Greetings, and welcome to Exagen Inc. First Quarter 2025 Earnings Conference Call. As a reminder, this conference is being recorded. I will now turn the conference over to your host, Mr. Ryan Douglas, Investor Relations for Exagen Inc. Thank you. You may begin.

Good morning, and thank you for joining us. Earlier today, Exagen Inc. released financial results for the quarter ended March 31, 2025. John Aballi, our President and Chief Executive Officer; and Jeff Black, our Chief Financial Officer, will host this morning's call. A recording of today's call and the press release announcing the quarterly results can be found on the company's website at www.exagen.com. As today's call includes 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. In addition, we will discuss non-GAAP financial measures on this call. Descriptions of these non-GAAP financial measures and reconciliations of GAAP to non-GAAP financial measures are included in today's press release. I'll now turn the call over to John.

Good morning, everyone, and thanks for joining the call today. It's exciting to be reporting our first quarterly results with the impact of our new markers, and we are seeing fantastic results. We plan to touch on that along with providing additional color around the debt refinance we announced last week. We have a lot going on at the company. We're off to a great start, and it's an exciting time. I'll detail a few critical topics relevant to our success and then turn the call over to Jeff for further detail on our financial performance over the last few months. To start, we delivered our ninth consecutive quarter of increasing trailing 12-month ASP, and we're incredibly proud of the progress we've made over the last 2-plus years. Our revenue cycle operations continue to improve, and Jeff will provide additional commentary, but we are methodically growing our per case reimbursement and have started to generate real momentum with our market access efforts. I tend to shy away from describing activity as I believe cash in the door is what really matters. But I think it's important to highlight that we have started to win administrative law judge or ALJ hearings as part of our strategic reimbursement efforts. To explain a bit more, over the course of the last couple of years, we sought to elevate our appeals efforts to that of an external review by a neutral third party. This takes a lot of time and diligence and is a learning process for each product we offer as we fine-tune the packet of information we submit based on feedback throughout the process. This past quarter, we successfully won our first ALJ hearing, which was a formal hearing of a Medicare Advantage denial that we initiated as part of our ongoing efforts. The case was originally denied due to a medical policy determination, at a large national insurer, and we petitioned the court for review in order to have this patient's case treated similar to other Medicare claims as it's entitled to. We've won the case and are highly encouraged by this effort as it starts to set a precedent for future appeals. We have several other hearings planned in the weeks ahead and a few are with the same judge. So we're highly encouraged by this progress and look forward to future wins. These wins provide reimbursement for that individual case, but also factor into our longer-term strategy of gaining awareness at the Medical Director level and bringing payers to the table while building momentum and leverage. I would expect over time that continued wins at the ALJ level catalyze efforts to improve medical policy with a broad set of payers, and we will see how long it takes, but this is a very good sign. Additional momentum was gained this quarter, by securing positive medical policy with TRICARE, under which all active duty service members, retirees and their families receive civilian medical care. We recently concluded a two-year effort where we underwent medical policy review through their formal process and AVISE CTD was granted positive medical policy. We are finalizing the contract efforts to ensure streamlined billing transactions, but this should be a catalyst for increased ASP in the future. These updates will be few and far between as, again, I believe the most relevant metric is still the trailing 12-month ASP. But both of these efforts have strategic implications relevant to the approach we've outlined over the past 2 years and are important milestones on their own. And lastly, regarding ASP progress, we continue to expect the incremental boost of our trailing 12-month ASP from the launch of our new markers to be approximately $90 by the end of the year. And with the momentum and real results I just described, we remain highly optimistic to meet our goal of adjusted EBITDA positivity by year-end. Our growth this quarter was fueled by a combination of continued gains in ASP, but also volume, which was very exciting to see and was in part the result of our new biomarker launch. This past quarter, volume grew 6% over our Q4 performance. Our sales team is highly energized by the rapid adoption and favorable response to the reinvigorated AVISE CTD. In Q1, we launched our new markers, but we also spent a considerable amount of time training the team on the enhanced value proposition. I believe these efforts, along with fantastic preparation by our marketing and customer service teams have enabled a highly successful launch with significant energy and excitement likely to persist. Additionally, our new Head of Sales, J.R., has been on board now for about 9 months, and his impact is starting to yield results. Our sales team is more focused on selling, and we've removed as many of the administrative efforts from the role as possible. Of note, we are hiring as well and have started to source talent for 2 expansion territories. If you're good at sales, hard-working, great at solving complex problems, have a dose of humility and operate with integrity, we'd love to