Exagen Inc. (XGN) Q4 2020 Earnings Report, Transcript and Summary

Greetings, ladies and gentlemen. And welcome to the Exagen Inc. fourth quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. Please note that this conference is being recorded. I would now turn the conference over to our host, Mike Cavanaugh, Investor Relations for Exagen. Thank you. You may begin.

Good afternoon and thank you for joining us today. Earlier today, Exagen Inc. released financial results for the quarter and fiscal year ended December 31, 2020. The release is currently available on the company's website at www.exagen.com. Ron Rocca, President and Chief Executive Officer, Kamal Adawi, Chief Financial Officer and Mark Hazeltine, Chief Operating Officer will host this afternoon's call. Before we get started, I would like to remind everyone that management will be making statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that are not statements of historical facts should be deemed to be forward-looking statements. All forward-looking statements, including, without limitation, statements regarding our business strategy and future financial and operating performance, including 2021 guidance, the impact of the COVID-19 pandemic on our business, our current and future product offerings and reimbursement and coverage are based upon current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results to differ materially from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please see our filings with the Securities and Exchange Commission, including our Form 10-K and subsequent filings. The information provided in this conference call speaks only to the live broadcast today, March 16, 2021. Exagen disclaims any intention or obligation, except as required by law, to update or revise any information, financial projections, or other forward-looking statements whether because of new information, future events, or otherwise. I will now turn the call over to Ron Rocca, President and CEO of Exagen.

Thanks Mike and thank you to everyone joining the call today. As always, we appreciate your continued support of Exagen. We are very pleased with the exceptional performance in the fourth quarter. Our testing franchise continues to grow despite well-known challenges that patients have visiting healthcare providers. During the fourth quarter, we delivered a record 28,601 of our flagship AVISE CTD tests, which includes our AVISE Lupus test and in back-to- back years of over 100,000 tests for the full year. We believe this is a testament to the value patients and healthcare providers receive with our AVISE suite of testing solutions. Due to the pandemic, patients must make additional efforts to visit their doctors and get their symptoms correctly diagnosed, making our test volumes even more impressive. This gives us confidence in the continued growth of our testing franchise, especially as COVID-19 related restrictions ease and patients can again freely visit their healthcare providers. Along a similar vein, we saw 1,690 ordering healthcare providers in the quarter, including a record 635 adopters. Moreover, we had a high retention rate of 99% among adopting healthcare providers. Again, we are very proud of these numbers given the circumstances. This further demonstrates the unique utility of our AVISE franchise to rheumatologists who are challenged with clinically difficult-to-diagnose diseases. Additional value provided by our AVISE CTD test during this pandemic is the convenience and accuracy to cover multiple connective tissue disorders versus serial testing, which could take many doctor visits over numerous years. As we have said before, life-threatening diseases like lupus and chronic disorders like rheumatoid arthritis do not stop during a pandemic and testing cannot either. With the pandemic making it more challenging for patients to see their doctors for treatment, the necessity of tests that can speed up the diagnosis and prognosis of autoimmune diseases is apparent. We believe our AVISE brands can address that need better than anything currently on the market. The SIMPONI co-promotion agreement which was amended in December delivered revenues of $1.7 million in the fourth quarter, which was near the contractually quarterly ceiling for the second consecutive quarter. That said, I do want to take this opportunity to provide some perspective around the future expectations. When we consider the opportunity provided by the new amended agreement coupled with COVID-19 pandemic, going forward we expect SIMPONI revenue to come in at the quarterly contractual minimum of $300,000. As always, we evaluate our product portfolio and allocate our important resources to the opportunities to generate the most value for our organization and patients. I would like to now turn to our sales force which is a key driver of our performance. The team covered 56 territories as of December 31, 2020. In the first quarter of 2021, we added seven new territories for a total of 63 territories as well as the creation of an inside sales force to further our reach with rheumatologists in the white space, complementing our decentralized sales force and covering vacant territories. Our specialized team has adapted well to the pandemic, continues continues to expand Exagen's reach to rheumatologists and is highly energized entering into 2021. I would also like to comment on the progress we have made on the reimbursement front over the course of 2020. This is a high-priority effort for Exagen and yielded over 14 million in-network lives over the course of the year bringing us nearly to 60 million in-network lives as of the year-end. We have maintained this momentum thus far in 2021, having recently completed new covered and in-network agreement with TRICARE West and Highmark, the fourth-largest overall Blue Cross Blue-Shield affiliate organization as well as adding contracts in-network services to two medical systems, the Tuft Medical Center and St. Charles Health System. Turning now to our R&D efforts. This remains a key strategic focus as we seek to solidify Exagen's position as a premier autoimmune company, providing an extensive range of testing solutions to help rheumatologists diagnose, treat, and monitor autoimmune diseases, which is notoriously difficult to do. We are focused on driving multiple sources of innovation and strengthening our intellectual property portfolio. For example, in November, we announced a new study in collaboration with Brigham and Women's Hospital in Boston to evaluate the effects of COVID-19 virus and its possible connections to subsequent autoimmune diseases. We will also continue to advance the development of further tests to add to our AVISE franchise, including our test for fibromyalgia, a disease which has a large addressable market. While not an autoimmune disease, it's often confused with connective tissue diseases and is therefore frequently diagnosed by rheumatologists. Adding an effective rule-in/rule-out test for fibromyalgia promises to be invaluable to healthcare providers. We believe that our AVISE tests are the most effective, complete, and differentiated series of tests for autoimmune diseases, and we remain focused on strategically enhancing that advantage. In closing, we are very pleased with our results in the fourth quarter and the full year of 2020. Our core testing franchise is strong and has proven to be resilient in the face of significant challenges. However, there are additional challenges which are out of our control such as the inclement weather in February 2021 experienced in Texas and other parts of the country. We made a lot of progress on the reimbursement front during the year, and we will continue to give that a high priority. We will continue to invest in our R&D to find additional differentiated tests to add to our AVISE franchise. And finally, we will have a sales force in place to drive rheumatologists to our platform. We believe that Exagen is well positioned for the future. I would now like to turn over the call to Kamal to discuss our financial results.

