Exagen (XGN) Q1 2026 Earnings Transcript

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Date

Monday, May 11, 2026 at 8:30 a.m. ET

Call participants

• President & Chief Executive Officer — John Aballi
• Chief Financial Officer — Jeffrey Black

Takeaways

• Revenue -- $17.3 million, an increase of 12% year over year, representing the highest first quarter in company history.
• Gross margin -- 59%, flat year over year and up 360 basis points sequentially from Q4 2025.
• Adjusted EBITDA loss -- $2.2 million, a 14% improvement compared to the prior year period.
• Test volume growth -- AVISE CTD volume rose 10%, surpassing market growth of 5%.
• Ordering clinicians -- Increased by 15% to just over 2,700, indicating deeper penetration and channel engagement.
• Trailing 12-month ASP -- Reached $444 per test, a $25 or 6% rise, marking 12 consecutive quarters of ASP growth.
• In-period ASP impact -- Out-of-period collections, totaling $900,000, added about $25 to in-period ASP; annual out-of-period collections last year were $1.5 million.
• Pharma services revenue -- Generated approximately $300,000, supported by over $5 million in backlog expected to be recognized over 2-3 years.
• Operating expenses -- Totaled $13.6 million, up 9%, with SG&A at $12 million (up 8%), and R&D at $1.6 million (up over 20%) due to commercial growth and myositis test preparation.
• Cash balance -- Ended at just under $22 million, ahead of internal projections.
• Territory productivity -- Annualized revenue per territory remains around or slightly above $1.5 million, reflecting stable productivity across 45 territories.
• Sales force expansion -- Recent expansion to 45 territories, with ongoing training and several territories having secured significant accounts.
• Guidance reaffirmed -- Full-year 2026 revenue guidance remains $70 million to $73 million, assuming high single-digit percentage test volume growth and low single-digit ASP growth off a Q4 2025 in-period ASP baseline of $430.
• Product pipeline -- Next stand-alone product, a myositis test, is targeted for commercial launch in early 2027.
• Scientific visibility -- Nine abstracts accepted at Autoimmunity 2026, including those related to myositis and the AVISE portfolio; two myositis and SLE manuscripts were accepted for publication for release later in the month.

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Risks

• First-quarter volume was negatively impacted by winter storms, causing a "1/3 of volume" loss over two weeks, equating to several thousand tests that are "essentially gone" due to the perishable nature of blood samples.
• Management said it is "very hard to predict" if outsized prior-period collections will continue each quarter, reflecting uncertainty in future ASP stability.
• Operating expenses increased 9%, partly due to higher investment in commercial expansion and R&D, which raised short-term costs.
• The LCD process for AVISE CTD remains in queue with no timeline provided, leaving the timing and impact of broader Medicare coverage uncertain.

Summary

Exagen (NASDAQ:XGN) delivered record quarterly revenue and sustained improvements in profitability metrics, supported by double-digit test volume growth and a 6% increase in trailing-12-month ASP. Management emphasized a strategy driven by disciplined revenue cycle execution, sales force expansion, and innovation, resulting in deeper ordering clinician engagement. Substantial out-of-period collections enhanced first-quarter ASP, but the persistence of such gains remains unpredictable, particularly given seasonality and payer dynamics. Expansion of biopharma contracts, ongoing R&D investment toward a 2027 myositis test launch, and continued operating leverage signal intent to scale, but weather disruptions and pending regulatory milestones introduce operational and reimbursement risks.

• Management highlighted a "3% market share" in the $2.2 billion autoimmune testing space, viewing this as supporting significant future share gains.
• ASP expansion was most attributed to ongoing improvements in claims appeals and payer engagement, with sustained improvement over a three-year period.
• Pharma service revenue growth is increasingly driven by contracts focused on both lupus and rheumatoid arthritis, with at least "1/3 of our biopharma business in RA."
• The company expects gross margins to trend up to the "mid-60s" range over time through further ASP gains and operational efficiencies.
• Operator-initiated client bill transitions, such as the Northwell contract loss, have not accelerated, and management continues to view this as a singular event.
• Sales training has been restructured into two phases to accelerate new representative effectiveness, with production improvements expected over a 6- to 9-month period.
• Future ASP levels depend on the successful transition of more payers to in-network contracts and the outcome of ongoing LCD review by MolDX.

