Expanding Test Menu And Territories Will Unlock Precision Diagnostics Demand

Key Takeaways

• Expanding test offerings, sales reach, and clinical validation position Exagen for significant market growth, margin improvement, and broader reimbursement.
  
• Strategic biopharma collaborations, disciplined operations, and digital integration support scalable, high-margin revenue and sustained earnings growth.
  
• Persistent operating losses, product concentration, reimbursement uncertainty, and industry threats from new technologies and regulations threaten Exagen's profitability, revenue growth, and long-term competitiveness.

Catalysts

Designs, develops, and commercializes various testing products under the AVISE brand in the United States.

• Exagen's expanding test menu, fueled by recent launches of novel biomarkers and ongoing R&D in lupus nephritis and kidney damage markers, positions the company to benefit from heightened demand as clinicians increasingly adopt precision diagnostics-a dynamic expected to accelerate revenue growth and potentially expand gross margins as operating leverage improves.
  
• The ongoing expansion of Exagen's sales territories, combined with substantially increased per-rep productivity and commercial leverage, suggests significant untapped market potential with current market penetration under 10%, supporting the prospect for sustained double-digit revenue growth as more of the aging population seeks advanced autoimmune testing solutions.
  
• Growing clinical evidence and real-world physician testimonials underscore AVISE's differentiated clinical value, driving stronger payer engagement and progress toward broader reimbursement-including with large national insurers-creating a catalyst for rising average selling prices (ASPs), reduced denials/write-offs, and future improvements to net margins.
  
• Strategic collaborations with biopharma partners and ongoing integration of Exagen's novel biomarkers into drug development enable diversified, high-margin ancillary revenues and provide non-dilutive funding to de-risk R&D, thus supporting earnings stability and enhancing the company's long-term earnings power.
  
• Advances in digital health integration, data analytics, and Exagen's strong operational execution (including discipline with R&D and marketing spend) increase the probability of scalable, profitable growth in the face of secular healthcare tailwinds (like rising autoimmune incidence), contributing to a clear path toward positive adjusted EBITDA and free cash flow.

Exagen Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Exagen's revenue will grow by 15.5% annually over the next 3 years.
• Analysts are not forecasting that Exagen will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Exagen's profit margin will increase from -28.8% to the average US Biotechs industry of 14.1% in 3 years.
• If Exagen's profit margin were to converge on the industry average, you could expect earnings to reach $12.8 million (and earnings per share of $0.49) by about August 2028, up from $-17.0 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 27.7x on those 2028 earnings, up from -11.6x today. This future PE is greater than the current PE for the US Biotechs industry at 16.9x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.81%, as per the Simply Wall St company report.

Exagen Future Earnings Per Share Growth

Risks

• Persistent net losses and increasing operating expenses, including heightened interest and debt costs, continue to pressure profitability and may necessitate further capital raises, risking future shareholder dilution and impacting EPS and long-term valuation.
  
• Heavy reliance on the AVISE suite and a narrow product portfolio creates significant exposure to competitive pressures, evolving clinical standards, and payer reimbursement challenges, which could limit sustainable revenue growth if adoption falters or new innovations outpace Exagen.
  
• Revenue per test (ASP) remains far below the clinical lab fee schedule, and while new markers are providing a tailwind, achieving and maintaining reimbursement at higher ASP levels remains uncertain given payer scrutiny, potentially compressing gross and net margins longer term if write-offs or denied claims increase.
  
• Scaling the sales force and expanding territories requires ongoing investment and flawless execution; given sector-wide shortages of skilled professionals and the importance of clinical relationship-building, failure to manage these dynamics or misjudging territory size could limit volume growth, thereby restraining top-line expansion.
  
• The diagnostics industry faces increasing threats from automated, AI-based, or alternative testing technologies, as well as potential regulatory changes to laboratory-developed tests (LDTs); Exagen must sustain high levels of R&D spending to remain competitive, introducing cost pressures and risk of obsolescence that could erode both revenues and margins over time.

Valuation

• The analysts have a consensus price target of $11.167 for Exagen based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $12.0, and the most bearish reporting a price target of just $10.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $90.6 million, earnings will come to $12.8 million, and it would be trading on a PE ratio of 27.7x, assuming you use a discount rate of 6.8%.
  
• Given the current share price of $8.99, the analyst price target of $11.17 is 19.5% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.