Exagen (NASDAQ:XGN) reported third-quarter financial results on Tuesday. The transcript from the company’s third-quarter earnings call has been provided below.
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Summary
Exagen reported record third-quarter revenue of $18.4 million, marking 11% year-to-date revenue growth and an adjusted EBITDA improvement of over 30%.
The company reiterated its full-year revenue guidance of $72 to $75 million and highlighted a new record in its trailing 12-month ASP of $451.
Strategically, Exagen is focused on expanding product adoption, increasing reimbursement through value-based strategies and delivering product innovations, including a myositis offering set to launch in early 2027.
The company expanded its sales territories to 45 and noted increased productivity and growth in its ordering physician base, with plans for further expansion in 2027.
Pharma services revenue nearly doubled year-to-date, and Exagen continues to enhance its product offerings and operational efficiencies while leveraging AI for workflow optimization in rheumatology practices.
Full Transcript
OPERATOR
Good day and thank you for standing by. Welcome to the Exagen third quarter 2026 earnings call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today’s conference is being recorded.
I would now like to hand the conference over to your first speaker today, Tina Jacobson, Head of Investor Relations. Please go ahead.
Tina Jacobson (Head of Investor Relations)
Thanks, operator. Good morning, and thank you for joining us to discuss Exagen’s financial results for the quarter ended September 30, 2026. Today I’m joined by John Aballi, our President and Chief Executive Officer, and Jeff Black, our Chief Financial Officer. The recording of this call, the press release announcing our financial results, and a slide presentation can be accessed on our website at www.exagen.com. Today’s call will include forward-looking statements. We encourage you to review the statements contained in today’s press release and the risks and uncertainties described in our SEC filings, which identify certain factors that may cause the company’s actual events, performance, and results to differ materially from those contained in the forward-looking statements made on today’s call. We also will discuss non-GAAP financial measures on this call.
Descriptions of these non-GAAP financial measures and the reconciliations of GAAP to non-GAAP financial measures are included in today’s press release. And now I will turn the call over to John Aballi. John.
John Aballi (President and CEO)
Good morning, everyone, and thank you for joining us. The third quarter extended what is fast becoming a record year for Exagen, with execution toward our vision increasingly evident in the results. I’ll get right into the details. This morning we reported third quarter revenue of 18.4 million, the best third quarter in company history. Year-to-date revenue has grown more than 11%, which has contributed to an adjusted EBITDA improvement of over 30%.
We grew both volume and price compared to last year. Trailing 12-month ASP reached a new record of $451, marking our 14th consecutive quarter of improvement. That speaks to the durability of our growth, and we’re confidently reiterating full-year revenue guidance of 72 to 75 million. During the quarter, we utilized our ATM facility to strengthen the balance sheet and opportunistically brought in high-caliber investors. As we continue to build and shape the company for the long term, we’re really pleased to have their support. As always, our mission is at the heart of everything we do. Autoimmune disease is diagnosed too late and too inconsistently, and it’s the patients that suffer. This is why Exagen exists, and we are singularly focused on building a unique platform to bring clarity to these complex diseases.
I spent a good amount of time in the field with customers over the last few months, and the conversations I had reinforce the critical nature of our work and the strategic path we’re taking. I visited with customers here in Southern California, Louisiana, and New York to discuss our offerings, how we can better support their practices, and to preview new products that will address important diagnostic challenges. One of the groups I visited specifically validated the myositis offering we’re readying for launch early next year, and we discussed the types of patients that would benefit as a result of this offering.
Feedback like that is motivating, and with this new product, we’re looking forward to serving even more autoimmune patients in need. With roughly 3% to 4% share of an autoimmune testing market that we estimate at 2 billion plus, the opportunity ahead of Exagen is significant. We’ll capture more of that opportunity the same way we’ve reshaped this business: by focusing long term and executing against three core objectives. The first, expanding adoption of our products; the second being increasing reimbursement through disciplined value-based strategies and operations; and third, delivering a steady cadence of innovation to address the unmet needs of our clinicians.
Let’s jump into clinical adoption. You can see in the chart on this slide that year-to-date volume is up 8%, and we’re now approaching 1.3 million of CTD tests since launch. Third quarter CTD volume was just above last year’s test volume and in line with historical seasonality trends. In the fourth quarter we expect continued normal seasonality, with the holidays and annual societal meeting subsequently impacting the number of days physicians are in clinic.
Our commercial investments are paying off well. We expanded to 45 territories over the past year, and while new reps typically take a year to get fully up to speed, productivity across the team continues to improve and our ordering physician base continues to grow. Our evidence base continues to expand as well. This is very much a strategic effort of ours, recognizing that reimbursement progress requires an ever-growing wave of high-quality content validating the utility of our products. And on that note, today we’re wrapping up at ACR Convergence in Orlando, where Exagen had a fantastic showing. Nine abstracts were featured at the conference, two of which were selected for podium presentations—one on disease associations for our proprietary T-cell markers and one analyzing phenotypic patterns across more than 375,000 CTD results.