have you join our team and help us build something special as we work to serve the rheumatology community. As we've seen with the broader organization, the stability of our team and reduced personnel turnover yield results. Our sales organization used to have voluntary turnover rates north of 30% just a few years back. Today, we have trailing 12-month voluntary turnover within our sales organization of 7%, and that includes recent retirement. The progress in building a mission-driven culture that rewards performance is evident in the positive trend these numbers illustrate. I'm very proud of the team we have. It's energizing to see the volume growth associated with having the right team in place with stability. We expect volume to continue to grow and have a couple more expansion territories identified, which we anticipate opening for recruitment in the next couple of months. More to come, but it's great to see new clinicians incorporating the AVISE CTD test into their clinical practice and increased adoption within our existing physician base. We are very pleased with the volume trend we're seeing to start the year. As we continue to turn around the operational performance of our organization, we recently improved our financial position with a new credit facility from Perceptive Advisors, an exceptional business partner and highly credible life sciences investor. As a reminder, we had a $20 million loan that was maturing in April of '26. While we anticipate being free cash flow positive by this time, the amortization schedule was over a 10-month period and too aggressive for our anticipated ability to service the debt. When Jeff joined the organization last year, this was a primary priority for him, and he did a fantastic job engaging with Rob at Credo 180 to help us navigate the market and find a great partner to achieve the flexibility we needed in refinancing our debt obligations. I should also mention that we are excited to have the optionality of the current facility to tap into additional minimally dilutive capital should we desire, as we continue to shape our organization to be the preeminent provider of proprietary testing in the autoimmune space. We are very grateful to Sam and his team at Perceptive for partnering with us in building something special here and now have the flexibility to pursue profitability and ultimately deleverage on our own timeline and capitalize on growth opportunities in a way which maximizes shareholder returns. Our efforts to develop future innovations, which will drive growth, continue with our next set of seronegative markers expected to launch around the end of this year. We've been working to clinically validate the utility of these markers over the past several months and their contribution to clinical practice should mirror that of our recently launched RA33 markers. We expect to gain approximately 8% in overall sensitivity for identifying patients with rheumatoid arthritis who would otherwise be serologically benign. The sensitivity gain puts our overall ability to detect the rheumatoid arthritis patient population at approximately 85%, far above conventional markers alone. This strong clinical value proposition should continue to open up a market for us, which we believe is approximately 3 times larger than the market for lupus diagnostics alone and will be accretive to ASP. Additionally, our efforts to develop diagnostics for detection and management of lupus nephritis patients continue to track well. And we have now designed and with the partner manufactured a custom array specific to the first version of our assay, which was developed in conjunction with the team at Johns Hopkins. This pared-down array will enable throughput at much higher volume with lower COGS while focusing on the key relevant biomarkers for this disease application. We are currently testing the newly customized array and plan to have results in Q3. We are also actively engaged at the biopharma level to find partners interested in leveraging this technology. More to come. Strategically, we have been advancing efforts to develop early markers of kidney disease while we pursued applications in lupus nephritis. The results from these efforts are very encouraging, and our Chief Medical Officer, Dr. Mike Nerenberg, recently presented the findings from 3 clinical validations at the annual Chronic Kidney Disease Drug Development Summit in Boston a couple of months ago. This work includes the profiling of 2 separate NIH cohorts and a lupus nephritis cohort, where we've shown great discriminating power for our proprietary in identifying early disease while outperforming the current standard of care. We look forward to continued validation of this technology and are actively pursuing biopharma partners through our business development efforts. In general, our R&D pipeline continues to advance impactful technology in multiple areas of significant clinical need. Additionally, we continue our efforts to develop signatures of disease activity in both SLE and rheumatoid arthritis. But maybe the most important point I want to make here is that we have now successfully demonstrated a capability to bring novel biomarkers to the clinic with the current Exagen team and done so in a reasonable time period with a prudent level of resources. Our internal teams have had to refine and build this skill and the past 12 months have demonstrated a proficiency for doing so. I'm very proud of the teams for their work in this area, and we have exciting opportunities in our pipeline, which we expect will have significant impact on patients and clinicians down the line. I'll now turn the call over to Jeff to provide additional details on this quarter's financial performance. But suffice it to say, I'm very enthusiastic about the track record our company has had and the track our company is on. We have what is shaping up to be a phenomenal year ahead of us, and we continue to generate momentum in our business.