Industry glossary

• ASP (Average Selling Price): The average revenue recognized per diagnostic test performed, after adjustment for collections timing, denials, and retrospective payments.
• AVISE CTD: Exagen's lead diagnostic test for connective tissue diseases utilizing proprietary CB-CAPs technology.
• LCD (Local Coverage Determination): Medicare administrative contractor policy governing local reimbursement for clinical tests and procedures.
• MolDX: A program by Medicare administrative contractors for the evaluation and coverage of molecular diagnostic tests.
• SG&A (Selling, General & Administrative): Non-production operating expenses including sales, marketing, and administrative costs.

Full Conference Call Transcript

John Aballi: Good morning, everyone, and thank you for joining us. We're starting 2026 off well. Today, we reported record first quarter revenue of $17.3 million, up 12% year-over-year and with continued improvement in profitability metrics as we execute our plan. Gross margin was 59% and adjusted EBITDA loss reduced to $2.2 million, a 14% improvement versus last year. These results continue our efforts to build Exagen into a durable company that compounds value over time by prioritizing 3 core objectives: expanding adoption of our products, increasing ASP through disciplined revenue cycle execution and delivering a steady cadence of innovation that meets the unmet needs of our clinicians. Q1 was another good example. We are executing and our strategy is working.

At the same time, our mission remains our anchor point. Autoimmune disease is still a category where patients often struggle to get clear answers and clinicians lack the tools to diagnose and treat with confidence in a timely manner. We exist to change that, and we'll do so by pairing better science with best-in-class execution. Our innovation efforts are on track, and we believe Exagen is well positioned to bring clarity to the complexities of autoimmune disease, ultimately improving outcomes for patients. When I look at our market opportunity, I'm incredibly energized by what's ahead. Drawing on our knowledge of the space and third-party research, we estimate the autoimmune testing market at over $2.2 billion, growing about 5% annually.

With just over 3% market share today, we believe there is significant and realistic opportunity to systematically gain share by bringing better science, more timely results and world-class service to our underserved channel. Driving adoption within that opportunity will be central to volume growth. And in the first quarter, AVISE CTD test volume grew 10% year-over-year, which compared to a 5% market growth rate suggests we continue to earn share in the quarter. Test volume remained in the mid-30,000 quarterly run rate range.

I feel very positive about that performance, especially in light of a couple of week disruption related to winter storms in late January and early February that reduced patient access and physician office days in specific U.S. regions. Demand outside of the weather-impacted weeks tracked well with our expectations. We entered Q2 focused on execution and 1 month in have seen a strong start, consistent with expected ordering patterns. In fact, year-to-date, we've seen several weeks where testing volume has exceeded 2025 weekly highs, and this is obviously just over a quarter into the year. A big part of my optimism stems from a review of our sales metrics, which continue to show a broadening of our ordering base.

Ordering clinicians were up 15% year-over-year, reflecting continued penetration and engagement within our channel. Our team is executing well, and the results continue to build. Now to ASP. One of the clearest indications that our operating strategy is translating into durable business improvement. We expanded trailing 12-month ASP to $444, up $25 per test or 6% versus last year. Strength in the first quarter was driven by continued progress in revenue cycle management and favorable collections timing. We've now delivered 12 consecutive quarters of increasing trailing 12-month ASP and view this metric as the most reliable indicator of progress as it smooths the variability associated with accrual accounting and timing of collections.

Overall, we're encouraged by continued improvement in our underlying reimbursement. It reinforces that we're investing in the right processes and the right tools to drive sustainable ASP expansion over time. In the first quarter, we continue to advance our processes around innovation and remain on track with our development priorities. We've been deliberately building the R&D to commercial muscle to deliver a dependable cadence for new products with the objective of launching approximately 1 product every 12 or so months to our clinician base. Our next key priority is an offering for myositis, our first new stand-alone product since 2020, currently targeted for commercialization in early 2027.

This is among the most requested diagnostic need within our channel and will fit well with our commercial reach. Myositis is an autoimmune disease that can present in many forms, but often causes chronic muscle inflammation, progressive weakness or rapidly progressing interstitial lung disease. Left untreated, it can lead to irreversible damage that extends beyond the muscles to vital organs. And in the most severe forms, this results in complications leading to complete loss of lung function or even death. The testing dynamic for myositis is similar to connective tissue disease, where specifically with early disease, symptomatic presentation is ambiguous and the differential is broad.

