.
In 2023.
I am pleased with the continued improvements made to the organization and the progress we have seen on our financial statements as John stated, we continue to target cash flow breakeven at revenues of 75 million and gross margins of 60%.
As I previously shared our gross margins were just shy of 60% this past quarter on strength of improving asps.
For full year 2020 for our revenue, we're providing guidance of approximately $54 million for first quarter 2020 for revenue, we're providing a guidance range of $13 million to $13 5 million for full year 2024, we believe our adjusted EBITDA will be better than negative $20 million.
Operator: For first quarter 2024 revenue, we're providing a guidance range of 13 million to 13.5 million. For full year 2024, we believe our adjusted EBITDA will be better than negative 20 million. Given our continued improved performance, we believe our existing cash and cash equivalents are adequate to meet our anticipated cash requirements into 2026. We will now open the call for questions. Thank you. We'll now be conducting a question and answer session. If you would like to ask a question today, please press star 1 on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.
Given our continued improved performance, we believe our existing cash and cash equivalents are adequate to meet our anticipated cash requirements into 2026.
We will now open the call for questions.
Thank you will now be conducting a question and answer session.
Like to ask a question today. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue you.
You May press star two if you'd like to move your question from the queue.
Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we poll for questions. Thank you. Thank you. And our first question comes from the line of Mark Massaro with BTIG. Please proceed with your question. Hey guys, thanks for taking the time to answer the question. You know, you guys talked about the change in the clinical lab fee schedule. Can you just walk us through what the change was to your Medicare rate? I believe it went from 1,085 to 840, but I think you have an opportunity to get paid another $200 for additional markers. Is that correct?
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
One moment please poll for questions. Thank you.
Thank you and our first question comes from the line of Mark Massaro with BTG. Please proceed with your questions.
Hey, guys. Thanks for taking the question.
You know you guys talked about the change in <unk>.
The clinical lab fee schedule I believe so can you just walk us through.
What the change was too.
To your Medicare rate I believe it went from 185 to 840, but I think you have an opportunity to get paid another $200 for additional markers is that correct and then.
Kamal Adawi: And then can you just give us a sense for whether or not you expect similar payment when you move to the new novel markers? Thanks for the question, Mark. Yes, those rates are correct. It did move from 1085 to 840.
Can you just give us a sense for.
Whether or not you expect similar payment.
When you move to the new novel markers.
Thanks for a question Mark.
Yes, those rates are correct. It did move from 1085 to 840.
When you look at Medicare is.
John Aballi: When you look at Medicare as the impact it has on ASP, that is a $26 impact on our ASP. So with the increase we've seen, year-over-year, driving our trail in 12 months to 336. A lot of that came on the back of commercial payers. And just to address the other point, yes, it will be stable. Hey, Mark, good morning.
The impact it has on Asps that is a $26.
Impact on our Asps, so with the increase we've seen.
Year over year with driving our trailing 12 months ASB to $3 36, a lot of that came on the <unk>.
Back of commercial payers.
And just address the other point, yes, it will be stable.
Hey, good morning.
Kamal Adawi: You also asked the question around impact relative to the new markers that we're launching here later this year. And so the methodology for those new markers is flow cytometry-based, which, as you know, we're highly proficient at offering those complex tests, and it'll be three markers. We haven't broken out financially how it's going to contribute to the organization because we're still honing in on that launch date. It's not currently factored into the guidance either. Okay. And the gross margin of 59% in the quarter came in well above our expectations.
You also asked the question around impact relative to the new markers that we're launching here later this year I believe.
And so those the methodology for those new markers as flow cytometry based which as you know, we're highly proficient and offering us complex tasks and it'll be three markers, we haven't broken out.
Financially how its going to contribute to the organization because we are still honing in on that launch date. It is not currently factored into the guidance either.
Okay.
The gross margins of 59% in the quarter came in well above our expectations.
Kamal Adawi: Kamal, how should we think about the gross margin trajectory in 24, recognizing that you are awfully close to your 60% gross margin target? Sure. So one thing to always keep in mind with our gross margins is that we have seasonality with them that can be seen year after year. And while I'm very happy with our 59% gross margin in Q4, what we usually see going into the next year is a lower gross margin in Q1, and then we increase that gross margin in each quarter. Now, this year, we're doing something very similar to what we did in 2023, which is holding claims. By holding claims, that will reduce some of the fluctuations you see going from Q1 to Q2, and we should see more stability in our gross margin between quarters because that fluctuation from the deductible resetting won't have as great of an impact on the business.
<unk>, how should we think about gross margin trajectory.
And 24 are recognizing that you are awfully close to your 60% gross margin target.
Sure. So one thing to always keep in mind with our gross margins as we have had seasonality with them that has been seen year after year and while I'm very happy with our 59% gross margin in Q4, while we usually see going into the next year is a lower gross margin in Q1, and then we increase.