Thank you, John, and good morning, everyone. 2025 is off to a strong and exciting start. We are eager to keep building on this momentum throughout the year. We've made great progress on our financial objectives over the past quarter. Notably, as John mentioned, the launch of our new biomarkers and early read on expanded ASP puts our profitability goals well within reach, and we remain fully focused on achieving them. Our new credit facility with Perceptive Advisors extends maturity of our prior term debt, ensuring runway to sustain free cash flow positivity while also providing flexibility to further accelerate growth initiatives on a minimally dilutive basis. Diving into the details of the first quarter, beginning with revenue. We achieved record revenue of $15.5 million, representing a nearly 8% increase compared to the first quarter of '24. This growth was driven primarily by continued expansion of our AVISE CTD trailing 12-month average selling price now at $419 per test, thanks to the addition of our new markers. We also saw a modest uptick in testing volume, both year-over-year and sequentially. Volume expansion will continue to be a key focus for us throughout 2025. To give you further color on ASP, our early read on new biomarker reimbursement of $90 per AVISE CTD aligns with our initial expectations. And while it's too early to make a call on our longer-term expectations, we are encouraged by early traction. Given that these new biomarkers were reflected for only a partial quarter, the $90 per test translated to about a $15 increase in our trailing 12-month ASP. It will take the remainder of '25 before the full impact of these new markers is reflected in our trailing 12-month ASP. And we continue to see opportunities to expand ASP through enhanced appeals and market access efforts. Moving on to our operating performance. Gross margin for the first quarter was 58.9%, slightly down from 59.6% in 2024, and we expect gross margin to improve steadily throughout 2025 as ASP expands. Notably, there were three transitory headwinds that had a short-term gross margin impact in the first quarter. First, as we noted in our fourth quarter call, we've invested ahead of the curve in lab operations to accommodate the new biomarker launch and our anticipated volume increases in 2025. Second, we launched the new markers in late-January, so the impact was reflected for only a partial quarter. And third, for most of our existing client direct bill contracts, the new marker pricing had not yet been updated for the full quarter. In these cases, we absorbed the cost of running the new markers, but did not report or bill out the results; and therefore didn't realize the margin impact of the expanded ASP. The good news here is that the majority of those contracts have now been amended to reflect the new pricing. In fact, if the full quarter of AVISE CTD volume reflected the benefit of the new biomarker ASP lift, our gross margin in the first quarter would have been over 60%. We continue to expect to see gross margin expansion in the second half of 2025 into the low 60% range, and we still have a line of sight to gross margin in the mid-60s over time. Turning to expenses. Our operating expenses totaled $12.5 million in the first quarter, representing a $900,000 and roughly 7.5% increase over 2024. Our R&D expenses were up about $200,000 year-over-year, driven primarily by increased activity in clinical studies and advancement of our pipeline. And SG&A expenses increased about $700,000 year-over-year, largely due to personnel additions to our sales and marketing teams. We expect our operating expenses to increase moderately in absolute dollars in the near term as we execute on additional R&D pipeline initiatives, expand our sales force and invest in infrastructure to support our expected volume and revenue growth. But it should decrease year-over-year as a percentage of revenue as we see operating expense leverage in 2025 and beyond. Importantly, we have the ability to modulate spend as appropriate and we are well positioned from a balance sheet perspective to make the investments needed to support our expected growth. Our net loss for the first quarter was $3.8 million compared to $3.4 million in the same period last year. Adjusted EBITDA loss was $2.5 million versus $2 million in the first quarter of 2024. Profitability remains a core focus for the company, and we expect to reach positive adjusted EBITDA by the fourth quarter of this year. As a reminder, our adjusted EBITDA excludes stock comp expense since it's noncash. And please refer to our earnings release issued earlier today for a reconciliation of adjusted EBITDA to net loss. Shifting to our balance sheet. We ended the first quarter of 2025 with cash and cash equivalents of just over $11 million and an accounts receivable balance of just under $15 million. As a reminder, our strategy includes holding claims at the beginning of the year, and we fully anticipate the temporary impact this has on both cash and AR. We've since begun releasing claims, and we expect our AR balance to normalize throughout the year. To elaborate further on this, as of the end of April, our combined cash and AR balance has increased to about $28 million, including about a $3 million increase to cash from our recent debt financing with Perceptive. On that note, as John mentioned, we are extremely pleased to bring Perceptive into the Exagen family with our recently announced credit facility. Perceptive is a widely recognized and respected life sciences investor. The new facility extends debt amortization by 5 years, eliminating nearly $20 million in principal payments that were due in 2026 under our prior term loan. This new facility also increases our potential borrowing capacity based on future milestones and strategic initiatives, providing access to minimally dilutive future growth capital. At close, we drew $25 million to repay our prior term debt, and we now have up to $50 million available for future tranches. Up to $20 million will be available in 2026, based upon achievement of revenue milestones and another up to $30 million available for approved strategic transactions if such opportunities arise. Borrowings mature in April 2030 with interest-only payments running through maturity. This was a great result for us. We couldn't be happier with the outcome, and we look forward to our new partnership with Perceptive as a lender and stakeholder. To put this all into context, we're now well positioned from a balance sheet perspective with nearly $80 million in combined cash, accounts receivable and available future credit capacity as of April 30. Turning to guidance. We expect 2025 full year revenue of at least $65 million, and we are on track to deliver positive adjusted EBITDA in the fourth quarter of '25. In closing, 2025 is shaping up to be a pivotal year for Exagen. We are on track to deliver over 17% revenue growth. We remain focused on achieving one of the key milestones John set upon his arrival, operating a profitable company. We're excited about the momentum we've built, and we're confident in our ability to meet and even exceed our own expectations once again, just as we did in 2023 and 2024. We thank you for your continued partnership and support. And we'll now open the call for questions.

