EXAGEN INC.

Previous wording

Since launching AVISE® CTD, we have produced an extensive body of peer-reviewed literature supporting the test’s clinical validity and utility, demonstrating the importance of AVISE® CTD in patient care. Revenue from this product comprised 91% and 92% of our revenue for the three months ended March 31, 2026 and 2025, respectively.

Current wording

Since launching AVISE® CTD, we have produced an extensive body of peer-reviewed literature supporting the test’s clinical validity and utility, demonstrating the importance of AVISE® CTD in patient care. Revenue from this product comprised 90% and 91% of our revenue for the six months ended June 30, 2026 and 2025, respectively.

Previous wording

▪Myositis Biomarkers. Myositis specific antibodies (MSA) are a well-defined group of important biomarkers for the diagnosis of idiopathic inflammatory myopathies, and the stratification of patients into clinical phenotypes, according to treatment responses, and disease outcomes. Despite the advanced research on these markers, significant challenges persist with standardization and availability of validated methods with fast turnaround time. Our research studies use different technologies for the detection of MSA. When compared, we gain a unique understanding about potential avenues for product development in the area of myositis.

Current wording

▪Myositis Biomarkers. Myositis specific antibodies (MSA) are a well-defined group of important biomarkers for the diagnosis of idiopathic inflammatory myopathies, and the stratification of patients into clinical phenotypes, according to treatment responses, and disease outcomes. Despite the advanced research on these markers, significant challenges persist with standardization and availability of validated methods with fast turnaround time. Our research studies use different technologies for the detection of MSA. When compared to traditional technologies, we gain a unique understanding about potential avenues for product development in the area of myositis. We expect to launch our first Myositis offering in 2027.

Previous wording

▪Reimbursement for Our Testing Products. Our revenue depends on achieving broad coverage and reimbursement for our tests from third-party payors, including both commercial payors and government payors. Payment from third-party payors differs depending on whether we are considered a "participating provider" (have entered into a contract with the payors as a participating provider) or a "non-participating provider" (do not have a contract and are considered a "non-participating provider"). Payors will often reimburse non-participating providers at a lower amount than participating providers, if at all. We have received a substantial portion of our revenue from a limited number of commercial payors, most of which have not contracted with us to be a participating provider. Historically, we have experienced situations where commercial payors proactively reduced the amounts they were willing to reimburse for our tests, and in other situations, commercial payors have determined that the amounts they previously paid were too high and have sought to recover those perceived excess payments by deducting such amounts from payments otherwise being made. When we contract to serve as a participating provider, reimbursements are made pursuant to a negotiated fee schedule and are limited to only covered indications. If we are not able to obtain or maintain coverage and adequate reimbursement from third-party payors, we may not be able to effectively increase our testing volume and revenue as expected. Additionally, changes in our estimated reimbursements for tests performed in prior periods can positively or negatively impact our revenue in the current period and cause our financial results to fluctuate. In addition, in connection with our revenue cycle management initiatives, we have in the past and continue to hold claims in the first half of the fiscal year, which typically results in increases in our accounts receivable and an accelerated decrease in our cash in the same period, with the trend subsequently reversed in the second half of the fiscal year as cash is collected on billed tests.