While roughly 100,000 patients in the U.S. are affected by the disease currently, we believe this number dramatically underrepresents the true disease prevalence given the number of patients that ultimately go undiagnosed due to inadequate tests in the market. We believe the patient population under evaluation for myositis is many times this number. While most clinicians rely on conventional testing today, the vast majority of them lack confidence in those results. We're developing a comprehensive offering that will bring clarity to this population that clearly needs a better solution. We are also excited about our scientific visibility to start 2026.

At Autoimmunity 2026, a key autoimmune conference this month in Prague, Exagen had 9 abstracts accepted, including several tied to our myositis research and continued evidence generation across the AVISE portfolio. We've also had 2 manuscripts accepted for publication related to our research in myositis and SLE. Those should be out for publication later this month as well. Our progress reflects the rigor, quality and practicality of the work our clinical team is driving. Looking ahead, we are reaffirming our full year 2026 revenue guidance of $70 million to $73 million. We're incredibly pleased with the start to 2026 while working to build successive quarters and ultimately years of profitable growth.

We remain focused on our priorities and delivering consistent execution. To close, I want to thank our team. The quality of this organization continues to improve and the solid results we're delivering are the product of real collaboration across every function. I am grateful for the tremendous energy, the effort and the high character that our people bring every day in service of autoimmune patients and clinicians. With that, I'll turn it over to Jeff for additional comments on the financials.

Jeffrey Black: Thank you, John, and good morning, everyone. 2026 is off to a solid start with first quarter results reflecting continued deliberate execution across the business. Once again, we achieved record top line performance by growth in both testing volume and ASP. I'll dive into the financial results, starting with revenue. First quarter 2026 revenue reached $17.3 million, an increase of 12% compared to last year. Testing volume grew 10%, driven by continued momentum from the investments we made last year to upgrade and expand the commercial organization. The team's productivity continues to ramp.

In fact, even with many of our new territories less than a year old, we drove a 4% improvement in sales productivity based on trailing 12-month volume per territory. And as John mentioned, we increased the number of ordering clinicians in the first quarter by 15% year-over-year. These are both clear indications that our commercial investments are translating into tangible performance gains. Our AVISE CTD trailing 12-month ASP expanded 6% to $444. Execution of our revenue cycle management initiatives supported a strong in-period ASP result, including the collection of over $900,000 in claims older than 360 days.

Over time, we continue to target an ASP of at least 50% of our Medicare reimbursement or approximately $600 to $650, recognizing that the quarterly contribution from our revenue cycle initiatives can be variable. Our pharma services offering generated roughly $300,000 of revenue in the quarter. Early efforts here are coming to fruition. We now have over $5 million in contract backlog value and growing that we expect to realize over the next 2 to 3 years. Moving to gross margin. We reported 59% for the first quarter of 2026, relatively unchanged compared to first quarter 2025 and up 360 basis points sequentially.

Gross margin in the quarter benefited from the strength of our in-period ASP and our continued COGS rationalization that is streamlining workflows in the lab and reducing costs across our supply chain. We remain confident that gross margin will progress to the mid-60s over time as we achieve further ASP expansion, generate scale and fixed cost leverage and further optimize costs. Turning to operating expenses. First quarter 2026 OpEx was $13.6 million, up about 9% compared to last year. We continue to exercise expense discipline and direct incremental spend toward growth investments, including commercial and R&D initiatives.

Breaking out the components of OpEx, first quarter SG&A was just over $12 million, an increase of 8% compared to our first quarter 2025 and driven primarily by investment in commercial talent and territory expansion. Notably, revenue growth continues to consistently outpace SG&A growth, indicating sustained operating leverage in the business. R&D accounted for about $1.6 million of OpEx in the first quarter, growing over 20% compared to last year to support continued pipeline development, including preparation for the myositis product launch expected in early 2027. Our adjusted EBITDA loss, which excludes depreciation and non-cash stock comp expense was $2.2 million in the first quarter, a 14% improvement compared to last year.

Please refer to the press release we issued earlier today for a reconciliation of our net loss to adjusted EBITDA. Turning to cash. We ended the first quarter with cash, cash equivalents and restricted cash of just under $22 million and ahead of our internal expectations. We continue to maximize our revenue cycle management, which includes beginning the year by holding most claims. Consistent with previous years, this temporarily increases accounts receivable and results in a higher use of cash in the first half of the year, which we expect to normalize in the second half. We continue to believe that our balance sheet provides us the runway needed to support the business to sustainable positive free operating cash flow.