Thank you. Our first question comes from Kyle Mikson with Canaccord Genuity. Please proceed.

Hi guys. Congrats on the quarter and the agreement with Perceptive. So starting off on volume, I think you talked about a sequential increase by 6%. That's kind of a modest growth of the year. Good to see that growing though. Could you just talk about your expectations for volume for the full year, how that kind of trends I guess, quarter-by-quarter, given it's a focus for you? And it seems like test per doc, per physician is kind of stable, maybe like 12 to 13 tests per doc. Could you just talk about if you are trying to expand that number as well?

Good morning, Kyle. Happy Cinco de Mayo. Thank you for your question. It’s a great question. Regarding volume, we are very pleased with our progress in Q1. The stability in our sales team over the last year has been exciting for us. J.R. and his team have done an excellent job identifying the right opportunities. When we launched the new markers, we focused on our existing physician base. To address your second question first, the test per physician is key for us, and the numbers you mentioned are accurate. We expect to see growth in that area, especially as we penetrate the rheumatoid arthritis market further. We have been working on familiarizing physicians with the new markers, which require thorough explanation and time. We will monitor how that develops for the rest of the year, but it is definitely a key focus. Additionally, we are still expanding. There are many physicians in rheumatology who do not use AVISE, presenting a great opportunity for us. Currently, we believe we serve about one-third of the rheumatology community, and there is a referral network that we can take advantage of. We will continue to push forward on both fronts. Generally, we don't provide specific guidance on quarterly volume, but we do anticipate growth this year. Q1 has been a promising start, and we'll see how it evolves. January was a bit slow for us volume-wise, but it picked up toward the end of the month. February was strong, and March was fantastic. That positive trend has carried into Q2. We'll have to see how things unfold. We have initiated our sales expansion, which should also help drive volume throughout the year, and that's our current outlook.