Current wording

▪Reimbursement for Our Testing Products. Our revenue depends on achieving broad coverage and reimbursement for our tests from third-party payors, including both commercial payors and government payors. Payment from third-party payors differs depending on whether we are considered a "participating provider" (have entered into a contract with the payors as a participating provider) or a "non-participating provider" (do not have a contract and are considered a "non-participating provider"). Payors will often reimburse non-participating providers at a lower amount than participating providers, if at all. We have received a substantial portion of our revenue from a limited number of commercial payors, most of which have not contracted with us to be a participating provider. Historically, we have experienced situations where commercial payors proactively reduced the amounts they were willing to reimburse for our tests, and in other situations, commercial payors have determined that the amounts they previously paid were too high and have sought to recover those perceived excess payments by deducting such amounts from payments otherwise being made. When we contract to serve as a participating provider, reimbursements are made pursuant to a negotiated fee schedule and are limited to only covered indications. If we are not able to obtain or maintain coverage and adequate reimbursement from third-party payors, we may not be able to effectively increase our testing volume and revenue as expected. Additionally, changes in our estimated reimbursements for tests performed in prior periods can positively or negatively impact our revenue in the current period and cause our financial results to fluctuate. In addition, in connection with our revenue cycle management initiatives, we have in the past held claims in the first quarter of the fiscal year, which resulted in increases in our accounts receivable and an accelerated decrease in our cash in the same period. The trend subsequently reversed in the three months ended June 30, 2026 as we collected cash on billed tests.

Previous wording

▪Expanding Adoption of AVISE® CTD. Since the launch of AVISE® CTD in 2012 and through March 31, 2026, we have delivered over one million of these tests. During the three months ended March 31, 2026, the number of AVISE® CTD tests delivered increased by approximately 10% over the same period in 2025. Revenue growth for our testing products will depend, in part, on our ability to continue to expand our base of ordering healthcare providers and increase our penetration with existing healthcare providers and on the success of the T-Cell Biomarkers and RA Sub-Profile Biomarkers, which we added to our AVISE® CTD tests in January 2025.

Current wording

▪Expanding Adoption of AVISE® CTD. Since the launch of AVISE® CTD in 2012 and through June 30, 2026, we have delivered over one million of these tests. During the three months ended June 30, 2026, the number of AVISE® CTD tests delivered increased by approximately 11% over the same period in 2025. Revenue growth for our testing products will depend, in part, on our ability to continue to expand our base of ordering healthcare providers and increase our penetration with existing healthcare providers and on the success of the T-Cell Biomarkers and RA Sub-Profile Biomarkers, which we added to our AVISE® CTD tests in 2025.

Previous wording

Our ability to increase our revenue may depend, in part, on the success of the T-Cell Biomarker and RA and PAD4 Sub-Profile Biomarkers enhancements to our AVISE® CTD test, in addition to our ability to further penetrate the market for our current and future testing products and increase our reimbursement and collection rates (ASP) for tests delivered.

Current wording

Our ability to increase our revenue may depend, in part, on our ability to increase our reimbursement and collection rates (ASP) for tests delivered and further penetrate the market for our current and future testing products.

Previous wording

In April 2022, we were granted a Proprietary Laboratory Analyses code (PLA code) for our protein-based test, AVISE® Lupus, which is offered standalone or as part of our AVISE®CTD test. Noridian Healthcare Solutions (Noridian), our Medicare Administrative Contractor (MAC), has set the current pricing for this PLA code at $840.65 per test. CMS will align local MAC pricing with national payment rates for the PLA code on the 2026 Clinical Laboratory Fee Schedule through their annual payment determination process to provide a standardized, nationally determined payment rate. The process for obtaining and maintaining consistent reimbursement for new tests can be uncertain, lengthy and time consuming. A pricing determination is not synonymous with a coverage determination. Having a price associated with the PLA code for any particular test does not secure coverage or reimbursement for that PLA code from Medicare or any other third-party payor.

Current wording

In April 2022, we were granted a Proprietary Laboratory Analyses code (PLA code) for our protein-based test, AVISE® Lupus, which is offered standalone or as part of our AVISE®CTD test. Noridian Healthcare Solutions (Noridian), our Medicare Administrative Contractor (MAC), has set the current pricing for this PLA code at $840.65 per test (the list price for AVISE® Lupus is $1,787.22). CMS will align local MAC pricing with national payment rates for the PLA code on the 2026 Clinical Laboratory Fee Schedule through their annual payment determination process to provide a standardized, nationally determined payment rate. The process for obtaining and maintaining consistent reimbursement for new tests can be uncertain, lengthy and time consuming. A pricing determination is not synonymous with a coverage determination. Having a price associated with the PLA code for any particular test does not secure coverage or reimbursement for that PLA code from Medicare or any other third-party payor.