Shifting to guidance. As John mentioned, we're reaffirming full year 2026 revenue guidance of $70 million to $73 million. The midpoint continues to assume high single-digit percent volume growth and low single-digit percent ASP growth relative to our Q4 2025 in-period rate of approximately $430. In closing, we remain committed to creating and sustaining shareholder value through financial and operational discipline as we deliver better care for autoimmune disease. Our financial performance reflects continued execution across top line expansion, cost management and targeted investment to create a durable business well positioned for self-funded growth and scale. Operator, we will now open the call for questions.

Operator: [Operator Instructions] Our first question comes from the line of Kyle Mikson with Canaccord.

Kyle Mikson: Congrats on a great quarter. I wanted to talk about the quarterly like in quarter ASP for a second. It was good to see the improvement in the trailing 12 months, but the quarterly was interesting. So it looks like maybe like 470 or high 400s, and that would obviously be a pretty big increase from the last few quarters. But I bring it up because it just seems like your first quarter ASP is typically the highest of the year of any of the 4 quarters. And so as we think about the step down going forward, if that is the case, just -- what's the progression going to look like?

I know you have the ASP guidance, but maybe just talk a little bit about the seasonality, what you're seeing with RCM and that stuff and how we should just be thinking about it as it kind of builds to the full year TTM.

John Aballi: Kyle, thanks a lot for the question. Appreciate it. When we look at this quarter, very happy with how our revenue cycle team was able to deliver, specifically related to the prior period cash collections, which drove some of that upside or outsized performance in the quarter. Tough for us to project that each quarter going forward or know exactly that prior period collections tends to be a little bit lumpy for us. So I don't think we're ready to say that there's going to be a step down in sequential quarters to characterize exactly the size of it.

But our revenue cycle approach has yielded pretty decent returns as it relates to prior period collections in quarters in the past, and it was great to see it happen again this quarter. Looking forward to it in future quarters as well. But the exact magnitude is always difficult for us to project. Anything you'd add, Jeff?

Jeffrey Black: Yes, Kyle, I would say you had done the calculation on in-period. Our out-of-period collections, just to put in perspective, we said about $900,000 in out-of-period greater than 12-month collections. Put that in perspective, we did about $1.5 million for the entire year last year. So tracking very nicely. And again, very hard to predict whether that becomes a run rate or otherwise. But that had about a $25 impact on the in-period ASP. So we are tracking ahead of that Q3 or Q4 exit rate, which is encouraging. But again, I think it's too early for us to make a call on what we expect Q2 in terms of whether it's continued enhancement.

We'll say we did see a full quarter of collections for PAD4. So that's tracking right around where we expect it to be. And then some of the increase is really relative to payer mix, which can change quarter-to-quarter. But again, very encouraged about a $25 impact on the out-of-period collections. Hoping that we'll continue to see that traction, but not yet ready to make the call.

Kyle Mikson: Okay. Yes, John, that was helpful. And Jeff, that was a really good color there as well. Thank you for that. On the ordering physicians in the quarter, that increased, I think, 15%, I guess, year-over-year. That's great to see. I just was wondering what were some of the reasons for that. And then I think that might imply like a lower average test order per doctor, which is probably extend that a cohort of newer to AVISE clinicians. On this though, what are some of the ordering trends of the more recent cohorts of physicians given several developments in the autoimmune field the last few years?

John Aballi: Great question, Kyle. So you're exactly right. The ordering physician base increased 15% year-over-year to about just over 2,700 physicians here for the first quarter. A big part of that has to do with our sales expansion. Obviously, with the additional territories we added in the back half of last year, those folks really high-caliber individuals, but they've just gotten into the field, established those relationships, and we're seeing the traction there. As it relates to orders per physician, you're on the mark there as well. I think part of the lower orders per physician for Q1, if you would be related to more of the weather impact, to be honest with you.

We had about 2 weeks in the end of January, early February, where we lost around 30% or so, 1/3 of our volume for those 2 weeks just related to that severe weather in the Northeast. And so that, on an average basis, orders per physician would pull that number down a little bit. So that's all we're seeing there. The weeks outside of the weather impact, we saw very robust demand on orders per physician, physician base and here into Q2 as well.