All right. That was great. And then just sticking on that volume theme. You provided some anecdotes for examples last quarter about the case studies indicating that you could actually expand the reach to physicians through different indications of autoimmune disease and things with these new markers. And I think that you referenced new markers as being the driver for the volume kind of increase in the first quarter. So could you actually just elaborate on that and how that could progress going forward and help you drive volume growth as well?

Yes, there are multiple factors contributing to our overall volume growth. One key factor is the stability of our sales team. Over the past few quarters, we have focused on building the right team. When I joined the organization just over two years ago, we right-sized the sales force. In the last 12 to 18 months, we have been working on finding the right individuals for our organization. As the team members settle into their roles, they become more familiar with our products and customer base, and this stability starts to yield improvements. They transition from merely learning and training to taking a more strategic approach in their selling processes, which is where we are now. This stability also creates new opportunities for expansion. Our new markers, which I have discussed with our sales team and clinicians, have injected excitement into the selling process. We released new publications in the first quarter, and we have a new offering with a different selling strategy. For physicians who are already engaged, we're still educating them and introducing something new to the conversation, which enhances our appeal. This energy is palpable and likely to continue, and it serves as a significant driver for growth. Additionally, the clinical utility of the new markers extends our reach into the rheumatoid arthritis space more than before. These factors will play a substantial role in supporting ongoing volume growth.

Perfect. For Jeff, I have two questions regarding the financials. First, could you provide the prior period revenue? It would be helpful to know that. Secondly, the adjusted EBITDA loss was slightly deeper than we anticipated. Even if you maintain stable operating expenses going forward, reaching breakeven by the fourth quarter might be challenging. You're clearly making progress, but I'm curious about how operating expenses are impacting the situation. Could you discuss your gross margin outlook as well as the SG&A and R&D investments for the remainder of this year?

Sure, I'll break that down for you. Your first question was about prior period cash collections. We continue to see fluctuations in those cash collections on a quarterly basis, which affects revenue and average selling price. For instance, in the fourth quarter of '24, we experienced about $1 million in excess cash from more than 12 months, compared to around $0.5 million in the first quarter of '25. This will vary, but we believe there is still opportunity to capitalize on. We are actively pursuing it and getting better over time. It will change from quarter to quarter, with around $0.5 million noted in the first quarter. Regarding profitability, EBITDA, and operating expense margins, there were several factors impacting the EBITDA figure in the first quarter. One significant factor was the gross margin, which faced some temporary challenges. However, we anticipate a substantial improvement in gross margin, especially in the second half of the year. We invested in labor and other costs to prepare for the launch of new biomarkers and the expected increase in volume, which impacted our expenses in the first quarter. This occurred during a revenue period where we hadn't yet realized the full effect of the new biomarker pricing due to only having a partial quarter and some direct billing accounts not fully adjusted to the new prices. We expect these challenges to improve in the second quarter. On the operating expenses side, we anticipate a moderate increase. A significant portion of the additional SG&A expense was related to the expansion of our commercial team, largely due to the variable compensation linked to the revenue increase. We will continue to manage these expenses responsibly. We expect to start seeing operating efficiencies, and we noted a slight decrease in total operating expenses as a percentage of revenue year-over-year. We believe this trend will continue, positioning us well to achieve free cash flow positive adjusted EBITDA by the fourth quarter.

Great. Thanks.

Thank you. Our next question comes from the line of Ross Osborn with Cantor Fitzgerald. Please proceed with your question.

Hi, good morning. Congrats on the results. So starting off, and I may have missed this, but do you have an update on when you expect to launch the second wave of RA markers?

Hi, Ross, good morning. We anticipate that by the end of the year we will have a schedule similar to our last set of markers. The end of the year and the beginning of the new year are key timeframes for us. The court's decision on the LDT does mean that we aren't strictly waiting for New York State's approval to launch at this moment. However, it's likely that we will still seek approval and launch afterward. We cannot control that aspect. For our last set of LDT assays, it took about two months to receive approval from New York State. We are following a similar development timeline, so we expect to see something by the end of this year or possibly early 2026.

Okay. Great. And then lastly, would you just provide some color on how you are feeling about market awareness, just meaning physician awareness of your new enhanced test? How much groundwork are you guys going to have to go out in terms of educating community? Or do you feel like it is pretty well known following publications where people are coming to you?