The College reserves podium presentations for a small fraction of the abstracts it receives, and in 13 years of presenting at this meeting, this is only the second time in Exagen’s history that it’s earned two in a single year. Our science continues to push the boundaries of traditional autoimmune care, and our wave continues to build. You may have noticed a new look for today’s presentation. At ACR, we unveiled a refreshed Exagen brand with a modern, science-forward identity built around a new tagline: clarity in autoimmune decisions.
It reflects who we are today and the leadership role we intend to play in autoimmune care. Over the coming months, we’ll gradually be rolling out the new branding along with a website upgrade. Pharma services delivered another strong quarter, with year-to-date revenue nearly doubling over last year. In support of partners across phase one through phase three trials, IBD development, and biobanking capabilities, we now offer 38 biomarkers, up from 32 last year. The programs we contribute to span lupus, RA, Sjogren’s, myositis, among others. With RA demand growing fastest, it’s further evidence that the data, biobank, and scientific capabilities we’re building have value that extends well beyond the clinic.
Turning to ASP, trailing 12-month ASP expanded to $451 in the third quarter, up $10 year over year. This remains the metric we use as operators to assess the business because it smooths the variability associated with accrual accounting and the timing of collections. Our revenue cycle team delivered another solid quarter and, year to date, recoveries on claims more than a year old are more than 2.5 times last year’s level as we continue to optimize processes with analytics and AI.
We continue to work towards an ASP of roughly half our Medicare rate over time, and I’m confident there’s more ground to gain in the coming quarters. This brings me to innovation, where we’re positioning Exagen to serve our channel more comprehensively. Our myositis offering is on track for launch in early ’27. We achieved meaningful milestones for the program this quarter by completing clinical and analytical validation, and we expect to submit our validation package to the New York State Department of Health by the end of January. Myositis will be our first new stand-alone product since I joined, and we plan to launch it through our existing sales team, reaching the same rheumatologists who already rely on Exagen for the best connective tissue disease testing on the market.
Work also continues on the customer-facing AI applications we mentioned last quarter—taking the AI successes we’ve had inside our own business and applying them to help clinicians run their practices more efficiently. During the quarter, we accelerated that effort by acquiring an AI-enabled workflow optimization platform for rheumatology practices, which we believe can streamline clinic operations and improve care for newly referred patients. It’s early, and we’ll share more as development progresses, but my field visits during the quarter confirmed the need for a solution like this that we’re building.
In an effort to provide greater clarity into some of the exciting science and products we’re building, I’m pleased to announce that on December 15th at noon Eastern, we will host a webcast titled Exagen Building the Autoimmune Platform. The event will offer a deeper dive into our myositis offering as well as a couple other projects in our pipeline. More importantly, we’ll show how Exagen is evolving from a single-product company into an autoimmune platform.
Registration details are coming soon, and we really hope you’ll be able to join us. To close, I want to step back and put Exagen’s progress in perspective. We’re very focused on building long-term success, and results since the current management team arrived at the end of 2022 show that our strategy is working exceptionally well. Over this period, revenue has grown at a compounded rate of roughly 14%, while adjusted EBITDA loss has improved on average roughly 37% per year, now running roughly equal to our R&D investment.
We achieved that while completely rebuilding many areas of the company, launching unique and novel biomarkers, establishing our pharma business, and funding the pipeline that’s taking us from a product to a platform. Today, the business is growing on both volume and price, our commercial engine is strengthening, and we’re investing in our next leg of growth from a stronger balance sheet. This is the business we said we’d build. We’ll keep building it in the same way, quarter after quarter—focused on the long term and delivering on what we communicated.
Before I hand the call over to Jeff, I want to thank our team. Progress like this is a tremendous amount of work, and the energy, effort, and high character our people bring every day in service of autoimmune patients and clinicians is what makes this progress possible. With that, I’ll turn it over to Jeff.
Jeffrey G Black (Chief Financial Officer)
Thank you, John, and good morning, everybody. As John just highlighted, our third quarter results reflect another solid quarter of execution across the business. Starting with third quarter revenue, we generated $18.4 million, an increase of 7%. Continued strength in clinician adoption and utilization offset normal seasonality to deliver AVISE CTD test volume growth of 2%. That’s on top of a tougher comp compared to the first half of the year, which reinforces the strength of underlying demand.
Our commercial investments are delivering solid returns as sales productivity continued to ramp, reaching another record, with trailing 12 months of AVISE revenue per territory up nearly 6%. That’s even as we expanded from 42 to 45 territories over the past year, with volume per territory holding stable while our newer reps scale. The number of ordering physicians was also up 5% in the quarter. The AVISE CTD trailing twelve-month ASP expanded to $451 per test, up $10 compared to last year, and revenue cycle initiatives drove another strong in-period ASP result, including about $800,000 collected from claims older than 360 days.