Kyle Mikson: Awesome. Perfect. And then finally, Jeff, you were mentioning the R&D expense this quarter was a bit elevated, partially due to preparation for the myositis launch, I guess, early next year. I just was wondering if you guys could talk about how much education or like additional marketing is going to have to be kind of executed, I guess, this year for that test? And how much of this is maybe R&D versus like an SG&A type thought process?

Jeffrey Black: Yes. I'll let John chime in on some details. But generally, this is going to be new product really outside of AVISE CTD, but it will be distributed through the same sales channel. So the expectation is we're adding to the bag. So there will be some incremental marketing efforts, but we don't expect to see OpEx ramp up substantially. We will continue to see investment this year on the R&D side. But this is -- will be our first stand-alone product beyond AVISE CTD really since, what, 2020?

John Aballi: 2020.

Jeffrey Black: So really excited about it, and we don't think it's going to add really incremental burn. It's really just adding to the existing bag.

John Aballi: The way we take a look at this, Kyle, or at least the way I think about it internally is we have to have very strong relationships with our customer base, but also the other innovators in the field and the KOLs. And that serves several purposes, but one of them being as you launch a new product and you conduct studies with folks, that can serve very much as incredibly powerful marketing material related to the new product. So we've already started that. We've got abstracts and actually an accepted manuscript now related to myositis and some of the research we're doing there. And that's all done with the existing budget.

And a big part of that or credit goes to our research team for having those relationships, finding creative ways to conduct studies in, call it, economical way, and we'll continue to do that. There may be some marketing expense that is associated with the product launch, but it will be measured and generally consistent with our current operating profile.

Operator: Our next question comes from the line of Bill Bonello with Craig-Hallum Capital Group.

William Bonello: So on the -- first of all, on the volume, on the weather, you talked about a couple of tough weeks. Any sense of maybe what the impact on volume growth might have been? I mean, did you, in theory, lose a day or 2 of productivity? Or how might we think about that?

John Aballi: Thanks so much for the question. So the way we have characterized it is for those 2 weeks, we lost about 1/3 of volume over the course of 2 solid weeks. So that's a couple of thousand tests. That should be -- I think, give you the exact color you need.

William Bonello: Yes. And then just to expand on that, is there anything else just as we see the ASP trend moving in the right direction, is there anything different that's happening at all on the volume front in terms of either maybe walking away from some lower-priced business or being more cautious about some of the accounts you're adding? Or would we say that maybe differential in the growth rate and the sequential downtick would pretty much all be the weather?

John Aballi: So great question. So in the quarter, the impact of volume was pretty much weather related. I mean not really any other drivers there or motivators there. And then on the ASP side, really what's driving that continues to be just our -- the strategy we employed a few years ago. And we just continue to get better at it. Our appeals continue to get better. These are long cycles, as you know. And as we learn through various successes or failures in our appeal efforts, we adjust our approach and make changes there.

We're always evaluating our Medicaid patient population, is maybe one area that I would say continues to evolve and certainly on the managed Medicaid side, what level of patient responsibility the market can support there. And so those are some changes we have made here in Q1, but I don't think those are big contributors to volume impact. They may have had some impact on the ASP side, but mostly ASP gains are due to wins on the revenue cycle side.

William Bonello: Okay. That's really helpful. And then maybe just a follow-up on that on the ASP side. So obviously, having improvement on both the collections front and it sounds like on the fighting denials and all of that. Can you just remind us maybe what some of the key opportunities are? I know as we were going through last year, there were some really specific opportunities you saw where you -- for things that you could get paid for because of some of what you had added to the product over the course of the last year. And maybe just give us a little bit of an update on how you're feeling about that and where those opportunities stand today?

John Aballi: Yes, absolutely. Thanks for the chance to expand on it. From my standpoint, opportunistically, we continue to pursue prior period collections. I mean we've talked about this a little bit with the new product launches, and you have your initial payment or your initial ASP, call it, from when you perform the test. And then over the course of about a 12-month, maybe even a little bit longer 12- to 18-month period, you're able to continue to work with the insurance company, with the patient in various ways through appeals, advocacy, what have you, and drive further collections. And that's what we anticipated doing with the new product launches on the existing product.