That's a great question. And I think it varies regionally. We have higher concentration of sales presence as it relates to various patient populations. So in some of the Southeast, for example, we're more highly concentrated. And then as I'm sure you can imagine, as you start to move West, there's areas or pockets where some rep may be covering in certain circumstances, maybe even two states or something. So in those instances, it takes a little bit more time to drive awareness, but you also have less physicians or they're more sparse. So from our standpoint, I think the awareness is reasonable amongst our physician base that was bought into and using AVISE prior to the new marker launch. We had the educational campaigns that didn't require necessarily an in-person visit. So e-mail blasts, fax blasts, ways to communicate outside of just the face-to-face. Although I believe internally, our strategy is to get in front of folks and actually walk them through it. I think that's a very powerful way to educate folks regarding changes to clinical practice, being able to answer questions, be able to talk through various case studies and what have you, it really makes it a more productive or fruitful conversation. So on that front, we're only two months in. We started doing a little bit of it prior to the holidays, but this is a message that certainly has to be discussed multiple times. And as different scenarios come up, various positivity rates or the new markers end up being positive in conjunction with other markers, physicians want to know what does that mean clinically. And so, that takes some time and then the value proposition starts to set in as you have those firsthand experiences. So I think we're still pretty early. It's likely going to take the majority of the year to fully educate folks, but it's just a deepening of the educational efforts.

Thank you. Our next question comes from the line of Mark Massaro with BTIG. Please proceed with your question.

Hi guys. Congrats on a good quarter. So in your prepared remarks, you mentioned that the facility that you have in place with Perceptive includes up to $30 million available for approved strategic transactions if opportunities arise. Can you maybe comment on what types of strategic transactions are something that you would consider? Would this be content-wise within perhaps autoimmune disease diagnostics? Or could it be broader than that? And then as far as the approval goes, I would assume that would include your Board of Directors, but can you also comment about the role that Perceptive has in determining whether or not it's approved or not?

Sure. Good morning, Mark, and thank you for your question. I’d like to share some insights on our strategy, and then I'll turn it over to Jeff to discuss the administrative details. First and foremost, we pursued this to gain flexibility. If we decide to access the additional capital, which isn't guaranteed, we have a straightforward path to do so that requires minimal effort and can offer a solution irrespective of the broader economic conditions. This flexibility was a key factor in the deal. We're focused on having options. As for the types of opportunities we're considering, it's very likely they'll be related to our current business. While we can't disclose specific details at this moment, it's reasonable to assume our interests lie in the autoimmune sector, particularly in developing novel biomarkers in that area. This leaves us with a wide array of possibilities. Although we don’t see many commercially viable assets ready for immediate integration into a CLIA platform, we are continually searching and remain open to opportunities, and we will keep performing our due diligence. Now that we are approaching a cash flow positive status, this is an ideal time to set up processes to ensure we’re ready and able to take advantage when opportunities arise. Jeff, would you like to address the administrative approvals?

Sure. I can't speak for Sam and the team at Perceptive, but based on discussions during the negotiations, I believe their diligence requirements for any transaction will primarily depend on the diligence we conduct and what we present to the Board. It seems likely that if we feel confident, have done our homework, and the Board supports it, Perceptive will be on board. Historically, in my experience with Perceptive and our conversations, they have been very supportive and eager to drive growth through sensible transformative transactions. Therefore, we don't anticipate a burdensome process as long as Management and the Board are aligned on the transaction.

That sounds great. You mentioned kidney disease and your efforts in advancing early markers. Do you see this as a committed area for you, or is it more in the exploratory stage? I'm trying to understand your conviction in this market at this time.