Gross margin in each quarter now this year, we're doing something very similar to what we did in 2023, which is holding claims.
By holding claims.
That will reduce some of the fluctuations you see.
Going from Q1 to Q2.
We should see more stability in our gross margin between quarters, because that fluctuation from the deductible resetting won't have as great of an impact on the business and we are very near where we are very close to our near term goal of 60% gross margins. So I am very pleased with the progress we're making there.
Kamal Adawi: And we are very near, we are very close to our near-term goal of 60% gross margins. So I'm very pleased with the progress we're making there. Okay, and then last question for me: the 2024 Revenue Guidance of $54 million is about 3% above 2023 levels. Can you maybe parse out what the mix will look like between volumes and ASP?
Okay and then last question for me the 2020 for revenue guidance.
About $54 million is about 3% above 2023 levels can you maybe parse out what the mix will look like between.
Volumes in ASP I would expect asps to be the focus but do you also think you can grow volumes in 2024.
John Aballi: I would expect ASP to be the focus, but do you also think you can grow volumes in 2024? Mark, I'll start off here. And, you know, from our perspective, 2024 is really an execution year. We set everything up in 2023, or at least did a lot of the heavy lifting in 2023 to make the strategic shifts that we needed to. And what that results in from our perspective is the most sensitive lever being ASP improvement. So our growth will be ASP driven, but we do expect to build back our volume over the course of the year, and we're kind of looking at it as You had the back half of 2023, you had a run rate for volume, and you've seen consecutive quarters kind of in the low 30,000 level in terms of advised CTD units. And so we're building back from that level. We're encouraged by what we've seen here in Q1, where we sit today in the quarter. But ASP is going to be the driver of growth there. Got it. All right, guys. Thanks for your time.
Hey, Mark I'll start off.
Here.
From our perspective 2024 is really an execution year, we've set everything up in 2023 or at least made that a lot of the heavy lifting in 2023 to make the strategic shifts that we needed to and what their results and from our perspective is the most sensitive lever being ASP improvement so.
Our growth will be our asps, driven but we do expect building back our volume over the course of the year and we're kind of looking at it as.
You had the back half of 2023, you had a run rate for volume you have seen now a consecutive quarters kind of in the low 30000 level in terms of advise CTD units and so we're building back from that level. We're encouraged by what we've seen here in Q1, where we sit today in the quarter.
The asps is going to be the driver of growth there.
Got it alright, guys. Thanks for the time.
Operator: Appreciate it. Our next question is from the line of Kyle Mikson with Kandacore Genuity. Please proceed with your question. Hey, things congratulations on the year.
Appreciate it.
Our next question is from the line of Kyle mixing with Canaccord Genuity. Please proceed with your questions.
Hey, thanks, Congrats on the year.
Kyle Alexander Mikson: So just on that last point there, John, when you think about the below 30,000 level here, building back from that, I mean, how, how, um, you know, how well above that can we get to over the course of 2024? Can we get to like close to 40,000 tests per quarter possibly? A lot of this is like kind of ASC verse falling, right? So just trying to parse it out is important.
On that last point there.
John when you think about the below 30000 level here, we're building back from that.
How how well above that can we get to over the course of 'twenty 'twenty four can we get to like close to 40000 tests per quarter, possibly I just had a.
A lot of this is like kind of ASP versus volume right. So just trying to parse it out it's important that we would love to hear your.
Kyle Alexander Mikson: So we'd love to hear your additional commentary if possible. Thanks. Yeah. Morning, Kyle.
Additional commentary if possible. Thanks.
Kyle Alexander Mikson: Thanks for joining the call and appreciate the question. From our perspective, you know, if you were to model 40,000 tests per year on a quarterly basis, or 40,000 tests on a quarterly basis, you would have to model a significant decline in the ASP. And that is not consistent with what we're achieving or our progress.
Yeah. Good morning call. Thanks for joining the call and I appreciate the question.
From our perspective, if you were to model 40000 tests per year on a quarterly basis or 40000 tests on a quarterly basis, you would have to model a significant decline in the ASP.
And that is not consistent with what we're achieving our progress so from our perspective, we expect the asps to trailing 12 month ASP remind you to continue to increase throughout the year, that's an inherently difficult metric to forecast progress on.
John Aballi: So from our perspective, we expect the ASP, the trailing 12-month ASP, mind you, to continue to increase throughout the year. That's an inherently difficult metric to forecast progress on, you know, understanding when you're going to have specific payer traction and when that cash actually hits the door is somewhat challenging. And so we've said look at a 12-month, trailing 12-month number, which smooths out some of that accounting variability.
I understand and when Youre going to have specific payer traction and when that cash actually hits. The door is somewhat challenging and so we said look at the 12 month trailing 12 month number smooths out some of that accounting variability and we expect our growth rate there, which.