And it's just -- it's coming to fruition. To have 900,000 in prior period collections here in Q1 when all of last year, we had about $1.5 million, that's phenomenal. We are, to be honest, so proud of the team because it's coming from multiple payers and through multiple initiatives. And so it's not just one single win that drove this, but it's on improving some of those collections for the new product launches. It's on the base business across multiple payers. And our level of payer engagement just continues to improve as well.

I mean here in the first quarter, we had -- I said it on -- we had presentations to 3 different medical directors at various Blues plans. They continue to be engaged. We're not -- these aren't just join a conference call, they sit silent, and you present your clinical dossier and then the call is over. There's high levels of engagement, lots of Q&A, follow-up requests for additional material. So we are -- our strategy is getting the attention of various payers. It's yielding improvement in ASP on the individual claim level for multiple CPT codes, and we'll just continue marching along. And that's been the strategy from day 1 and just continues to improve in terms of efficacy.

William Bonello: Okay. And then if I could, just one last follow-up on that, but -- and that's helpful. But just in terms of getting paid for the additional markers, and obviously, that's part of the success presumably on the prior period collections. But as you look forward, are you feeling -- how are you feeling about consistency of payment for those additional markers? Are you thinking that's going to be -- I hate to say easier, but you -- as you look forward, do you expect to see maybe the rate of denials moderate or a bit given the success you've had with the prior period collections? Or is it too early to say on that?

John Aballi: No. So it definitely will improve the rate going forward, especially just because we're on accrual accounting, right? So as you have a track record of improved collections, you can actually accrue it and then it will factor into the rate going forward, right? So from that perspective, we'll have greater certainty, we'll have greater clarity because we'll have firsthand experience in seeing this through full cycle for -- this is more specific to the new marker reimbursement. So from that perspective, we'll improve. But I think the other thing I would say is we now have a 3-year track record of consistent improvement in ASP.

And so I have a lot of confidence that our processes work and that they'll continue to yield positive results over time as well. So all of that will be factors. The way to really lock it in, as you know, is through in-network contracting and then your velocity of payments will improve. And I don't know that you ever sleep soundly at night regarding this area, but at the same time, it may speed everything up a little bit.

Operator: Our next question comes from the line of Dan Brennan with TD Cowen.

Daniel Brennan: Maybe, guys, just on pacing for the year. Just Q2, Street is just shy of $18 million. Can you give us some flavor about maybe price volumes, you guys seem okay with that number? How do we think about that?

John Aballi: And from a guidance standpoint, we are guiding quarterly. I think we feel very comfortable about our annual guide that $70 million to $73 million. Obviously, a very nice quarter here for Q1, some of it driven by the prior period collections that we aren't quite ready to earmark for the rest of the year each quarter. So we're still filling it out. We'd like to get another quarter behind us before we take a look at that annual number. And I think the quarterly spread is what it is on the analyst side, but I don't think we're too far off.

Daniel Brennan: Okay. And then maybe just one follow-up on the weather. So you lost those a couple of thousand tests, I guess, in Q1. So I guess, presumably, do those come back in Q2? Or are they gone? And does that kind of create a favorable comp in Q2?

John Aballi: Yes. So because the sample type that we work in is peripheral blood, it's got a viability component to it. Really, it gets moved -- those tests get moved theoretically. If we were dealing with paraffin-embedded tissue or fixed tissue or something like that, you could envision a catch-up period that's maybe a little bit more realistic. But for us, in essence, those are gone. Those are clinic days that are completely gone. There's only so many patients that a physician can see in a single day. So those are essentially gone.

Daniel Brennan: Got it. Okay. Maybe you could just give us an update on the path towards an LCD. I know that's been on file for a couple of years now. Just wondering kind of any update there. How we think about that? And what kind of -- if, in fact, that were to come, how do we think about the impact that would mean on your ASP uplift?

John Aballi: Sure. So maybe I'll start with the impact first. Impact-wise, an LCD is a very nice progress for our organization. It will memorialize the coverage with Medicare that we have, I guess, in plain sight but also allow us to leverage that for Medicare Advantage conversations and even policy discussions related to commercial lives with various plans. So we're looking forward to it, still waiting, continue to have a very good relationship with the MolDX team, meet with them on a regular basis, about every quarter just to get an update. We do have -- our body of evidence supporting AVISE CTD continues to expand.

In fact, we had a systematic review, a very significant publication for us internally, just get accepted for publication. That will come out maybe in a month's time or so. And we look forward to updating the MolDX team with that evidence as well. But where we sit right now is we're in the queue. They are unable to tell us exactly where in the queue we are, but we remain in the queue, and they have a complete understanding of our product and the clinical evidence behind it. But that's about all we can say at the moment.