As John mentioned, over time we continue to target an ASP of at least 50% of Medicare reimbursement, or approximately $600 to $650 per test, recognizing that this improvement will take time and that quarterly contribution from our revenue cycle initiatives can be variable. Pharma Services revenue was over $900,000 in the third quarter, bringing the year-to-date total to $2.2 million, up nearly 85% over last year. This growth reflects continued execution against our contract backlog, which now stands at roughly $5.5 million, and the broadening of our offering. While revenue recognition can fluctuate quarter to quarter, we see Pharma Services as a meaningful long-term growth lever with a strong trend line.
Moving to gross margin, we reported just under 59% for the third quarter, up about 40 basis points, attributed to ASP expansion, operating leverage, and ongoing COGS rationalization. We remain confident that gross margin will progress to the mid-60s over time. Turning to expenses, our total operating expenses for the third quarter were $15.2 million, up just over $2 million compared to 2025. That includes a year-over-year increase of over $600,000 in non-cash stock-based compensation and a one-time in-process R&D charge of roughly $600,000 relating to the strategic investment that John described. Excluding stock-based compensation and the in-process R&D charge, non-GAAP OPEX was $13.4 million, up about 6% and $800,000 over the third quarter of last year.
Breaking out the components of OPEX, third-quarter SG&A was $12.8 million, up about $1.3 million, driven primarily by commercial investment and higher stock-based compensation. R&D was $1.8 million in the third quarter, up just slightly compared to last year to support pipeline development, including preparation for the myositis product launch expected in early 2027. Adjusted EBITDA loss was $1.9 million in the third quarter, compared to a loss of $1.9 million last year. The year-to-date picture of adjusted EBITDA more clearly demonstrates the scale our business is delivering. Year-to-date revenue grew more than 11% while operating expenses, excluding stock-based compensation and the in-process R&D charge, grew about 6%. Roughly a third of every incremental revenue dollar has flowed through to adjusted EBITDA, which year-to-date has improved more than 30%.
Turning to the balance sheet, we increased our cash position by $3.5 million in the third quarter, ending the period with cash and equivalents of just over $28 million. During the quarter, we opportunistically added about $6.5 million in cash through disciplined execution of our ATM program. We don’t see the ATM as a primary source of capital, but view it as a useful tool when deployed in a targeted, disciplined way, and that’s how we approached it this quarter.
After quarter close, we also drew $5 million from the expiring $10 million tranche under our Perceptive debt facility, bringing our pro forma cash balance at the end of Q3 to just over $33 million. This was not about cash need, but with that tranche about to expire, drawing part of it was a responsible way to strengthen our balance sheet. Importantly, we have the runway needed to support the business to sustainably positive adjusted EBITDA and operating cash flow, and that gives us the flexibility to be disciplined and opportunistic in how we manage the balance sheet.
Shifting to guidance, today we reiterated our 2026 full year revenue outlook of $72 million to $75 million. That outlook continues to assume high single-digit volume growth and mid single-digit full year ASP growth compared to the fourth quarter 2025 exit rate. It also reflects the typical second half volume seasonality from fewer clinic days and our growing contribution from Pharma Services. In summary, third quarter reflected continued execution against our priorities. We grew revenue faster than we spent, we saw continued momentum in sales productivity while we added territories, and we strengthened the balance sheet with discipline that gives us a solid platform heading into 2027 and beyond. Operator, we will now open the call up for questions.
OPERATOR
Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. In the interest of time, we do ask that you limit your questions to one question and one follow-up. Please stand by while we compile the Q&A roster. And our first question comes from Max Masucci of Roth Capital Partners. Your line is open.
Max Masucci (Analyst at Roth Capital Partners)
Hi. Nice quarter. Thanks for taking the questions. First one, just looking at the implied Q4 guide, it is still a decently wide range, so it would be great—can you walk us through the key items there, that bridge from the low to the high end?
John Aballi (President and CEO)
Morning, Max. Thanks so much for the question and joining the call. Appreciate the opportunity to dive a little bit deeper here. From our perspective, the year’s progressing really how we revised the guidance in Q2 and we feel confident that as we head into Q4 it’s going to finish as a record year. As we stated, we still expect to be growing high single digits for the year on volume and, call it, low to mid single digits on ASP. We felt that the guide still reflected that and especially the midpoint of the guide felt pretty comfortable where we’re at. So from our standpoint, it continues to line up with how the company is performing and puts us right in line with where we expect to finish.
Max Masucci (Analyst at Roth Capital Partners)
That’s great. And next one for me, just can you share any customer feedback you’ve fielded for the myositis test during ACR Convergence? And what can we expect to learn during the December myositis education call?
