Exagen (XGN) Q2 FY26 earnings call: guidance and Q&A

Given the strong Q2 performance, is there conservatism in the raised full-year guidance, especially regarding volume, considering last year's sequential uptick from Q2 to Q3?

Management acknowledged the strong Q2 but emphasized that the second half typically experiences seasonality with fewer business days and more clinician vacations. While last year's Q2 to Q3 volume was flat, prior years showed typical seasonality, which is factored into the current guidance.

“The second half of the year, you're right. Last year, we had a phenomenal second half, which didn't have the typical seasonality. It was relatively flat compared to our Q2, but wasn't down. We had 10 years of seasonality prior to that. And so I think from our standpoint, just keeping that in the back of the mind is an important factor as we crafted our guidance this time around.”

asked by William Ruby · answered by John Aballi

How should we expect the sales force expansion to contribute to volumes in the second half of the year?

Management expects decent contribution from the expanded sales force, noting the high caliber of new hires. However, as many expansion territories started from a low base, it will take 6-12 months for them to meaningfully impact the top-line volume growth.

“But most of these expansion territories were starting from a relatively low basis. And so it will take a little bit of time before they really move the top line number in a meaningful way. But over time, call it, the next 6, 9, 12 months, I think that 10% expansion in our sales force that we executed in the back half of last year should really start to drive some meaningful volume growth for our organization.”

asked by William Ruby · answered by John Aballi

To what extent is the ASP improvement driven by revenue cycle management versus getting paid for new markers, and what is the current tracking for new marker reimbursement?

The ASP improvement is a blended result. For the new biomarkers (T-Cell, RA33, PAD4), the company is tracking in the mid-$90s towards a target of $100, with ongoing appeals for claims. The overall ASP progression is 100% attributable to progress with commercial payers and effective RCM.

“Combined T-Cell, RA33 and PAD4, our overall expectation we'd communicated was going to be somewhere in that $100 range. Where we're tracking today is really in the mid-90s. So we're tracking very well. We don't think there's any reason we couldn't ultimately get to that target, particularly since that a lot of those claims in the last year are still going through appeals and revenue cycle management.”

asked by William Bonello · answered by Jeffrey Black

Given the current gross margin of 61%, how should we expect it to track for the rest of the year, potentially exceeding prior expectations of high 50s to 60%?

Management now believes ending the year at 60% or above for gross margin is more realistic and less aspirational. This is due to strong ASP expansion, effective fixed cost management, and supply chain cost optimization.

“We actually think there's now a track to ending the year at that 60% or above. So we've seen very good traction. ASP expansion done a really nice job at managing fixed costs, managing supply chain costs. So I think the 60% range is a lot more realistic now and less aspirational for the year.”

asked by Kyle Mikson · answered by Jeffrey Black

Can you provide an update on the myositis launch, including data readouts, timing, and how you are thinking about pricing the test?

The myositis offering is on track for commercial launch in early 2027. Pricing will initially use methodology-based CPT codes, similar to previous analyte launches. The company will focus on cash collections initially to establish an accrual rate over time, with potential for algorithmic interpretation and value-based reimbursement long-term.

“So pricing-wise, from our standpoint, we're going to launch similar to what we did with the analytes that we launched last year, and that is there's methodology-based CPT codes that correspond with the various analyte testing. So you would have ELISA-based testing, for example, has an established CPT code. That's all been vetted, and we believe we have the right set of codes to build this out.”

asked by Mark Massaro · answered by John Aballi

What is the current expectation for an update regarding the MolDX LCD, previously anticipated in mid-to-late 2026?

The expectation for an update in mid-to-late 2026 remains, but the process is opaque and not controlled by Exagen. The company has completed its request to MolDX and is waiting for feedback, maintaining a stable Medicare reimbursement. They are working to share their new systematic review with the MolDX team.

“That is still our expectation, but we don't control it, and it's a fairly opaque process. So just as a reminder, where we sit now, we have completed request in to MolDX. We've actually had that in since the summer of 2022 and are waiting for their feedback.”

asked by Matthew Parisi · answered by John Aballi