Exagen Inc.

Company Overview

Business Model: Exagen Inc. is a medical technology company focused on the design, development, and commercialization of innovative testing products under its AVISE® brand. These products are primarily used for the differential diagnosis, prognosis, and monitoring of complex rheumatic, autoimmune, and autoimmune-related diseases, including systemic lupus erythematosus (SLE) and rheumatoid arthritis (RA). The company generates revenue through the sale of these diagnostic testing services, aiming to provide clarity in autoimmune disease decision-making and improve patient clinical outcomes.

Market Position: Exagen Inc. maintains a strong focus and extensive background in rheumatology, targeting approximately 6,000 rheumatologists across the United States. The company estimates its addressable market to be greater than 2 million patients per year in the United States. Its flagship product, AVISE® CTD, launched in 2012, is positioned as a superior solution for earlier and more accurate diagnosis of complex autoimmune conditions compared to traditional screening methods.

Recent Strategic Developments: Under the leadership of CEO John Aballi, who joined in October 2022, Exagen Inc. has executed an operational turnaround, achieving a return to revenue growth and gross margin expansion while significantly reducing operating expenses and cash burn. In 2025, the company enhanced its AVISE® CTD panel by adding eight new biomarkers, including T-Cell Biomarkers (TC4d, TIgG, TIgM) and RA Sub-Profile Biomarkers (Anti-RA33 IgA, IgG, IgM, Anti-PAD4 IgA, IgG), to improve clinical utility in diagnosing SLE and RA. The company also entered into an exclusive license agreement with Johns Hopkins University in November 2023 for patent rights related to urinary protein biomarkers for lupus nephritis.

Geographic Footprint: Exagen Inc.'s primary operations and customer base are located within the United States. All its testing products are performed in its approximately 13,000 square-foot laboratory in Vista, California. All 220 employees are located in the United States.

Financial Performance

Revenue Analysis

Profitability Metrics (2025):

• Gross Margin: 58.3%
• Operating Margin: -21.1%
• Net Margin: -29.9%

Investment in Growth:

• R&D Expenditure: $6.3 million (9.4% of revenue)
• Capital Expenditures: $0.6 million
• Strategic Investments: In April 2025, Exagen Inc. secured a senior secured delayed draw term loan facility of up to $65.0 million from Perceptive Credit Holdings IV, LP, with an initial tranche of $25.0 million funded. The company also raised $18.6 million in net proceeds from a public offering of common stock in May 2025 and $3.4 million in net proceeds from at-the-market sales of common stock in 2025.

Business Segment Analysis

Exagen Inc. manages its operations and allocates resources as a single reporting segment, focused on the design, development, and commercialization of testing products for complex rheumatic, autoimmune, and autoimmune-related diseases.

AVISE® CTD

Financial Performance:

• Revenue: Comprised 91% of total revenue for both the years ended December 31, 2025 and 2024.
• Growth: Testing volume increased by approximately 11% year-over-year in 2025. The trailing twelve-month average selling price (ASP) for AVISE® CTD increased by approximately 7%, or $30 per test, reaching $441 in Q4 2025 from $411 in Q4 2024.
• Operating Margin: Not separately disclosed for the product, but contributes to the overall company gross margin of 58.3% in 2025.
• Key Growth Drivers: The increase in revenue was driven by higher testing volume and continued ASP expansion, supported by disciplined payer engagement, appeals, revenue cycle optimization, and the accretive impact of new biomarkers. Salesforce expansion also contributed to growth.

Product Portfolio:

• AVISE® CTD is a comprehensive test aiding in the differential diagnosis of various connective tissue diseases (CTDs), including SLE, RA, Sjögren’s syndrome, and Antiphospholipid syndrome (APS).
• It incorporates the proprietary AVISE® Lupus platform, which leverages Cell-Bound Complement Activation Products (CB-CAPs) technology (EC4d and BC4d) and eight autoantibodies for SLE assessment.
• In 2025, Exagen Inc. added three new T-Cell Biomarkers (TC4d, TIgG, TIgM) to enhance SLE sensitivity and five unique RA Sub-Profile Biomarkers (Anti-RA33 IgA, IgG, IgM, Anti-PAD4 IgA, IgG) to address the seronegative RA subgroup.