John Aballi (President and CEO)
Yeah, great question. So I actually was in Orlando this weekend at ACR and speaking to quite a few clinicians. Really fun conversations. I mean, so just to reframe this, when I joined Exagen, one of the first things I did was orient our development pipeline to our top customer needs. And that required quite a bit of voice of customer. Our team’s very adept at that. And it’s been a lot of fun really studying our customer base. Myositis was the number-one asked-for thing.
You’d be talking to a clinician, they’ll be describing their family, their kids, and then out of nowhere, you know, “Hey, if you have the opportunity to develop something that can help me in myositis, that would be fantastic.” And so that has rung true or continued to ring true. And at ACR, we meet with as many of our customers as we can, but especially those larger practices that have physician boards and whatnot. And countless times it came up again—the excitement around myositis, wanting to know the breadth of the panel, which we think will be sufficiently comprehensive. We’ll have unique markers that others don’t offer, and then we expect to be able to turn our testing around within a week, which is really critical for the field.
Current alternatives are in the four- to six-week, some even expanding into the eight-week, timeframe. So we think on those three fronts we’ll have a highly differentiated product that is still in extremely high demand—the number-one asked-for solution amongst our customer base—and we’re very excited for what’s coming. We should have a clinical validation that is published here in the next few months. You’ll get a sneak peek of that on the call. We’ve conducted our analytical validation and we’ll update a little bit on the process for launch there and the readiness of our team.
But the other exciting thing on the call in December is we have a KOL clinician, Dr. May Choi—who I met with at ACR, by the way, as well—who will give, I think, a very important patient perspective of how challenging these patients are to diagnose, what you look for, and then what the ultimate consequences are of missing the diagnosis or not having the adequate tools to work with these patients. So I think it should be very interesting and it should give you a lot more specificity on this specific topic that I’m sure most people are not as familiar with.
Max Masucci (Analyst at Roth Capital Partners)
Thanks, John. Looking forward to the call next month.
John Aballi (President and CEO)
Thank you.
OPERATOR
Thank you. And our next question comes from Dan Brennan of TD Cowen. Your line is open.
Dan Brennan (Analyst at TD Cowen)
Great, thank you. Thanks for the question here. Maybe just looking out for 2027 for a moment. Can you just remind us on what the PAMA impact would look like if it gets implemented, since I know this will be a topic as we head into year end?
John Aballi (President and CEO)
Yeah, good morning, Dan. Thanks for the question. So, yeah, nice to have, I guess, some clarity regarding PAMA. I guess in terms of the pricing and potential impact, we still don’t know fully if it’ll be implemented. I believe the comment period has transpired, but still waiting to see ultimately what Congress comes up with there, as they, as you know, delayed this multiple times. For us, going through PAMA, we had a couple objectives. The first was to ensure that our PLA code remained in line with our existing pricing, and that’s really been at the heart of our revenue cycle operations and optimization over the last several years.
So we did achieve that goal. I think it’s a big milestone for us. Our Medicare rate for our unique PLA code remains stable and steady at $840. But we do also utilize some generic CPT codes and those we have no control over given the median is set by the national labs there. So from that perspective, we do expect some slight headwinds overall in a blended rate. We’re talking low single-digit impact. If it were to be realized fully, we’ll have to see again how it transpires. But from our perspective, we believe our revenue cycle optimization and the strategies we’re employing here should overcome that over time.
So not too worried as we head into 2027.
Dan Brennan (Analyst at TD Cowen)
Great, thanks, John. And just on myositis, I think you cited like a 100,000-person TAM in the past but felt it could be really underdiagnosed. I know we’ll get color as we head into 2027, but anyway, at this early stage, how to think about a predicate-like ramp in myositis—how meaningful that could be in year one, year two type thing?
John Aballi (President and CEO)
It’s a great question. And you know the 100,000 patient reference point that you just brought up, we’ve now come to appreciate that I think it’s materially higher than that in terms of the testing population, the rule-out population if you will. The ramp we’re still figuring out. We have some internal projections not entirely ready to share them externally. We may go into a little bit on our December 15th call as well. We’ll have to just see. But from our perspective, it’s the same sales channel, it’s the same customer base. It has the potential to move into pulmonology as well, the ILD space, and we’ve actually seen quite a bit of excitement there. But as we’ve done with the Avise CTD, we don’t want to get out over our skis in terms of increasing sales expense. We want to do it in a responsible, measured way. And I think we’ll just have to see how it paces throughout 2027. Maybe more to come on the December call.
The systematic—great question. Thanks for bringing that up. The systematic review absolutely has. As you’re familiar with, many of these payers have established timelines for medical policy review. It’s gotten us—the systematic review has gotten in front of many of these folks for their year-end review cycle. It’s driven some progress with one Blues plan specifically, but it continues to be a longer game. But yes, it absolutely has had an impact and opened some doors.
OPERATOR
Thank you. And our next question comes from Kyle Mikeson of Canaccord Genuity. Your line is open.