John Aballi: There's a growth rate there, which will lead you into that $54 million overall revenue number. That's a number we feel comfortable with right now, knowing how we're progressing. And so that's about the level of detail that we're able to provide at this point. But I would not model a decline in ASP.
Which will lead you into that $54 million overall revenue number that's a number we feel comfortable with right now knowing knowing how we're progressing and so that's about the level of detail.
We're able to provide at this point, but I would not model a decline in ASP, that's not consistent with our strategic approach.
Kamal Adawi: That's not consistent with our strategic approach. Okay, that was helpful. And then Kamal on like cash burn and cash collections. First on like prior period collections. I know you had some of that in 2023. Is there any way you could kind of parse that out and help us understand the apples to apples comparison with the guidance here? Because, you know, as we alluded to before, the growth year over year is not very robust, I guess, even though underlying strengths like that are clear. So that'd be helpful. And then with cash, it just sounds like the cadence is similar to 23, like it'll be similar to 23 and 24.
Okay that was helpful and then tomorrow on like cash burn and cash collections first of all unlike prior period cognizant I know you had some of that in 'twenty. Three is there any way you could kind of parse that out and help us understand the apples to apples comparison with the guidance here because as we alluded to before the growth year over year is not robust I guess, even though underlying strength like it's clear.
So that would be helpful and then with cash.
That looks like the cadence is similar to 'twenty three is like it will be similar to FY2023 'twenty four does that mean that like the first half of the year cash burn is going to be in line with like the full year burn kind of I.
Kamal Adawi: Because I mean that like the first half of your cash for is going to be in line with like the full year burn kind of that makes sense. I don't know, just kind of parse these things out for us. Sure.
I don't know just kind of parse these things out for us.
Kamal Adawi: Thanks for the question, Kyle. So, let me address the prior period collections first. For full year 2023, our prior period collections were around $5 million.
Sure. Thanks for the question Kyle So let me address the prior period collections first.
Full year 2023, our prior period collections were around $5 million, we're very pleased with the progress. We made there the revenue cycle management team made great strides and improving the processes and it was a big driver.
Kamal Adawi: We're very pleased with the progress we made there. The revenue cycle management team made great strides in improving the processes, and it was a big driver for our accomplishments in 2023. So, we're very happy with that.
For our accomplishments in 2023, so very happy with that now trying to forecast prior period collections or ASP in general is very challenging, but what I can tell you with how prior period collections.
Kamal Adawi: Now, trying to forecast prior period collections or ASP in general is very challenging. But what I can tell you about prior period collections should be thought about for 2024 is while we made great strides in improving the processes, one of the things we're going to see there is improved time to collect on some of these older tests that weren't in AR or that were. We believe we made good progress there, and we expect to see some additional prior period collections in the first half of the year, but by the back half of the year, I don't Now to address your second point on cash, we ended the year with $36.5 million, and I'm very pleased with the progress we made in terms of reducing our burn and being very focused on our cash. We will see what we see in 2023 with cash and AR offsetting during the year.
Should be thought about for 2024.
While we made great strides.
And improving the processes one of the things we're going to see there is improved time to collect on some of these older tests that werent in that work.
Older than 12 months.
So we believe we've made good progress there and we will see we expect to see some additional prior period collections at the first half of the year, but by the back half of the year I don't think its going to be material or be a discussion point, because I think revenue cycle management wealth caught up by that.
Point now.
Now to address your second point on cash.
We ended the year with $36 5 million and I am very pleased with the progress we've made in terms of reducing our burn and being very focused on our cash.
<unk>.
We will see.
What we saw in 2023 with cash and AAR offsetting during the year so by holding claims.
Kamal Adawi: So by holding claims, we will see our cash balance drop, and our AR increase and then offset towards the end of the year. I think what you saw in Q4 of this year is exactly what we tried to signal all year in terms of. This should be offset by the end of the year. So I would expect to see that same cadence in 2024 with AR and cash balance. Right, okay, that's helpful. Kamal, thanks for that.
We will see our cash balance.
Drop at our <unk> increase and then offset towards the end of the year I think what you saw in Q4 of this year is exactly what we tried to signal all year in terms of.
This should offset by end of year. So we would expect to see that same cadence in 2024 with a cash balance.
Right. Okay. That's helpful color. Thanks for that and then final one for John on the new.
John Aballi: And final one for John on the new, the three new T cell markers launched in 4Q of this year. That sounds exciting. I just wondered where those came from.
The three new T cell markers loss in <unk> of this year that sounds exciting I, just wondering where those came from the companies had partnerships with health systems and academic labs, and even like Biopharma companies over time. So just was wondering if the markers came from them or whether that was internally developed.
John Aballi: The companies had partnerships with health systems and academic labs and even biopharma companies over time. So I was wondering if the markers came from them, or were those internally developed? That's a good question, Kyle.