Daniel Brennan: Okay. And just in terms of the Northwell transition, I think you guys felt pretty good that other customers weren't looking to kind of switch from direct bill to kind of, I guess, third-party pay. Just any update there. How do you feel about that? Does that still remain the case today?

John Aballi: Yes. Well, it still stings. I think from my perspective, it's really unfortunate that we weren't able to find a path there. But as it relates to our broader client bill business, no further change. In fact, I think our relationship with our client bill customers continues to be very strong. Maybe adjusted our approach a little bit, and we have a lot of senior leadership highly tuned into our client bill accounts and just continue to foster them as we do with really any other account. So no further updates, if you will.

And as it relates to Northwell, we continue to find ways to serve their clinician base outside of the system itself but see it unlikely -- see it as unlikely that a client bill arrangement comes back in the near future.

Daniel Brennan: Got it. Right. But you're not really hearing like you think it is kind of more of a one-off, I guess, is still the case, correct?

John Aballi: Yes. And that happened in July of last year. And since then, we continue to have, like I said, strong relationships with our client bill business. So pretty close to the definition of one-off, in my opinion.

Operator: Our next question comes from the line of Mark Massaro with BTIG.

Mark Massaro: It was really nice to see the 15% increase in ordering clinicians. Can you give us a sense, are these all specialists, so I presume rheumatologists? Or perhaps did you see any increase in breadth? And then related to that, can you speak to any potential opportunity to market to primary care or more generalist clinicians?

John Aballi: Yes. Thanks for the question. Very interesting one. From the physician base standpoint, we still target the rheumatologists as our primary customer, and that's what we saw in terms of the expansion, continued growth, but roughly proportional to what we had previously. So about 2/3 devoted to the rheumatology channel and then about 1/3 of that expansion coming outside of it. When we see utilization of the test outside of rheumatology, it can come in a few different ways, general practitioners, internists, but we also see it in the women's health side, so OBG, but also pulmonology as well. And so we don't have targeted -- we want to keep our sales team focused.

And I think you really need to take a look at what the potential is for those physicians before you start targeting and marketing to them. And so from our standpoint, where we've seen expansion outside of the rheumatology specialty work well, it's when the rheumatologist is still involved even if behind the scenes. They know their referral network very well, and they know which physicians for whatever geographic reason are seeing some of these patients, and they'll help direct us in that respect. So that's what we saw with this expansion as well.

Mark Massaro: Okay. That's great. And I think you expanded to, I believe, 45 territories. Can you just speak to how you're feeling about the productivity of some of the newer reps? How do you think they're ramping? And if they're not fully ramped, do you see any potential for some pickup in the back half of the year?

John Aballi: Yes. So first of all, they're fantastic people and been really excited about how we've -- how they've been able to come in. We've modified our training now a couple of times to cater -- to really refine it over the last couple of years, and it's working well. We just had our -- we split training into 2 phases. The first is kind of welcome to rheumatology, remove the deer in the headlights sort of perspective. And we bring them back after a couple of months in the field to dive deeper into the science but also really do more of a Q&A and tailor it to what they're seeing and the challenges that they're facing in their territories.

And we did that here in late December. So we've now had a quarter with our new reps going through Phase 2 of the training. And so they're still getting their feet under them. I think we typically see production consistent with our goal targets somewhere in that 6- to 9-month range. But to truly get running, it takes a little bit longer than that. And we've had a few of our territories land some pretty big accounts, clients, which is telling me that they understand the product. They're able to convey the clinical utility of the product in an effective way and develop that relationship.

So very happy with how pretty universally these 5 territories have gotten acclimated to rheumatology and our product, but still a ways to go. And I would think you see a continued build throughout the year. We'll also look to expand our sales organization even further once we have those folks adequately supported. So maybe that comes in the back half of the year or so. We'll have to see.

Mark Massaro: Okay. Fantastic. And then my last question. I know in prior calls, there had been more discussion around the newer biomarkers launched in 2025. I know you've talked about PAD4, I think, RA33, some others. Just curious how that is ramping. And to what extent do you see potential upside in ASPs as we try to tune up our models? I'm just wondering how those are progressing relative to your internal expectations.