Market Dynamics:

• AVISE® CTD addresses the challenge of diagnosing complex autoimmune conditions with overlapping symptoms, aiming for earlier and more accurate diagnosis compared to traditional methods.
• The test provides unique biomarkers that empower clinicians to confidently and quickly diagnose various CTDs.

Other AVISE® Tests: Exagen Inc. also offers other diagnostic, prognostic, and monitoring tests under the AVISE® brand, including AVISE® APS, AVISE® Vasculitis AAV, AVISE® Anti-Histone, AVISE® SLE Prognostic, AVISE® Anti-CarP, AVISE® SLE Monitor, AVISE® MTX, and AVISE® HCQ.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: Exagen Inc. did not repurchase any equity securities during the year ended December 31, 2025.
• Dividend Payments: The company has never declared or paid cash dividends and does not anticipate doing so in the foreseeable future, intending to retain future earnings for business growth. The Credit Agreement also restricts dividend payments.

Balance Sheet Position (as of December 31, 2025):

• Cash and Equivalents: $32.2 million
• Total Debt: $22.9 million (comprising $0.6 million current borrowings and $22.3 million non-current borrowings, net of discounts and debt issuance costs)
• Net Cash Position: $9.3 million
• Credit Rating: Not disclosed in the filing.
• Debt Maturity Profile: The Perceptive Term Loan Facility, with an outstanding principal of $25.0 million as of December 31, 2025, matures on April 25, 2030, with an interest-only period through maturity and all principal and accrued interest due at maturity. Other equipment notes payable mature between October 1, 2026, and April 1, 2028.

Cash Flow Generation (2025):

• Operating Cash Flow: $(13.6) million
• Free Cash Flow: $(14.2) million (Operating Cash Flow - Capital Expenditures)
• Cash Conversion Metrics: Not explicitly detailed in the filing.

Operational Excellence

Production & Service Model: Exagen Inc. performs all its AVISE® tests in its approximately 13,000 square-foot laboratory in Vista, California. This facility is certified under the Clinical Laboratory Improvement Amendments of 1988 (CLIA) and accredited by the College of American Pathologists (CAP), and licensed by California and all states requiring out-of-state licensure, including the New York Department of Health (NYSDOH). The laboratory specializes in high-complexity testing and typically reports results within five business days of specimen receipt. The company emphasizes quality assurance through continuous monitoring and improvement of processes and procedures.

Supply Chain Architecture: Key Suppliers & Partners:

• Reagents & Materials: Exagen Inc. relies on sole suppliers for critical reagents, equipment, and other materials used in its testing products and transportation kits. For the year ended December 31, 2025, approximately 49% and 40% of diagnostic testing supplies were purchased from two suppliers.
• Shipping Carriers: Utilizes United Parcel Service (UPS) and Federal Express Corporation for expedited, reliable transport of patient specimens.

Facility Network:

• Manufacturing: The primary laboratory and testing operations are located in Vista, California.
• Research & Development: R&D activities are conducted at the Vista, California facility.
• Distribution: The company's warehouse facility for testing products is located in Vista, California. Exagen Inc. also leases approximately 28,000 square feet of additional office space in Carlsbad, California.

Operational Metrics: The company's laboratory maintains CLIA certification and CAP accreditation, demonstrating adherence to high-quality standards for complex testing.

Market Access & Customer Relationships

Go-to-Market Strategy: Distribution Channels:

• Direct Sales: Exagen Inc. employs a specialized field-based sales force organized into 45 territories across five regions (West, Central, Northeast, Southeast, and Mid-Atlantic) in the United States. Sales representatives have extensive experience in healthcare sales, particularly in rheumatology, diagnostics, and pharmaceuticals.
• Digital Platforms: The company augments field selling activity with a balanced marketing mix, including print and digital advertising, direct marketing, and continuing medical education programs.

Customer Portfolio: Enterprise Customers:

• Tier 1 Clients: The sales force strategically targets high-potential practices and rheumatologists.
• Strategic Partnerships: Exagen Inc. collaborates with leading pharmaceutical companies and contract research organizations for diagnostic testing services and the use of de-identified data. It also has established relationships with multiple rheumatology care management organizations ("Super Groups").
• Customer Concentration: In 2025, Customer A accounted for 24% of total revenue and 23% of accounts receivable. Customer B accounted for 18% of total revenue and 19% of accounts receivable. Customer C accounted for 10% of total revenue and 14% of accounts receivable.