That's a good question, Kyle and if you'll permit just a little bit of extra detail on them. You know first of all of these markers are going to be a huge benefit to patients and and the clinicians who manage these patients if you leverage the advice test.
John Aballi: And if you'll permit just a little bit of extra detail on them, you know, first of all, these markers are going to be a huge benefit to patients and clinicians who manage these patients if you leverage the advised test. With our test, we anticipate identifying up to 50% of patients with SLE who would otherwise test negative by traditional biomarker testing. I think that's a metric that should really resonate with clinicians, certainly with patients who have had long journeys in their diagnostic odyssey. It's a dramatic improvement. We're very proud to bring these to market. We know that much earlier diagnosis of these conditions can impact patient outcomes, and so we're excited to contribute to improved care in this way. In terms of financial performance for our company, as I said, these are not included in our guidance as we lock down a launch date, but they're going to be materially impactful to our organization. These markers we had a license to out of Allegheny.
With our test, we anticipate identifying up to 50% of patients with SMA, who would otherwise test negative by traditional biomarker testing I think that's a metric that.
It should really resonate with commission certainly with patients who have had long journeys and their diagnostic Odyssey.
It's a dramatic improvement, we're very proud to bring these to market.
<unk>.
We know that much earlier diagnosis of these conditions can impact patient outcome and so we're excited to contribute to improved care in this way in terms of financial performance for our company.
As I said these are not included in our guidance as we locked down a launch date, but it's going to be materially impactful to our organization. These markers. We had licensed to out of Allegheny, We have a longstanding relationship and collaboration with that organization has been very fruitful with the physician researchers there.
John Aballi: We have a longstanding relationship and collaboration with that organization, and it's been very fruitful with the physician researchers there. We have quite a bit of ongoing research that goes on, but we've had licenses to them for a couple of years now, and we worked on an abstract over the last 12 to 18 months, had that published at the most recent ACR meeting, and are just very excited about the results and the prospect of bringing these markers to patients. So hopefully that gives you a little sense of where they are. They've been licensed to the organization for a couple of years, but we had a heightened focus on advised CTD, and it really brought some of these opportunities to light over the last year. Yeah, you know, that was great. Allegheny County makes sense.
There, we have quite a bit of ongoing research that occurs but we've had licensed to them for a couple of years now and we.
We had worked on an abstract over the last.
12 months to 18 months had that published at the most recent ACR meeting and are just very excited about the results and the prospect of being bringing these markers to patients. So hopefully it gives you a little sense of where they where they have been licensed to the organization for a couple of years, but we had a heightened focus on advise CTD and it really brought some of these opportunities to light over the last year.
<unk>.
Yes that was great Allegheny's makes sense. It just actually a follow up so that they are kind of compatible with CB caps technology or is it like.
John Aballi: There's actually a follow-up so that they're kind of compatible with the CBCAP technology, or is it like, you know, it's like incremental to that. So, there are three individual analytes. One of them is cell-bound complement as it pertains to T-cells.
Incremental to that.
So there are three individual analytes one of them is sell down complement as it pertains to T cells. So right now our.
John Aballi: So, right now, our BioCTD offering measures cell-bound complement on the erythrocytes along with B-cells. This would be adding the T-cell component. But then, additionally, it's looking at cell-bound IgG and IgM antibodies, and that's a unique aspect of this disease as well, specifically SLE. So, you're right in talking about cell-bound complement, but two additional markers are specific
Our <unk> offering measure somehow complement on the retro sites along with B cells. This would be adding the T cell component, but then additionally, it's looking at cell bound ITG and IGN antibodies and that's a unique aspect of this disease as well specifically SLE.
Youre right in and talking about shutdown complement by two additional markers are specific antibodies.
Kyle Alexander Mikson: Okay, yeah, that sounds great. Thanks, guys. Appreciate the time.
Okay, Yeah. It sounds great. Thanks, guys appreciate the time.
Operator: Thank you. Our next questions are from the line of Dan Brennan with TD Calendars. Please proceed with your question. Thank you. Congratulations on the quarter.
Yes.
Our next question is from the line of Dan Brennan with TD Cowen. Please proceed with your question.
Hey, Thank you congrats on the quarter.
Daniel Gregory Brennan: Maybe you could just walk through, we haven't filled all the numbers in yet, but just when we think about the burn for the year, we go through the assumptions you've laid out so far. Could you just give us a sense of kind of what's implied for the cash burn for the year? So we provided the adjusted EBITDA number for 2024. We believe it will be better than negative $20 million.
Maybe if you could just walk through we haven't put all the numbers in yet, but just when we think about the burn for the year, we walk through the assumptions you've laid out so far could you just give us a sense of kind of what's implied for the cash burn for the year.
So we provided the adjusted EBITDA number for 2024.
We believe it will be better than negative $20 million.