Kyle Mikeson (Analyst at Canaccord Genuity)
Hey guys, thanks for the questions. So, solid quarter it looks like. You know, volume and providers and all that, and ASP as well in the period, kind of growing single digits equating to this high single-digit overall revenue growth rate, which is solid like I said. But in the past you’ve been a double-digit grower. I’m just curious what variables and factors will really drive a return to double-digit growth recognizing maybe the PAMA headwinds next year as you just discussed.
I’m thinking ordering physicians, the RCM efforts, expanded coverage or more reps, and then of course the pipeline tests. I’m curious how important these components are to getting to double-digit. Thanks.
John Aballi (President and CEO)
Yeah, good morning, Kyle. Thanks for the question. From our perspective, we’re on track to deliver, at the midpoint there, somewhere around 11–12% revenue growth. So we believe that this year should culminate in double-digit growth. But I think at the heart of our strategy, as you’ve been following for the last few years, we’re really working towards cash flow positivity. And I think that’s why we’re especially proud of the improvements on the adjusted EBITDA side.
And as I mentioned, if you look over the last four years, we’ve been improving that around 37% a year on average each year. So we’ll continue to do that. I do think that we can have double-digit revenue growth, especially as we move more into a platform from a single product. So I think myositis will certainly be a factor. We will continue to expand our sales team. I think we’ve had a nice expansion here over the last 12 months. Those folks continue to get settled and acclimated, and we’re seeing some pretty nice growth within those territories. But back half of the year tends to have some seasonality.
We’ve talked about this in the past. We saw that here in Q3; we expect it in Q4. But our physician base continued to grow. I mean, that grew 5% year over year here. So I think we’re doing all the right things. We absolutely have the right strategy and, more importantly probably, we have the right people to execute that strategy. So the ingredients are here.
Kyle Mikeson (Analyst at Canaccord Genuity)
All right, thanks, John. When it comes to the commercial payers, I heard you talk about Blues, but are you focused on broadly local, maybe the health system base, the payviders, or the larger plans out there? I’m just curious—to your point earlier—it’s been years of watching this process happen with the coverage expansion and trying there, but it’s unsuccessful in some areas with some of these mega plans. I’m just curious what the current strategy is there.
John Aballi (President and CEO)
From a market access standpoint, our strategy is really to drive broader awareness and then work with who’s listening. And some of that has to do with physician advocacy, some of that has to do with your appeals efforts, some of that has to do with the evidence generation that you have in conference attendance and what have you. So we continue to make, in my opinion, really nice progress. To have 14 consecutive quarters of growth in an area that historically is pretty difficult for specialty diagnostics is something we’re very proud of.
Yes. To directly answer your question, we’ve made decent progress with some of the smaller IDNs in various regions. You know, you have that in the Southeast, you have it in the Southwest as well. We’ve worked with various military plans, TRICARE—we’ve talked about in the past. The large national plans, a couple of them actually pay us very well and find value in the testing that we provide. And then we’ve continued to work with the others on an appeal basis, and we’ve been successful through our ALJ process again this quarter.
We saw great success there. So at any given time we’re in some stage of the cycle, if you will, with various plans. And so it’s not necessarily a concerted effort to go for, you know, this tier of payer. It’s going to be more regionally based. It’s going to be where we have clinician momentum or ALJ momentum and appeals progress. And then when we’re able to get in front of them face to face, we tend to be fairly effective, and I think you see that represented in our trailing twelve-month ASP progress.
Kyle Mikeson (Analyst at Canaccord Genuity)
Okay, excellent. And then just lastly, was this acquisition of the AI-enabled workflow software platform part of the strategy to unlock new tests and expand the market opportunity, or is it just kind of complementary to what you already—
John Aballi (President and CEO)
Yeah, so this was somewhat opportunistic. You know, we saw a very interesting platform that a few of our customers were already using in their day-to-day workflow. We think it has broad applicability but a high value proposition in the community-based rheumatologist and really helps optimize their practice workflow, and there’s a few different modules we can get into, but pretty exciting from our standpoint. The original technology was based out of Israel, and as we had been following them and talking with them, it just ended up working out well from a price standpoint and the value we think we got in return.
Ultimately, where this platform evolves to, we’re still working through, but I can tell you internally we’re pretty excited about embedding a software platform in our customer base that helps them work more efficiently and effectively, but basically gives Exagen a presence on a day-to-day basis. You know, right now we field the sales force which goes in on a regular basis, but it’s just not practical to go see, you know, 150 docs a week. So, you know, if that’s roughly the number of physicians each territory is managing, something like this brings Exagen into the clinic on a day-to-day basis, and potentially we find that very interesting and attractive.
Could help leverage some of the testing solutions we provide. Could shorten some of the learning curve, especially given that innovation is such a core aspect to our strategy. But we’ll see how this evolves. Super excited. You know, it has existing customers. We’ve been demoing some of the new features we’ve been working on, and we’ll have to see how it evolves here in 2027.