Geographic Revenue Distribution: All of Exagen Inc.'s revenue is derived from operations within the United States.

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: The diagnostics industry is characterized by rapid technological changes, frequent new product introductions and enhancements, and evolving industry standards. Autoimmune disease incidence has significantly increased in recent years. The market for Exagen Inc.'s testing products is estimated to be greater than 2 million patients per year in the United States.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors:

• Traditional Methods: Standard diagnostic tests such as antinuclear antibody (ANA), anti-double stranded DNA (anti-dsDNA), and serum complement biomarkers (C3 and C4).
• Commercial Laboratories: ARUP Laboratories, Inc.; Laboratory Corporation of America Holdings; Mayo Clinic; Quest Diagnostics Incorporated; Aqtual, Inc.
• Other Diagnostic Developers: AMPEL BioSolutions, LLC; DxTerity Diagnostics, Inc.; Genalyte Inc.; Immunovia AB; Oncimmune Holdings plc; Progentec Diagnostics Inc.

Competitive Response Strategy: Exagen Inc. aims to become the standard of care in autoimmune disease testing by expanding adoption of AVISE® CTD, continuously developing innovative testing products with superior clinical utility, and delivering sustainable profitable growth through gross margin expansion and operating expense efficiencies. This includes optimizing revenue cycle practices, expanding managed care medical policies, and educating payors on the clinical utility and cost-effectiveness of its tests.

Risk Assessment Framework

Strategic & Market Risks

• Market Dynamics: Operating results may fluctuate significantly, making future results difficult to predict. The company has a history of losses and may not achieve or maintain profitability. Market size estimates may be smaller than anticipated.
• Technology Disruption: Rapidly changing technology in the diagnostic industry could render current and future testing products obsolete.
• Customer Concentration: Commercial success depends on attaining and maintaining significant market acceptance among rheumatologists, patients, and third-party payors.
• Product Pipeline: Developing new testing products is a lengthy and complex process, with no guarantee of timely commercialization or success.

Operational & Execution Risks

• Supply Chain Vulnerabilities: Reliance on sole suppliers for critical reagents, equipment, and materials poses risks of supply interruptions or quality issues.
• Geographic Concentration: All revenue is derived from tests conducted at a single laboratory facility in Vista, California, making operations vulnerable to natural disasters or other disruptions.
• Capacity Constraints: Inability to support increased demand for testing products could harm the business.
• IT Systems: Failures in information technology, telephone, or other systems could disrupt operations and compromise sensitive information.
• Billing Complexity: Billing for testing products is complex, time-consuming, and expensive, potentially leading to delays or reduced reimbursement.
• Human Capital: Loss of senior management or inability to attract and retain skilled personnel could adversely affect the business.

Financial & Regulatory Risks

• Reimbursement Uncertainty: Commercial success is highly dependent on obtaining and maintaining broad coverage and adequate reimbursement from third-party payors.
• Healthcare Policy Changes: Changes in U.S. healthcare policy (e.g., PAMA, ACA) could significantly harm the business by reducing payment rates or available reimbursement.
• Regulatory Compliance: Operating in a heavily regulated industry (CLIA, CAP, NYSDOH, FDA, HIPAA, HITECH, state privacy laws, anti-kickback, self-referral laws) is expensive and time-consuming, with potential for substantial penalties for non-compliance.
• Debt Covenants: The Perceptive Term Loan Facility contains restrictive covenants that limit operational flexibility and could lead to acceleration of debt if violated.
• Capital Requirements: The company may require substantial additional capital to finance planned operations, which may not be available on acceptable terms.
• Tax Attributes: Ability to utilize net operating loss carryforwards and certain other tax attributes may be limited by ownership changes under Section 382 of the Internal Revenue Code.

Geopolitical & External Risks

• Geopolitical Exposure: Business disruptions from geopolitical instability, acts of war (e.g., Ukraine, Middle East conflicts), or trade policy uncertainty could adversely affect operations.
• Inflation: The current inflationary environment has increased costs for labor, materials, and supplies, potentially impacting financial results.
• Government Funding: Inadequate funding or work slowdowns/stoppages at government agencies (e.g., SEC, CMS) could hinder regulatory processes or access to capital.