Kamal Adawi: Some of the things to think about are where we came in at in 2023 with an adjusted EBITDA of negative 17.1. While we're continuing to make improvements on ASP, I do want to recall the $5 million in prior period collections that we had in 2023 that were fantastic to the business. And when it's prior period collections, 100% flows down to the bottom line. I don't anticipate seeing the same level of prior period collections in 2024. I got it.
Some of the things to think about us.
Of where we came in at in 2023 with adjusted EBITDA of negative $17, one while we're continuing to make improvements on asps.
I do want to recall, the $5 million and prior period collections that we had in 'twenty three that were fantastic to the business.
When its prior period collections, that's 100%.
The flows down to the bottom line.
I don't anticipate to see the same levels prior period collections in 2024.
Got it.
Daniel Gregory Brennan: And it's a commentary that you've got, you know, 75 million in revs and 60% gross margin, which is the target to turn fee cash flow positive. I know you said, I believe you said cash on the balance sheet to 37 and a half gets you in the 26. So that is the implication.
Commentary that you've got at $75 million in rather than 60% gross margin, which is the target to turn free cash flow positive I know you said I believe you said cash on the balance sheet to $37. Five gets you in the 2006 so is the implication.
Kamal Adawi: Do you think the 37 or, you know, do you think the current cash balance will actually get you to that, or, excuse me, 36 and a half million? Would that get you to reach cash flow positivity? Good question, Dan. We haven't connected the two externally in a public forum. You know, what we've worked to do is, as business performance has improved, and we've seen the runway extend, we've worked to communicate that consistently. So previously, we had said we had cash well into 2025. Now we've extended that projection into 2026. We haven't connected the two yet.
Do you think that 37%.
Do you think the current cash balance will actually get you to that one excuse me $36 5 million would that get you to free cash flow positivity.
Good question, Dan we haven't connected the two externally.
In a public forum, we have work to do is as the business performance has improved and we've seen the runway extend we have worked to communicate that consistently. So previously we had said we had cash.
Well into 2025, now we've extended that projection into 2026.
We haven't connected the two were highly dependent on improvements in ASP.
John Aballi: We're highly dependent on improvements in ASP, right? The slope of our progress for ASP gains will really govern our pace at which we achieve cash flow positivity. So that's the connection there. We likely need to get to an ASP around the mid to high 400s in order for that to materialize. We're making meaningful progress. You saw that this year.
The slope of our progress for ASP gains will will really govern.
Our pace at which we achieved cash flow positivity. So that's the connection there likely need to get to an ASP around the mid to high four hundreds in order for that to materialize.
We're making meaningful progress you saw that over this year, we pointed to a trailing 12 month number but the quarterly progress is very positive as well. So that's how we look at it.
John Aballi: We've pointed to a trailing 12 month number, but the quarterly progress is very positive as well, so that's how we look at it. Got it. And then the final one, just on sales headcount, can you just remind us kind of where we are today? Is that number stable?
Got it and then a final one just on sales head count can you just remind us kind of where are we today is that number stable and just give us a sense of where you are with like culling accounts to focus on profitable accounts versus beginning to be at the point, where I know you talked about like most of the year. This year, it's still ASP accretion for the guide, but just where are you like in the <unk>.
John Aballi: And just give us a sense of where you are with like calling accounts to focus on profitable accounts versus beginning to be at the point where I know you talked about like most of the year, this year is still ASP accretion for the guy. But just where are you in the field towards seeing maybe that restrictive nature of focusing on profitable accounts flip towards being able to grow volume? So if you take a look at it, when it really comes down to it, we're, in 2023, we've really changed our business. And I think at the core of it, the way we think about it is that the insurer is a customer of ours. And there are some things that they require, which can be burdensome for the ordering physician and therefore impact their desire to partner with us in patient care.
<unk> towards seeing maybe.
That restrictive nature of focusing on profitable accounts flip towards being able to grow volumes again.
So if you take a look at it when it really comes down to it.
Over 2023, we've really changed our business and I think at the core of it the way we think about it is the insurer is a customer of ours and there are some things that they require which can be burdensome for the ordering physician and therefore impact their desire to partner with us and patient care.
John Aballi: So the superior performance of the VIVE CTD test is still seen by, you know, around 2400 clinicians. That's our year-end ordering physician count. We just need to work with them to satisfy the insurer needs and in a way that doesn't overly complicate or burden their clinical practice. That's our goal. That's what our field-based team is working on. We're no different.
So the superior performance of advise CTD test is still seen by.
Around 2400 clinicians that's our year end ordering physician count, we just need to work with them to satisfy the insurer needs and in a way, which doesn't overly complicated burden their clinical practice. That's our goal that's what our field based team is working on.
If you.
We're no different.