Previous wording

During the year ended December 31, 2023, we implemented several revenue cycle management initiatives, including among others, withholding the submission of commercial payor claims for reimbursement until subsequent quarters, increasing appeals efforts, adjusting the documentation required of physicians when ordering our tests and implementing increases to our patient payment rates. Additionally, in November 2023, we increased the list price billed for our tests. These ongoing revenue cycle management initiatives aim to optimize our appeals process and the potential for cash collections. During the fiscal year ended December 31, 2024, we experienced moderate declines in test volume since the second half of the fiscal year ended December 31, 2023, as rheumatologists and patients adjusted to these changes. During the fiscal year ended December 31, 2025, we saw a return to volume growth. The number of AVISE® CTD tests delivered during the three months ended March 31, 2026 improved by approximately 10% as compared to the number of AVISE® CTD tests delivered during the three months ended March 31, 2025 due to continuing physician demand and adoption, early traction from our new biomarkers, and salesforce expansion. Additionally, the trailing-twelve-month ASP of our AVISE® CTD tests increased by approximately 6% during the three months ended March 31, 2026 compared to the same period in 2025.

Current wording

During the year ended December 31, 2023, we implemented several revenue cycle management initiatives, including among others, withholding the submission of commercial payor claims for reimbursement until subsequent quarters, increasing appeals efforts, adjusting the documentation required of physicians when ordering our tests and implementing increases to our patient payment rates. Additionally, in November 2023, we increased the list price billed for our tests. These ongoing revenue cycle management initiatives aim to optimize our appeals process and the potential for cash collections. During the fiscal year ended December 31, 2024, we experienced moderate declines in test volume since the second half of the fiscal year ended December 31, 2023, as rheumatologists and patients adjusted to these changes. During the fiscal year ended December 31, 2025, we saw a return to volume growth. The number of AVISE® CTD tests delivered during the three months ended June 30, 2026 improved by approximately 11% as compared to the number of AVISE® CTD tests delivered during the three months ended June 30, 2025 due to continuing physician demand and adoption, early traction from our new biomarkers, and salesforce expansion. Additionally, the trailing-twelve-month ASP of our AVISE® CTD tests increased by approximately 4% during the three months ended June 30, 2026 compared to the same period in 2025.

Previous wording

Revenue increased $1.8 million, or 11.7%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily due to ASP expansion driven primarily by our new biomarkers, and, to a lesser extent, an increase in test volume. The number of AVISE® CTD tests delivered in the three months ended March 31, 2026 increased by approximately 10% compared to the same period in 2025. In addition, our AVISE® CTD trailing twelve-month ASP increased by $25 per test to $444 per test in the first quarter of 2026 from $419 per test in the first quarter of 2025.

Current wording

Revenue increased $2.7 million, or 15.9%, for the three months ended June 30, 2026 compared to the three months ended June 30, 2025, primarily due to increases in test volume and expansion of our AVISE® CTD. The number of AVISE® CTD tests delivered in the three months ended June 30, 2026 increased by approximately 11% compared to the same period in 2025. Our AVISE® CTD trailing twelve-month ASP increased by 4% or $18 per test to $446 per test in the second quarter of 2026 from $428 per test in the second quarter of 2025. In addition, our pharma services revenue increased by approximately $0.7 million, to $1.0 million in the second quarter of 2026 from $0.3 million in the second quarter of 2025.

Previous wording

Cost of revenue increased $0.7 million, or 11.4%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. This increase was primarily due to increases of $0.5 million in the cost of materials and supplies, $0.2 million in depreciation and amortization, and $0.2 million in other expenses, partially offset by a decrease of $0.2 million in employee-related expenses (including salaries, benefits and stock-based compensation).