John Aballi: Yes. The new markers, I think, generally inside the building, we're very happy with the decision to pursue that research and ultimately commercialize those markers. And I think part of what gives us that optimism or excitement is we've actually started to land pharma contracts related to testing with the new markers. We actually have 2, specifically for PAD4 and RA33. So our unique RA markers are not only grabbing the attention of our clinical base and being useful in that context, but we're seeing that utility spread into our pharma partners. And obviously, as you have these new markers incorporated into various trials and subsequent publications leveraging these, it's just going to continue to build.

And we continue to be the only group in the U.S. providing these markers and just very excited to drive that innovation into the field. Specifically as it relates to ASP, I think our revenue cycle operations continue to improve the ASP that we're able to generate on our test, but specifically those new markers. And we're still gaining confidence with what that looks like full cycle. I mean PAD4 launched in September of this past year. So we're 6 months in, and we don't guide on ASP. And so I think from that standpoint, it's going to be tough for me to give you some direction there. But we like how the first quarter shaped up related to ASP.

Some of that prior period collection was related to the new markers, and we'll just continue to build from here.

Mark Massaro: Great. Actually, John, just to clarify that, the pharma business that you're landing, how much of this is lupus related versus RA or any other type of autoimmune disease?

John Aballi: That's an interesting question. So it's interesting, Mark, because you sign a contract for up to a certain amount of service and some of that's dependent on trial enrollment, right? But we have -- right now, we have a pharma business heavily focused in lupus, but actually quite a bit in RA as well. We've never broken it out publicly. Jeff, what would you...

Jeffrey Black: Yes, it's a great question, Mark. Historically, clearly, lupus, the expansion of the contract backlog, which has expanded from in the 4s to the $5 million range over the course of the last 90 days. A lot of that has been driven by RA. I would still say a bigger percentage is lupus, but we are seeing sort of a growing contribution from RA.

John Aballi: Yes, we're doing at least 1/3 of our biopharma business in RA. It may be higher than that, but at least 1/3.

Operator: Our next question comes from the line of Matthew Parisi with KeyBanc Capital Markets.

Matthew Parisi: This is Matthew Parisi on for Paul Knight over at KeyBanc Capital Markets. Congrats on the quarter. I believe you called -- on the last call, you called out that ACR is now advocating for the AVISE CTD test. Can you talk to any impact that you're seeing as a result of that advocacy?

John Aballi: Matthew, thanks for the question. And you're exactly right, very happy to have found a path that ACR can play in helping us drive greater access to our test. And given that we're at various forms of discussions with different payers, I would hesitate to call out a payer by name, but it's been a very positive impact. And any time you have physicians advocating for your product directly to the payer, I think tough to mess that up, to be honest with you. And so we welcome it. We welcome the partnership. We really appreciate that they recognized the role diagnostics play in the ecosystem and that there needs to be a path for advocating greater access for patients.

It just continues. So it wasn't a onetime event. It's a partnership that we formed with the ACR and the physicians there, and they're committed to speaking on our behalf and advocating for their constituency related to access. So I would just say it remains strong and continues.

Matthew Parisi: That's great to hear. And then if I can squeeze in one more. You previously mentioned revenue per territory in the range of $430,000. Do you have like an updated revenue per territory number for the quarter? And then how should we really think about that as you ramp up the new territories?

Jeffrey Black: Yes, Matt, I think that the number you're referring to is a quarterly number. So the annualized number would be north of $1.5 million. That continues to be, what I would say, our target, $1.5 million plus, and we're tracking right about there, maybe moderately improved given the results of Q1.

Operator: Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Aballi for any final comments.

John Aballi: Thanks so much. I really appreciate everyone who joined the call today. And it's really a lot of fun to start the year off the way we have. Basically, we're continuing our momentum from the second half of '25 but reigniting our progress in ASP gains. And I don't think anything is more fun than that. I'm incredibly proud of our team, as I have been now for several years. They continue to deliver in transforming this organization into, really, the preeminent diagnostic company serving autoimmune patients. Progress at the company has come in spurts, but we've consistently improved our trajectory, and we have put ourselves in a position to own the autoimmune diagnostic space.

And while others are focused elsewhere, we'll continue to chip away at this opportunity and build a truly incredible autoimmune powerhouse. We appreciate the support of all stakeholders and look forward to continuing to update on our progress. Thanks so much again.

Operator: Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

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