John Aballi: Health care costs are increasing. Those of us with fixed pricing are getting squeezed. And the practicing clinician is seeing the exact same scenario. What we're asking of them, additional medical records, more information on the requisition, better documentation of the clinical utility of the test and how it's being used in patient care, they don't get reimbursed for any of that.
Health care costs are increasing those of us with fixed pricing are getting squeezed and practicing clinician is seeing the exact same scenario, what we're asking of them additional.
Medical Records more information on the acquisition.
Better documentation of the clinical utility of the test and how it's being used in patient care. They don't get reimbursed for any of that and so it's increasing their operating costs and with rising wages. This is not an insignificant ask but the way we see it it's a requirement of doing business in this space, it's a requirement of offering proprietary testing we.
John Aballi: And so it's increasing their operating costs. And with rising wages, this is not an insignificant ask. But the way we see it, it's a requirement of doing business in this space. It's a requirement of offering proprietary testing.
John Aballi: We just need to get good at it as a business and develop processes with each of our customers to satisfy insurer requests. That's what we mean by building back over time. We saw ordering trends stabilize in Q4 within our physician base. We've seen it building back here in Q1. And so from our standpoint, we still have 40 territories spread throughout the continental U.S., and that's likely not to change here in the near term.
Just need to get good at it as a business and in developing processes with each of our customers to satisfy insurer requests.
That's what we mean by building back over time, we saw ordering trends stabilized in Q4 within our physician base. We've seen it's building back here in Q1, and so from our standpoint, we still have 40 territories spread throughout the U S.
Continental U S and that's likely to not change here in the near term.
John Aballi: We continue to monitor on a per-territory basis which territories are at least covering the cost of a sales rep, breaking even, and those which are materially higher that we should split. We've done at least one analysis this past year. We look at it as kind of a biannual thing where we review each of our territories from a profitability standpoint, take a look at six-month trends, and then we'll adjust. But for now, 40 territories is the right footprint for us and will likely be for a portion of this year. Great. Thanks.
We continue to monitor on a per territory basis, which territories or at least covering the cost of the sales rep, breaking even and those which are materially higher that we should split we've done at least one analysis this past year.
We look at it as kind of a biannual thing where we review each of our territories from a profitability standpoint take a look at six month trends and then we will adjust that for now 40 territories as the right footprint for us.
And we will be likely.
For a portion of this year.
Great. Thanks, Thank you John.
Ross Everett Osborn: Thank you, John. Our next questions are from the line of Ross Osborn with Cantor Fitzgerald. Hey guys, congrats on the progress. So maybe just one question for me at this point.
Our next questions are from the line of Ross <unk> with Cantor Fitzgerald. Please proceed with your questions.
Hey, guys congrats on progress.
Kamal Adawi: It sounds like ASPE is going to be the biggest driver to achieving EBITDA breakeven, but we'd be curious to hear your thoughts about OPEX cadence for this year. Is there any chance we should expect leverage on the SG&A line? So Ross, the way that I'm looking at OPEX is that there is no major commercial expansion, you know, similar to the increases we've had in the past. I wouldn't anticipate anything like that.
Just wanted to me at this point it sounds like <unk> is going to be the biggest driver to achieving EBITDA breakeven.
Would be curious to hear your thoughts about opex cadence for this year.
Is there any chance, we should expect leverage on the SG&A line.
So Ross the way that I'm looking at.
Opex is.
There is no major commercial expansion.
Over to the increases we've had in the past I wouldn't anticipate anything like that right now it is just us managing against inflationary increases on the SG&A lines.
Ross Everett Osborn: Right now, it's just us managing against inflationary increases on the SG&A line. Okay, great. Thank you. Our next question is from the line of Andrew Brackmann with William Blair. Hey guys, good morning.
Okay, great. Thank you.
Thanks Ross.
The next question is from the line of Andrew <unk> with William Blair.
With your question.
Andrew Frederick Brackmann: Thanks for taking the questions. Maybe on the new markers here, can you maybe just talk about some of the specific steps that are needed to actually include that in the test here in the back half of the year? And I guess how should we be thinking about investment in further studies to really highlight the benefit that these might be able to provide to patients? Hey, Andrew.
Guys. Good morning, Thanks for taking the questions.
Maybe on the new markers here can you maybe just talk about some of the specific steps that are needed to actually include that in the test here in the back half of the year and I guess, how should we be thinking about investment in further studies to really highlight that benefit that these might be able to provide patients. Thanks.
John Aballi: Good morning. Great question. Appreciate the opportunity to expand. So these are lab-developed tests, meaning there are not IVD, FDA-approved kits available. We're validating these analytically as well as clinically in our lab and running those experiments. We've already performed an initial clinical validation. We have the assay up and running in our research laboratory. We're moving it and getting it CLIA-ready.
Hey, Andrew Good morning, Great question I appreciate the opportunity to expand.