Kyle Mikeson (Analyst at Canaccord Genuity)
Okay, exciting. I look forward to the webinar in a couple of weeks. Thanks.
John Aballi (President and CEO)
Thanks, Kyle.
OPERATOR
Thank you. And our next question comes from William Bonello of Craig-Hallum. Your line is open.
William Bonello (Analyst at Craig-Hallum)
Hey guys, thanks a lot. I’m wondering if you can just provide a little bit more color on the dynamics around volume growth. It was a lot lower on a year-over-year basis than we’ve seen in a while, I think, than people had been expecting. I understand seasonality, but obviously that doesn’t explain the year-over-year growth rate. So any nuance in the quarter, and then maybe just, you know, repeat again what you think is sort of the more normalized volume growth.
Jeffrey G Black (Chief Financial Officer)
Yeah. Hey Bill, this is Jeff Black. Thanks for the question. I think it’s—simply stated—it really has to do with the year-over-year comps, right? If you recall, and I know we don’t disclose specific quarterly volume, but if you recall, in ’25 we saw a pretty significant step-up, right, in our kind of average quarterly volume. And so it just made for a tougher comp in the third quarter. That’s really the driver. But I think the encouragement here is that we still see an uptick in our ordering HCPs or ordering clinicians.
So that’s indicative of just continued demand and adoption, but just less clinic data as a result of summer vacations. And we’ll see some of that continue through the holidays in the fourth quarter as well. And that just seems to be a dynamic that we experience in the second half of every year.
William Bonello (Analyst at Craig-Hallum)
And just again, what you said in terms of the sort of expectations for volume growth going forward.
Jeffrey G Black (Chief Financial Officer)
Yeah. We would expect, you know, pretty much on an annual basis to be growing high single digits on volume, low to mid single digits on ASP, and to have that combination reflect revenue growth in the double digits as well while we pursue cash flow profitability.
William Bonello (Analyst at Craig-Hallum)
Okay, and then just the last one is just: Can you give us an actual Avise CTD revenue figure for the quarter?
Jeffrey G Black (Chief Financial Officer)
Yes. It’s $16.4 million.
William Bonello (Analyst at Craig-Hallum)
Thank you. That’s it.
OPERATOR
Thank you. And our next question comes from Mark Massaro of BTIG. Your line is open.
Mark Massaro (Analyst at BTIG)
Hey guys. Thank you for taking my questions. I wanted to start with myositis. To what extent do you think you can answer additional clinical questions for the rheumatologist? I presume this test is to aid in diagnosing myositis, but I’m wondering if there are any other clinical questions this test can enable you to answer across autoimmune disease.
John Aballi (President and CEO)
Yeah, that’s a great question, Mark. And I hope you’ll be able to join us on December 15th. We’ll actually be able to have a Q&A session with Kol in this field, and I think that’d be the perfect forum for that. But I will speak to what I know. So the exciting thing for us is that some of the unique markers that we have, we’re aiming at diagnostic capabilities first and foremost, as you referenced. But in addition to that, several of them have other prognostic implications. And so there’s two markers specifically that potentially confer high risk of lymphoma, a progression to cancer that’s very important, especially for how the patient subsequently gets worked up and is monitored throughout time.
One of the markers is specifically associated with statin-induced myositis. And so that’s basically a drug-induced condition that can be adjusted, you know, a different MOA for addressing the patient’s condition, but ultimately alleviating some of the negative side effects that are leading to that myositis or inflammatory myopathy condition. So from that standpoint, the test should be able to address that. But I’ll also say one of the reasons why we think our offering is unique is it should be the only offering out on the market that is quantitative. And so we’re taking a lot of care, a ton of effort really, to validate the quantitative nature of each of these markers. When we launch, it’ll be a 17-marker profile, which we feel, again, is fairly comprehensive for the market. But each of those markers are validated on a quantitative level. So rather than just saying positive/negative, we give you the titers.
And that allows physicians to monitor as therapies come into the market over time. And so you can actually evaluate therapeutic response for the various markers. And that’s something we’re really excited about. Myositis has several B-cell depletion drugs that are in development right now. I believe actually one of them was recently approved. So very exciting from that standpoint. And that’s the different dimension than just pure diagnosis.
Mark Massaro (Analyst at BTIG)
Fantastic. Yes. I figured there were multiple clinical questions, so that’s great. And yeah, I look forward to joining on December 15th. All right. I also wanted to ask, Jeff, maybe this is for you. Are you still planning to achieve adjusted EBITDA positive at an $80 million annual revenue run rate?
Jeffrey G Black (Chief Financial Officer)
Yeah, Mark, that hasn’t changed. And again, what we reviewed with you, I think last quarter, was at $80 million and around a 63% gross margin, we should be right at break-even on an adjusted EBITDA basis. And we still believe that’s the case.