Current wording

Cost of revenue increased $0.9 million, or 13.5%, for the three months ended June 30, 2026 compared to the three months ended June 30, 2025. This increase was primarily due to increases of $0.3 million in the cost of materials and supplies, $0.2 million in depreciation and amortization, $0.2 million in employee-related expenses (including salaries, benefits and stock-based compensation), and $0.3 million in other expenses, partially offset by a decrease of $0.1 million in royalty expenses.

Previous wording

Gross margin as a percentage of revenue increased to 59.0% for the three months ended March 31, 2026 compared to 58.9% for the three months ended March 31, 2025, primarily due to the changes to revenue and cost of revenue described above.

Current wording

Gross margin as a percentage of revenue increased to 61.3% for the three months ended June 30, 2026 compared to 60.4% for the three months ended June 30, 2025, primarily due to the changes to revenue and cost of revenue described above.

Previous wording

Selling, general and administrative expenses increased $0.9 million, or 7.7%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. This increase was primarily due to an increase of $0.8 million in employee-related expenses (including salaries, benefits, commissions, bonuses and stock-based compensation) and an increase of $0.1 million in outside services.

Current wording

Selling, general and administrative expenses increased $1.0 million, or 8.4%, for the three months ended June 30, 2026 compared to the three months ended June 30, 2025. This increase was primarily due to increases of $1.0 million in employee-related expenses (including salaries, benefits, commissions, bonuses and stock-based compensation), $0.3 million in outside services, and $0.2 million in facilities-related expenses, partially offset by a decrease of $0.5 million in other expenses.

Previous wording

Research and development expenses increased $0.3 million, or 21.0%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. This increase was primarily due to an increase of $0.3 million in employee-related expenses (including salaries, benefits, bonuses and stock-based compensation) and an increase of $0.1 million in clinical trial expenses, partially offset by a decrease of $0.1 million in outside services.

Current wording

Research and development expenses decreased $0.1 million, or 3.8%, for the three months ended June 30, 2026 compared to the three months ended June 30, 2025. This decrease was primarily due to decreases of $0.1 million in facilities related expenses, $0.1 million in clinical trial expenses, and $0.1 million in outside services, partially offset by a $0.2 million increase in employee-related expenses (including salaries, benefits, bonuses and stock-based compensation).

Previous wording

Interest expense increased by $0.7 million, including an increase of $0.3 million in non-cash interest expense, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily due to the Perceptive Term Loan Facility that we entered into in April 2025 and the embedded finance lease related to a supply agreement, as amended, with one of our suppliers for certain reagents. We expect to continue to incur this interest expense under the Perceptive Term Loan Facility.

Current wording

Interest expense increased by $0.1 million, for the three months ended June 30, 2026 compared to the three months ended June 30, 2025, primarily due to the Perceptive Term Loan Facility that we entered into in April 2025 and the embedded finance lease related to a supply agreement, as amended, with one of our suppliers for certain reagents. We expect to continue to incur this interest expense under the Perceptive Term Loan Facility.

Previous wording

The fair value of the warrant liability increased by $0.9 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily due to the Credit Agreement executed in April 2025.

Current wording

The fair value of the warrant liability increased by $0.9 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025, primarily due to the Credit Agreement executed in April 2025.

Previous wording

Interest income decreased $0.3 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily due to a $0.3 million net loss on debt modification related to the First Amendment executed in March 2026.

Current wording

Other income (expense), net decreased by $0.2 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025, primarily due to a $0.3 million net loss on debt modification related to the First Amendment executed in March 2026, partially offset by an increase of $0.1 million in interest income.