Yes, we are very encouraged by our work in kidney disease. We have some exciting scientific developments underway. We are focusing on two main efforts, one being lupus nephritis, which addresses a critical need within a subset of patients with systemic lupus erythematosus. Approximately half of lupus patients experience some form of kidney involvement, diagnosed through kidney biopsy. Although there are existing treatments, their effectiveness is uncertain over time, and during this period, irreversible kidney damage can occur. We have developed programs that may enhance diagnostic capabilities in this area, as well as measure disease activity and therapeutic response. We have made efforts to investigate broader biomarkers of kidney damage within our lupus nephritis development project, and we're excited about this opportunity due to the significant clinical needs and patient demand. The current standard of care tools are insufficient, and the markers we are developing are applicable across various diseases. We have validated these markers in early diabetic kidney disease as well as lupus nephritis. This data was shared by Dr. Mike Nerenberg, our Chief Medical Officer, at the biomarker summit in Boston. Chronic kidney disease affects around 14% to 15% of the U.S. population, while diabetes affects approximately 11% to 12%. These are substantial patient populations when considering the overall U.S. demographic. We are enthusiastic about the potential of these markets, but it's too early to comment on how we will approach commercialization. At this stage, our primary focus is on advancing the science, which looks promising. We will be releasing a manuscript later this year detailing our findings. Additionally, there has been notable progress with SGLT2 and GLP-1 in expanding labels for chronic kidney disease patients, which presents an exciting opportunity for us to better identify these patients compared to the current standard of care.

That sounds great. And just one more for me. Congrats on winning the ALJ hearing with a large national insurer. I wanted to get a sense for how many more hearings you have later this year? And then just give us a flavor. I imagine that there are likely multiple national health plans or health plans, regional that you might be meeting with. So can you just give us a sense for how many, what you think the impact could be and what the cadence of that is throughout the year?

Yes. To clarify how this process works, we apply for high-level reviews throughout the year as we gather insights from each. So far, we've had around 15 of these. In cases we did not win, we've learned valuable lessons, particularly that we did not provide sufficient evidence early enough in the appeal process, such as during the first or second appeal, which could not be included by the time we reached the ALJ hearing. Consequently, we have adjusted our revenue cycle operations to include that information earlier. This may involve documentation related to Medicare coverage or reimbursement. By improving our appeals process, we ensure we are adequately prepared going into an ALJ hearing. Over the last 24 months, we've been learning how to optimally manage this for AVISE CTD, which recently resulted in a successful appeal with the right judge. We have several hearings scheduled for May and a few in June, but that is currently the extent of our schedule. We still have numerous requests pending, and we will see how those are scheduled. Generally, a couple of months is a reasonable timeframe to navigate the entire process at a high level.

Great. Thank you so much.

Thank you. Our next question comes from the line of Andrew Brackmann with William Blair. Please proceed with your question.

Hi guys. Good morning. Thanks for taking my question. Maybe to stick on the payer's subject here for a second. You also noted that you had a positive medical policy with TRICARE in the quarter. Can you maybe just talk a little bit more about the learnings from that experience, how you can take those learnings from TRICARE and continue to broaden out those medical policy wins?

Yes, good morning. Thank you for the question, Andrew. We made significant progress with TRICARE over the past couple of years. We participated in their demonstration project, which is their process for determining medical policy. We submitted our clinical dossier along with evidence supporting our test. They took approximately one to one and a half years to review everything and ultimately made a positive determination. This not only validates the evidence behind our test but also indicates the demand for it. It's encouraging to know we have the necessary evidence to influence medical policy, particularly for important patient groups like active military personnel. This is a positive outcome for us. Additionally, we can leverage this in strategic discussions regarding veteran opportunities and other large national plans, as this national policy shift has occurred in our favor and is a public policy we can reference. Overall, this is very positive. We will continue to strengthen our evidence package and work on our appeals to increase awareness at both the plan and regional levels. This effort is ongoing. Perhaps the most significant takeaway is that our current evidence package is effective and contributing to positive policy changes.

Great. And then back to the next set of RA markers. It sounds like you have pretty good line of sight to launching those at the end of this year, early next. I guess outside of the NYS approval here, what internally needs to be done to get those ready for launch?