Mark Massaro (Analyst at BTIG)
Okay. And then I know you got the question about PAMA. Recognize that the generic codes could come down just a little bit. And I recognize it’s early, but I’m curious if, with the modest PAMA impact, you still think you’re on track to grow ASPs next year. I’m just wondering if you could walk me through some of the puts and takes on that. I recognize there’s some opportunity with commercial payers as well. So I’m just curious. An early view on that.
John Aballi (President and CEO)
Yeah, I think it’s absolutely an important question. We talked at length, I guess maybe more coincidentally even last year at this time, we talked about some of the impact headwinds due to client bill and the Northwell customer that we lost last year and the impact to ASP there. So we’ve had headwinds, Mark, you know, over time, and we’ve still been able to overcome them through our strategies. I feel like our Market Access team is stronger than ever. I feel like our revenue cycle team is stronger than ever. You know, the way that we approach things, we are constantly learning, constantly challenging our underlying assumptions and working to get more efficient and effective in everything we do. And I think the revenue cycle operations that we have are really incredible relative to where we were four years ago. So I have a lot of confidence that given we’ve moved our ASP up north of 70% in the last four years, that despite having some smaller headwinds on some of the generic codes, we will still be able to improve our ASP.
And that may come through additional relevant markers that we’re working on in our pipeline; that may come through continual improvement from a revenue cycle standpoint. But I also think our Market Access team is doing a fantastic job, and we’ll have to see kind of that impact over time.
Mark Massaro (Analyst at BTIG)
And maybe just a clarification question. You recognized $800,000 in prior period collections, Jeff. Do you think there’s an opportunity to continue along that path or do you think that’s not a likely scenario?
Jeffrey G Black (Chief Financial Officer)
No, Mark, we do. As I think you know, it can be lumpy. A quarter ago it was over a million dollars, but you know, it’s tracking on a very nice trajectory. You know it’s going to end up more than—the greater than 360-day collections will end up more than double what it was last year. So we’ve got really good momentum. We’re starting to optimize, as John said, with technologies and better education, better people to continue to enhance the appeals process.
And that’s both clearing backlogs and also just getting better at optimizing ASP. So we think there’s continued opportunity there for sure.
Mark Massaro (Analyst at BTIG)
Fantastic. Thanks, guys.
Jeffrey G Black (Chief Financial Officer)
Thanks, Mark.
OPERATOR
Thank you. And our next question comes from Mayank Montani of B. Riley. Your line is open.
Amin Shaherly (Analyst at B. Riley)
Hey, good morning, team. This is Amin Shaherly on for Mayank. Thank you for taking my question. I just wanted to ask how, I guess, how did September and October exit and, you know, kind of what you’re seeing quarter-to-date in 4Q.
John Aballi (President and CEO)
Yeah. Good morning. Thanks for joining the call. You know, September and October were fantastic months for us. October was, I believe, volume-wise, our third-highest month in the last couple of years. ASP-wise, we continue to have progress and we had very nice progress with our pharma services. So from an Exagen operations standpoint, fantastic. Tough to complain about any of those areas. We also hit major milestones in developing our myositis platform. We finished in October—we finished some of the analytical validation work, and then the clinical validation wrapped up toward the end of the month as well. So from a prioritization standpoint, everything we’re seeking to do or have sought to do in 2026 is we’re executing in line with those expectations. So very nice in that regard.
Amin Shaherly (Analyst at B. Riley)
Thank you for that. I guess piggybacking on the pharma services comment, does argenx’s recent phase 3 data in IMNM, does that kind of change your myositis launch expectations or, you know, any pharma services interest?
John Aballi (President and CEO)
You know, so very happy for them. I think we also expect more behind, but from our standpoint we think it does change. Just anytime you have drugs coming into a space that previously didn’t have as strong medical solutions there, it’s a positive. You’re going to have more people out in the field talking about the disease. Clinicians are going to be more interested in finding these patients because now there’s a practical way to address their condition.
And so we think it’s a positive for the space. We think it’s a positive thing for the patients and look forward to their success and hopefully being a part of it through our solution as well.
Amin Shaherly (Analyst at B. Riley)
We hope so too. Just maybe a final question on the in-period ASP against the 451 kind of trailing 12 months, and then I guess how much did the aged claim collections kind of contribute in 3Q versus that $2.3 million in first half?
Jeffrey G Black (Chief Financial Officer)
Yeah, it’s a great question. So just to put it in perspective, the trailing twelve-month ASP at 451 was roughly equal to where we ended up in-period in Q3. But I think you raised an important question, and that is if you take a look at—we did about $1.3 million in excess cash collections over 360 days in Q2. We did $800,000 in Q3. And like I said, that can be very variable from quarter to quarter. But to put that in perspective, that was a half-million-dollar difference.
If we would have collected at that same level in Q3, it would have had almost a $14 impact on ASP. So you can see the, you know, the opportunity and the impact it can have on a quarter-to-quarter basis.