Previous wording

We have incurred net losses since our inception. For the three months ended March 31, 2026 and 2025, we incurred a net loss of $4.0 million and $3.8 million, respectively, and we expect to incur additional losses in future periods. To date, we have generated only limited revenue, and despite any estimates we may make regarding our ability to become profitable, we may never achieve revenue sufficient to offset our expenses. As of March 31, 2026, we had an accumulated deficit of $318.2 million and cash and cash equivalents of $21.5 million. Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation. Currently, our funds are held in cash. A total of an additional $40.0 million is available at our option under the Perceptive Term Loan Facility as amended in March 2026 should we attain specified revenue levels and satisfy other conditions. We held claims in the quarter ended March 31, 2026, which resulted in increases in our accounts receivable and an accelerated decrease in our cash and cash equivalents in the quarter ended March 31, 2026 and a reversal of that trend is expected in the remaining three quarters of the fiscal year ending December 31, 2026.

Current wording

We have incurred net losses since our inception. For the six months ended June 30, 2026 and 2025, we incurred a net loss of $7.2 million and $8.2 million, respectively, and we expect to incur additional losses in future periods. To date, we have generated only limited revenue, and despite any estimates we may make regarding our ability to become profitable, we may never achieve revenue sufficient to offset our expenses. As of June 30, 2026, we had an accumulated deficit of $321.4 million and cash and cash equivalents of $24.6 million. Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation. Currently, our funds are held in cash. A total of an additional $40.0 million is available at our option under the Perceptive Term Loan Facility as amended in March 2026 should we attain specified revenue levels and satisfy other conditions. Consistent with historical practice, we held claims in the quarter ended March 31, 2026, which resulted in increases in our accounts receivable and an accelerated decrease in our cash and cash equivalents in the quarter ended March 31, 2026 and a reversal of that trend occurred in the quarter ended June 30, 2026 and is expected to continue in the remaining two quarters of the fiscal year ending December 31, 2026.

Previous wording

On September 15, 2022, we entered into the Amended Sales Agreement with TD Cowen, as sales agent, pursuant to which we may offer and sell, from time to time, shares of common stock having an aggregate offering price of up to $50.0 million. We are not obligated to sell any shares of our common stock under the Amended Sales Agreement. As of December 31, 2025, we have sold 360,554 shares of common stock under the Amended Sales Agreement at an average per share price of $9.82, for gross proceeds of approximately $3.5 million and net proceeds of approximately $3.4 million after deducting $0.1 million in commissions paid to TD Cowen and other offering expenses payable by us. During the three months ended March 31, 2026, we did not sell any shares of our common stock pursuant to the Amended Sales Agreement.

Current wording

On September 15, 2022, we entered into the Amended Sales Agreement with TD Cowen, as sales agent, pursuant to which we may offer and sell, from time to time, shares of common stock having an aggregate offering price of up to $50.0 million. We are not obligated to sell any shares of our common stock under the Amended Sales Agreement. As of December 31, 2025, we have sold 360,554 shares of common stock under the Amended Sales Agreement at an average per share price of $9.82, for gross proceeds of approximately $3.5 million and net proceeds of approximately $3.4 million after deducting $0.1 million in commissions paid to TD Cowen and other offering expenses payable by us. During the six months ended June 30, 2026, we did not sell any shares of our common stock pursuant to the Amended Sales Agreement.

Previous wording

Our primary use of cash is to fund our operations as we continue to grow our business. We expect to continue to incur operating losses in the near term. In the short-term, we expect increases in cost of revenue as a result of costs associated with the addition of the T-Cell Biomarkers and RA Sub-Profile Biomarkers to our AVISE® CTD test. We also anticipate increases in our selling, general and administrative expenses due to increased headcount. We expect research and development expenses to remain relatively consistent in the short-term. We believe we have sufficient laboratory capacity to support increased test volume. Cash used to fund operating expenses is impacted by the timing of when we pay expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.