Yes. So in order to get an LDT ready for launch, obviously you have to get to a point where you're comfortable with the validation study. So that's both a clinical validation and maybe multiple, which proves that you're accurately determining disease from normal folks, right? Are we accurately identifying the seronegative population? And can you hone in on the sensitivity and specificity of the markers there, determine the cutoffs, et cetera. We are past that point. The next step and in no particular order, but the next step is analytical validation. And so can you reproducibly measure the markers repeatedly in different context, different operators, multiple machines, et cetera. Most of that work has been done. We are wrapping up the reports for that effort. And then you have to get ready to run it at scale. And that's something that takes a little bit of time. Training in these first two steps, we obviously don't distract the CLIA team. They're working on a daily basis to handle the clinical volume. But as we start to ramp up training, a lot of the competency assessments and all of the regulatory requirements, quality management system requirements in the lab have to be implemented, SOPs, that type of thing. So all of that work takes a little bit of time, especially to do it at a high-quality level. But we also have to work with our suppliers to get ready for the type of volume we anticipate. All those contract negotiations have been completed from our standpoint. We are waiting now for our first large shipment of reagents. That should occur sometime probably over the summer. Manufacturing has to be ramped up at the supplier side and what have you. So those things still remain, mostly just operational. Our LAS systems have to be updated as well, but all that stuff is underway and is controllable mostly on our side. So that's why we feel comfortable by year-end into early '26, similar to how we did it with these last set of markers is a reasonable timeline.

That’s great color. Thank you.

Thank you. Our final question this morning comes from the line of Paul Knight with KeyBanc Capital Markets. Please proceed with your question.

Thanks for the time and congratulations on the quarter. Jeff, my first question is about how this new line works this year. Am I correct in understanding that you will take $20 million from the old line and then add $5 million of incremental cash?

Yes, Paul, that's about right. It is a little less in terms of net proceeds, and we've already done so. We drew the $25 million initial tranche and retired existing debt. Net proceeds were just over $3 million, and then we have the opportunity based on milestones in '26 to draw more down.

Meaning $25 million possibly and then $30 million later on, right?

Right. There are two potential $10 million tranches that are based upon revenue milestones between now and the end of 2026. And then there is another $30 million that's set aside for potential business development M&A.

Okay. Got it. And then, John, what do you think was driving the acceleration in revenue or test sales through March? Was it the ALJ hearing? What are your thoughts on that?

Thank you for the question, Paul. The growth in volume seems to be primarily attributed to the launch of the new marker. This launch has energized the team and enhanced the clinical utility for our customers. Additionally, the publication of the manuscript has contributed to the excitement, as this innovation in the biomarker space is rare, particularly in autoimmune disorders. This has garnered significant interest among rheumatologists. In Q4, we effectively highlighted the clinical practice improvements that can be anticipated from using these markers, which I believe has driven much of the growth. The timing also aligns with our observed ramp in sales. Moreover, as I mentioned, we maintained team stability. We adjusted our national sales meeting to January of this year, bringing the team together to focus on training and practicing the clinical value proposition, including preparing for possible questions. I believe the team is well-prepared, and this is reflected in our results. So I consider this to be the main driver.

And then, John, what do you think you need in terms of number of successful cases, court cases where you start to change practice of payers?

Yes, it will vary by payer. However, it's expected to be between six to twelve cases, so we don't need hundreds or thousands of wins. These are not granted frequently. Additionally, losing an ALJ hearing does not reflect well on the insurer, as they are required to adequately treat their Medicare beneficiaries, similar to standard Medicare. Therefore, losing such a hearing essentially confirms that they failed to meet their obligations, which is beneficial for us. It establishes a precedent that we can reference in future appeals. For these large plans, this provides a means to ensure that patients receive the treatment they are entitled to. We will keep pursuing this, but I anticipate it will be around six to twelve cases.

Okay, thank you.

Thank you. Ladies and gentlemen, that concludes our time allowed for questions. I'll turn the floor back to Mr. Aballi for any final comments.

Thanks so much. We are off to a very strong start this year, and we anticipate that it could be one of our best years in the company's history in 2025. Our operational turnaround is taking shape, and our strategy of focusing on our core product, enhancing reimbursement, and rebuilding our future pipeline is progressing beyond my initial expectations. We have made careful decisions regarding personnel and have placed a strong emphasis on the character of the individuals we bring onto our team. This has positively transformed the company, fostering accountability and encouraging progress towards our shared goals. It has also established stability within the organization, which is becoming increasingly beneficial and is exciting to be part of. I look forward to providing further updates and am very thankful for your partnership as we develop something special here. Thank you.