So these are the lab developed tests, meaning theres not IBD FDA approved kits available. We're validating these analytically as well as clinically in our lab and running those experiments. We've already performed an initial clinical validation, we have the assay up and running in our research laboratory, we're moving it and get.
John Aballi: And so some of those aspects require really getting it to a point where it operates at scale. So better processes around controls. We manufacture our own controls, for example. Better processes around batching, and workflow.
It clear ready and so some of those.
<unk> require really getting it.
To a point, where it operates at scale, so a better processes around controls we manufacture our own controls for example, a better processes around batching workflow, there's some it and software changes, which really need to be made to handle it at the at the demand level. We expect here later this year and so it's mostly operational at this point as opposed to.
John Aballi: There are some IT and software changes that really need to be made to handle it at the demand level we expect here later this year. And so it's mostly operational at this point as opposed to technical feasibility. We're well past that stage, which is a big reason why we're talking about it externally. And from a clinical validation standpoint, we have an abstract out, and we're working on a formal publication likely to come later this year as well. So the initial steps have been taken, and we're very confident with the performance of these markers. We have the appropriate supplier agreements and everything in place so that we do ultimately go live. We're in good shape.
Feasibility, we're well past that stage, which is a big reason why we're talking about it externally.
From a clinical validation standpoint, we have an abstract out and we're working on a formal publication.
To come later this year as well so the initial steps have been taken.
We're very confident with the performance of these markers, we have the appropriate supplier agreements and everything in place. So that we do ultimately go live we're in good shape. Another key component to this when.
John Aballi: Another key component to this is that when you bring novel biomarkers to clinical practice, there's a huge educational burden required. And so our commercial teams have been preparing, actually, for the last several months in this regard, a lot of planning in terms of what materials will be needed, quite a bit of voice of customer. How do we actually present the results in a manner that is easy to digest, clinicians are busy, but also which allows them to act quickly? Most of that has been completed. It's now executing on it.
When you bring novel Biomarkers to clinical practice, there is a huge educational burden required and so our commercial teams have been preparing actually for the last several months in this regard a lot of planning in terms of what materials will be needed quite a bit of voice of customer how do we actually present the results in a manner, which is easy.
To digest clinicians are busy, but also which allows them to act quickly so.
Most of that has has been completed it's executing on it so a lot of the planning phase is done.
Andrew Frederick Brackmann: So a lot of the planning phase is done. There are still caveats to that, but quite a bit of that is done, and then we just need to execute. So we'll have to actually complete our formal CLIA validations on the analytical side. Then we'll get our publication out. We'll refine our training, our entire field-based team, and we hope to launch sometime late into Q4. So that's really what's left, and like I said, from a risk standpoint, the way we view it as a technical risk of the assay working or panting out from a clinical standpoint, we're past that in our expectations. Perfect.
They are still caveat to that but quite a bit as that is done.
And then we just need to execute so we'll have to actually complete our formal CLIA validation on the analytical side, we will get our publication out we'll refine our training of our entire field based team and then we hope to launch sometime late into Q4. So.
That's really what's left and like I said from a risk standpoint, the way we view it as a technical risk of the assay working or.
Panning out from a clinical standpoint, we're past that and are in our expectations.
John Aballi: And then maybe just switching gears, going back to some of the commercial activities that John mentioned around sort of hurdles or requirements to really do business in this arena. Can you maybe just sort of talk about some of the specific tactics that your team might be able to deploy to either incentivize that behavior from positions to allow them to gather that data or sort of reduce that burden for them? Thanks.
Perfect and then maybe just switching gears going back to some of the commercial activities, John that you mentioned around sort of hurdles or requirements.
I really do business in this arena can you maybe just sort of talk about some of the specific tactics that your team might be able to deploy to either incentivize that behavior from physicians to allow them to gather that data sort of reduce that burden for them. Thanks.
John Aballi: Yeah, it all comes down to reducing barriers, obviously. You have to understand your practices at a very deep level to understand where the pain points are. I think a big part of change management is really explaining the why behind those changes. And to be honest with you, a lot of clinicians don't really understand the revenue cycle side, what's being asked by insurers when you're dealing with proprietary markers and having to prove clinical utility of tests or tools. And so explaining that to them takes time. Some people want to listen; some people don't.
Yeah, It all comes down to reducing barriers obviously.
You have to understand your practices at a very deep level to understand where the pain points are.
A big part of change management is really explaining the why behind those changes and to be honest with you a lot of clinicians don't really understand the revenue cycle side, what's being asked by insurers.
When youre dealing with proprietary markers and having to prove clinical utility.
Of tests are tools, and so explaining that to them.
It takes time some people want to listen some people don't we try very hard not to make our problems our customers problems sets.
John Aballi: We try very hard not to make our problems our customers' problems; that's our job, a pretty basic business tenant. But from our perspective, when you're able to explain the why, a lot more downstream goes smoothly, right, you get the buy-in. So we worked hard.