Current wording

Our primary use of cash is to fund our operations as we continue to grow our business. We expect to continue to incur operating losses in the near term. In the short-term, we expect increases in cost of revenue as a result of costs associated with the addition of the T-Cell Biomarkers and RA Sub-Profile Biomarkers to our AVISE® CTD test in 2025. We also anticipate increases in our selling, general and administrative expenses due to increased headcount. We expect research and development expenses to remain relatively consistent in the short-term. We believe we have sufficient laboratory capacity to support increased test volume. Cash used to fund operating expenses is impacted by the timing of when we pay expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.

Previous wording

Net cash used in operating activities for the three months ended March 31, 2026 was $10.4 million, primarily resulting from (i) our net loss of $4.0 million adjusted for non-cash charges of $1.3 million primarily related to change in fair value of warrant liability, stock-based compensation, depreciation and amortization, non-cash lease expense and non-cash interest and (ii) changes in our net operating assets of $7.8 million primarily related to net increases in accounts receivable and prepaid expenses and other current assets, partially offset by net decreases in accrued and other current liabilities and operating lease liabilities.

Current wording

Net cash used in operating activities for the six months ended June 30, 2026 was $6.4 million, primarily resulting from (i) our net loss of $7.2 million adjusted for non-cash charges of $3.9 million primarily related to change in fair value of warrant liability, stock-based compensation, depreciation and amortization, non-cash lease expense and non-cash interest and (ii) changes in our net operating assets of $3.2 million primarily related to net increases in accounts receivable, prepaid expenses and other current assets, and net decreases in accrued and other current liabilities and operating lease liabilities, partially offset by net increases in deferred revenue and accounts payable, and net decreases in other assets.

Previous wording

Net cash used in operating activities for the three months ended March 31, 2025 was $10.7 million, primarily resulting from (i) our net loss of $3.8 million adjusted for non-cash charges of $1.2 million primarily related to stock-based compensation, depreciation, amortization, non-cash lease expense and non-cash interest, and (ii) changes in our net operating assets of $8.1 million primarily related to net increases in accounts receivable and net decreases in accrued and other current liabilities and operating lease liabilities, partially offset by net increases in accounts payable.

Current wording

Net cash used in operating activities for the six months ended June 30, 2025 was $13.6 million, primarily resulting from (i) our net loss of $8.2 million adjusted for non-cash charges of $3.9 million primarily related to stock-based compensation, depreciation, amortization, change in fair value of warrant liability, loss on extinguishment of debt, bad debt expense, non-cash lease expense and non-cash interest and (ii) changes in our net operating assets of $9.2 million primarily related to net increases in accounts receivable and net decreases in accrued and other current liabilities and accounts payable, partially offset by net decreases in prepaid expenses and other current assets.

Previous wording

Net cash used in investing activities for the three months ended March 31, 2026 and 2025 was $0.2 million and $0.1 million, respectively, due to net purchases of property and equipment.

Current wording

Net cash used in investing activities for the six months ended June 30, 2026 and 2025 was $0.8 million and $0.3 million, respectively, due to net purchases of property and equipment.

Previous wording

Net cash used in financing activities for the three months ended March 31, 2026 was $0.1 million, primarily resulting from payments on finance lease and notes payable obligations, partially offset by proceeds from ESPP purchases.

Current wording

Net cash used in financing activities for the six months ended June 30, 2026 was $0.4 million, primarily resulting from payments on finance lease and notes payable obligations, partially offset by proceeds from ESPP purchases.

Previous wording

For a description of our critical accounting estimates, please see the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates" contained in our 2025 Annual Report. There have been no significant changes in our critical accounting policies and estimates during the three months ended March 31, 2026 as compared to the critical accounting policies and estimates disclosed in the Management’s Discussion and Analysis of Financial Condition and Operations included in our 2025 Annual Report.

Current wording

For a description of our critical accounting estimates, please see the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates" contained in our 2025 Annual Report. There have been no significant changes in our critical accounting policies and estimates during the six months ended June 30, 2026 as compared to the critical accounting policies and estimates disclosed in the Management’s Discussion and Analysis of Financial Condition and Operations included in our 2025 Annual Report.