Innovation & Technology Leadership

Research & Development Focus: Core Technology Areas:

• AVISE® Lupus Platform: Incorporates Cell-Bound Complement Activation Products (CB-CAPs) technology (EC4d and BC4d) and proprietary algorithmic interpretations for SLE diagnosis.
• T-Cell Biomarkers: Includes TC4d, TIgG, and TIgM, licensed from Allegheny Health Network Research Institute (AHN), enhancing SLE sensitivity.
• RA Sub-Profile Biomarkers: Includes Anti-RA33 and Anti-PAD4 autoantibodies, providing diagnostic and prognostic insights for seronegative RA patients.

Innovation Pipeline:

• Lupus Nephritis (LN) Biomarkers: In collaboration with Johns Hopkins University (JHU), developing urinary biomarkers (e.g., Tenascin-C) for early detection and prediction of kidney function loss in LN. A U.S. non-provisional patent application was filed in November 2025.
• SLE Disease Activity: Leveraging clinical and laboratory data from longitudinal SLE cohorts to develop an AI-driven algorithm for guiding treatment decisions. Candidate assay is undergoing clinical validation.
• RA Disease Activity: Screening protein antibody markers from an extensive biorepository to develop an algorithmic solution for predicting RA disease activity. Candidate assay is in development.
• Kidney Damage Biomarkers: A multi-analyte blood-based panel for sensitive detection of early kidney damage in renal disease, outperforming creatinine and eGFR. Two U.S. provisional patent applications were filed in May 2025. This program has been deprioritized for commercialization at this time.
• Myositis Biomarkers: Research studies are ongoing to design a myositis panel with high clinical utility and fast turnaround time, leveraging partnerships and in-house development.

Intellectual Property Portfolio:

• Patent Strategy: Exagen Inc. owns seven issued U.S. patents and two U.S. nonprovisional patent applications related to its AVISE® Lupus platform, expiring between 2032 and 2034. It licenses one issued U.S. patent for the T-Cell Biomarkers, expiring in 2035. The company also owns two patents for AVISE® MTX, expiring in 2026 and 2027. A U.S. non-provisional patent application was filed in November 2025 for LN urinary biomarkers licensed from JHU.
• Licensing Programs: Holds exclusive, worldwide licenses from AHN for T-Cell Biomarkers and from JHU for LN urinary protein biomarkers.
• IP Litigation: Not explicitly detailed as ongoing, but the company highlights the risk of third-party claims alleging intellectual property infringement.

Technology Partnerships: Exagen Inc. collaborates with Allegheny Health Network Research Institute and Johns Hopkins University for research and development.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: Exagen Inc. recognizes the importance of attracting, motivating, and retaining talent at all levels, including key members of its executive management team, for its continued success.

Board Composition: The board of directors oversees risk management activities, with the Nominating and Corporate Governance Committee specifically overseeing risks from cybersecurity threats.

Human Capital Strategy

Workforce Composition (as of December 31, 2025):

• Total Employees: 220 (216 full-time, 4 part-time)
• Geographic Distribution: All employees are located in the United States.
• Skill Mix: 59 in laboratory operations, 14 in research and development, 61 in sales and marketing, and 82 in general and administrative functions.

Talent Management: Acquisition & Retention:

• Hiring Strategy: Employs a specialized sales force with specific technical backgrounds and industry expertise.
• Retention Metrics: Not explicitly detailed, but the company aims to create an equitable, inclusive, and empowering environment.
• Employee Value Proposition: Provides competitive compensation and benefits packages, including equity incentive plans (2019 Incentive Award Plan, 2019 Employee Stock Purchase Plan).

Diversity & Development:

• Diversity Metrics: Not explicitly detailed, but the company is building a diverse environment.
• Development Programs: Offers comprehensive disease-level sales training, regular ongoing training and certifications for sales representatives, and leadership development initiatives.
• Culture & Engagement: Values innovation, passion, data-driven decision making, persistence, and honesty.