Pretty basic business tenant, but from our perspective, when you are able to explain the why a lot more downstream go smoothly right you get the buy in so we worked hard to set ourselves up in that regard, we're very transparent with our internal team and that leads to transparency externally.
John Aballi: We're very transparent with our internal team, and that leads to transparency externally. And so, as we work through some of that explanation, then it comes down to execution. And what I mean by that is, each practice is different. Some have In some cases, the phlebotomist handles most of the test processing within a clinician's office. In some cases, it's front office staff. In others, it's nurses.
And so as we work through.
Some of that explanation then it comes down to execution and what I mean by that is each practice is different some have.
Some in some cases, a phlebotomist handles most of the test processing within our clinicians office in some cases as front office staff and others, it's nurses and in some of the actual clinician. So you can't have a one size fits all approach to this you have to tailor it into each additional into each practice and and.
John Aballi: And in some, it's the actual clinician. So you can't have a one-size-fits-all approach to this. You have to tailor it to each additional – to each practice.
John Aballi: And so there's some customization of processes there, but that makes it easier on the actual clinician. Also, when we're explaining the why, some of this is training on what insurers are actually looking for. You know, insurers are really looking for: was this test – What was the presentation of the patient that justified ordering the test, and how was the test used, and how did patient management change after the test was ordered and results received?
So there's some customization of processes, there, but that makes it easier on the actual condition of.
Also when more explaining the why some of this is training on what insurers are actually looking for insurers are really looking for was this test with a presentation of the patient, which justified ordering the tests and how is the test used and how did patient management change after the test was ordered and results receipt.
John Aballi: So, it all comes down to documentation, and unfortunately, that's... that can be a bottleneck for some practices. And so explaining that, talking through exactly some of the feedback we get from insurers has proven helpful, but a lot of this takes time, right? And it's a...
So it all comes down to documentation and unfortunately thats.
That can be a bottleneck for some practices and so explaining that talking through exactly some of the feedback we get from insurers has proven helpful. But a lot of this takes time and it's a.
John Aballi: It's a cyclical feedback loop, meaning we work with different clinicians, we set expectations, we help them understand the why, and then when we put it in practice, that's version one, and we ultimately have to get to a successful version. This may even involve them getting online and partnering with us in some of the appeals process. We've had that happen, and that's ultimately part of our goal, where a clinician's voice is there, discussing the utility of the test in their practice.
It's a cyclical.
Back loop, meaning.
We work with different clinicians, we set expectations, we help them understand the why and then when we put it in practice that's version one and we ultimately have to get us to a successful version with it may even involve them getting online in partnering with us and some of the appeals process, we've had that happen and thats ultimately part of our goal where a clinician voices there.
Perspective on the utility of the test in their practice so.
John Aballi: So, that's really what it comes down to. There's been quite a bit of change in the office. It's a different experience.
That's really what it comes down to.
Quite a bit of change in the office, it's a different experience, it's more akin to I guess with some of the oncology testing is doing but.
Andrew Frederick Brackmann: It's more akin to, I guess, what some of the oncology testing is doing, but clinicians, you know, when they see the clinical value of the test, they're very willing to do this. It's just, can you make it easy on my staff? You know, I can't afford to spend an hour of their day completing test requisitions or pulling medical records or this type of thing.
Clinicians when they see the clinical value of the test.
Very willing to do this is just can you make it easy on my staff I can't afford to.
To spend an hour of their day completing test requisitions are pulling rent medical records or or this type of thing and so its a utilization tactic by the insurer and but we're working to satisfy as I said, we view them as a customer.
John Aballi: And so it's a utilization tactic by the insurer, but we're working to satisfy it. As I said, we view them as a customer. That's a great color.
That's great color thanks, guys.
Andrew Frederick Brackmann: Thanks guys. Yeah, thanks. Thank you. We've reached the end of our question and answer session. I'll turn the floor over to John Aballi for closing remarks.
Yeah. Thanks, Andrew.
Thank you.
We have reached the end of our question and answer session I will turn the floor over to John <unk> for closing remarks.
Great. Thanks, 2013, excuse me 2023, that's gone by quick was an exciting year and I'm very proud of the progress we've made.
John Aballi: 2013, excuse me, 2023, it's gone by quick, was an exciting year, and I'm very proud of the progress we've made. We're working towards a more profitable business, and we're well on our way. I believe we have the right strategy, the right efforts, and the appropriate resources to transform our organization. Thanks for your interest in Exagen and for joining us on the call today. And this concludes today's conference. You may disconnect your lines at this time, and thank you for your participation.
We are working towards a more profitable business and we're well on our way I believe we have the right strategy the right efforts and the appropriate resources to transform our organization.
Thanks for your interest in <unk> and for joining the call today.
This concludes today's conference you may disconnect your lines at this time and thank you for your participation.