Amin Shaherly (Analyst at B. Riley)
Thank you, team. That’s very helpful. I look forward to December 15th.
OPERATOR
Thank you. And if you have a question, please press star 11. And our next question comes from Matthew Parisi of KeyBanc Capital Markets. Your line is open.
Matthew Parisi (Analyst at KeyBanc Capital Markets)
Yes, this is Matthew Parisi on for Paul Knight at KeyBanc Capital Markets. Congrats on the great quarter and thanks for the questions. You’ve previously called out that ACR is not advocating for the AVISE CTD test. I’m just wondering if you could talk to the impact that you’re seeing as a result of said advocacy.
John Aballi (President and CEO)
Yeah, good morning, Matthew. So I was just at ACR. As I mentioned, part of the agenda that I accomplished there was meeting with a few of those physicians on—if you’ll recall—the Core Committee, the Committee on Rheumatologic Care. That is one group or one entity within ACR that has been willing to advocate on our behalf directly into payers. They continue to have conversations on a regular basis with multiple payers on our behalf advocating for broader access to clinically high-value testing.
And we continue to talk to them about some of our offerings in the pipeline and how we need likely a more robust solution than individual advocacy. But the interesting thing here is while they continue to talk to various medical directors, they’re also looking at regulators. And that’s a slightly different angle than we’ve had in the past, especially as it relates to Medicare Advantage populations, Medicaid populations, where, you know, we’ve consistently won ALJ-type hearings. And so a great partnership—it continues to strengthen. Many of the members of those committees have two-year rotations.
And so it’s important for us to have a really good feel for who’s in the wings, if you will, and who’s likely to come into that committee over time. And we continue to strengthen our partnership there. So grateful for it and like the progress we’re making.
Matthew Parisi (Analyst at KeyBanc Capital Markets)
That’s great to hear. And then you expanded both the salesforce and territories over the last 12 months, and I’m just wondering if we should expect further expansions in 2027.
John Aballi (President and CEO)
Yeah, great question. I’ll be able to give more details on it likely in Q1 as we launch myositis. I think I referenced that the initial launch is going to be directed straight into the rheumatology channel, consistent with the demand that we see in the market and where we think we’ll have the most success initially. That said, there may be opportunities to move into interstitial lung disease. One of the primary questions there is, is it autoimmune-related interstitial lung disease?
And one of the ways of resolving that is through, or in part, a myositis evaluation. We think the connective tissue disease offering that we have has applicability there too. But depending on how our launch looks and what feedback we’re getting and how pulmonologists start to receive that information, I think it’ll help us frame our expansion plans for 2027. And as I mentioned, I do try to travel quite a bit and get into the field. This quarter was no exception. I actually was in Louisiana visiting a pulmonology group. I spoke with a few pulmonologists recently, virtually as well. There’s a strong need for this type of offering in the market. So that’ll be informed at the start of ’27.
Matthew Parisi (Analyst at KeyBanc Capital Markets)
That’s really great to hear and appreciate the insight. Now if I could just ask one more if there’s been any kind of further update regarding the LCD for CTD.
John Aballi (President and CEO)
Yeah, great question. Thanks for keeping that topic going. It’s very relevant for our organization. I think also, just given the lack of autoimmune LCDs that are out there relevant for the industry, from our perspective, no update, no change. We meet quarterly with the MolDx team and actually have a meeting here later this quarter, mostly just to get the systematic review in front of them and to educate them on how that was published and how the study was conducted.
I just want to make sure that we answer any questions and again continue to foster that relationship given what we have in our pipeline. But as we said today, no update. And the way this process goes, you really don’t find out until you find out. So still in waiting.
Betty (Analyst)
Thanks again. That’s all for me. Congrats on the quarter and I look forward to the December 15th meeting.
John Aballi (President and CEO)
Thanks, Betty.
OPERATOR
Thank you. I show no further questions at this time. I’d like to turn it back to John Aballi for closing remarks.
John Aballi (President and CEO)
Great. And thank you all so much. I really appreciate everyone joining the call today. Q3 was emblematic of our strategy in general. We continue to grow revenue faster than costs, our sales productivity advanced, ASP improved, and we reached meaningful milestones on our pipeline. I’m very pleased with where we’re sitting today. What stood out to me this quarter was the confidence showing in Exagen from multiple directions: from the rheumatology community, which put our science on the podium at ACR. From institutional investors who chose to—I’m really, or incredibly, proud of our team. The talent and character across Exagen continues to transform this organization into the preeminent diagnostic company serving the autoimmune community.
In the next few months, with our myositis launch and with the Exagen Forward webcast on December 15th, we’ll give you a much clearer picture of the platform we’re building and the scale we believe we can achieve. Again, just appreciate the support of all of our stakeholders and look forward to continuing to update you on our progress. Thanks so much.
OPERATOR
This concludes today’s conference. Thank you for participating and you may now disconnect.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.
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