Environmental & Social Impact

Environmental Commitments: Climate Strategy: Exagen Inc. is subject to federal, state, and local laws and regulations governing the use, storage, handling, and disposal of regulated medical, hazardous, and biohazardous waste. The company utilizes licensed outside vendors for waste disposal. No specific climate strategy, emissions targets, or carbon neutrality commitments are explicitly disclosed.

Supply Chain Sustainability: No specific details on supplier engagement for ESG requirements or responsible sourcing are explicitly disclosed beyond general supplier compliance.

Social Impact Initiatives: Exagen Inc. participates with multiple patient advocacy organizations and medical societies, such as the American College of Rheumatology (ACR), to build awareness and adoption of its testing products.

Business Cyclicality & Seasonality

Demand Patterns: Exagen Inc. expects some seasonal variations in its financial results due to factors such as year-end holidays, vacation patterns of patients and healthcare providers (including medical conferences), climate and weather conditions, seasonal conditions affecting medical practices (e.g., influenza outbreaks), and the timing of patient benefit changes, deductibles, and co-insurance limits. Notably, Q3 and Q4 2025 volumes were the highest ever for those periods, without the typical second half seasonality experienced in the past.

Planning & Forecasting: The company's operating plans and cash resource demands are subject to change based on various factors, including market demand, reimbursement rates, and the timing of research and development activities.

Regulatory Environment & Compliance

Regulatory Framework: Industry-Specific Regulations: Exagen Inc. operates under a complex regulatory framework, including:

• CLIA and CAP: Its Vista laboratory is CLIA-certified and CAP-accredited for high-complexity testing.
• State Licensure: Licensed by California and all states requiring out-of-state licensure, including the NYSDOH, which also requires product-specific approval for laboratory developed tests (LDTs).
• FDA: Historically, the FDA has exercised enforcement discretion over LDTs, which Exagen Inc. believes its AVISE® tests are. However, the regulatory landscape is evolving, and future legislation or FDA action could subject LDTs to more stringent medical device regulations.
• HIPAA and HITECH: Complies with federal standards for the privacy and security of protected health information (PHI), including breach notification requirements.
• State Data Privacy Laws: Subject to state laws like the California Confidentiality of Medical Information Act (CMIA), California Consumer Privacy Act (CCPA), and California Privacy Rights Act (CPRA), as well as emerging laws like Washington's "My Health My Data" Act.
• Anti-Fraud and Abuse Laws: Subject to federal and state laws such as the Anti-Kickback Statute, Stark Law, False Claims Act, Civil Monetary Penalties Law (CMP Law), and Eliminating Kickbacks in Recovery Act of 2018 (EKRA).

Trade & Export Controls: The company is subject to U.S. export control and import laws and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations, Office of Foreign Assets Controls (OFAC) sanctions, and the Foreign Corrupt Practices Act (FCPA).

Legal Proceedings: A qui tam case, previously settled with the Department of Justice for $0.7 million plus interest in October 2023, was dismissed with prejudice by the presiding judge on July 15, 2025.

Tax Strategy & Considerations

Tax Profile (as of December 31, 2025):

• Effective Tax Rate: Not explicitly stated as a single rate, but the provision for income taxes was $(0.3)% in 2025.
• Net Operating Loss (NOL) Carryforwards: Approximately $115.7 million in federal NOLs that do not expire, $43.5 million in federal NOLs expiring in 2026, and $113.2 million in state NOLs expiring in 2030.
• Tax Credits: Approximately $1.4 million in federal tax credits expiring in 2026 and $1.2 million in California tax credits that do not expire.
• Section 382 Limitations: Ownership changes in 2003, 2008, 2012, 2017, and 2019 limited the utilization of $55.0 million of tax attribute carryforwards through December 31, 2017.
• Geographic Tax Planning: Primarily focused on U.S. federal and state tax jurisdictions.
• Tax Reform Impact: The One Big Beautiful Bill Act (OBBBA), enacted July 4, 2025, was determined not to have a material impact on the company's financial statements.

Insurance & Risk Transfer

Risk Management Framework: Exagen Inc. maintains professional liability insurance and information security risk insurance. The company is predominantly self-insured for business disruptions.

Risk Transfer Mechanisms: Not explicitly detailed beyond insurance coverage.