Thank you, Ron, and good afternoon everyone. Total revenues in Q4 2020 were $12.7 million, an increase of 24% over Q4 2019. Total revenues for the full year 2020 were $42 million, which was a 4% year-over-year increase from 2019 despite the impact from the ongoing COVID-19 pandemic. Total revenues were driven primarily by AVISE CTD testing volumes including a record 28,601 in the fourth quarter and 100,450 for the full year. As Ron mentioned, the number of ordering healthcare providers was 1,690 for Q4 2020 compared with 1,665 for Q3 2020 and 1,707 for Q4 2019. AVISE CTD test revenue was $8.6 million in the quarter and other testing revenue was $2.4 million. AVISE CTD revenue for the full year was $29.2 million and other testing revenue was $7.7 million. Revenue for SIMPONI was $1.7 million for Q4 2020 and $5.1 million for the full year 2020 with 100% gross margin. Once again, we are very pleased with the performance of our core testing franchise in the face of headwinds from the ongoing COVID-19 pandemic. Cost of revenue were $4.3 million in Q4 2020, resulting in a gross margin of 66%, compared to 55% in Q4 2019. For the full year 2020, cost of revenue were $16.6 million with a gross margin of 61%, compared to $18.8 million and gross margin of 53% for the full year 2019. The improvement in gross margin was driven by an increase in high-margin SIMPONI revenue, a decrease in royalty costs associated with the expiration of a royalty on our CB-CAPs technology and a decrease in direct costs including materials and supplies. Operating expenses in Q4 2020 were $15.4 million, compared with $13.1 million in Q4 2019. Operating expenses for the full year 2020 were $57.2 million, compared with $49.7 million in 2019. The increase was primarily due to employee related expenses, including stock-based compensation associated with the overall increase in headcount and an increase in R&D expenses. The net loss in Q4 2020 was $3.5 million, compared with $3.4 million in Q4 2019. For the full year 2020, the net loss was $16.7 million compared to $12 million in 2019. Looking at our balance sheet. Cash and cash equivalents as of December 31, 2020 were approximately $57.4 million. Full year 2021, we expect our total revenue to be approximately $47 million to $49 million. This includes testing revenue of $46 million to $48 million, representing growth of approximately 27% over 2020 at the midpoint of the range. We are prioritizing resources for AVISE testing franchise and expect $1.2 million in revenue for SIMPONI for the full year 2021. We will now open the call for questions.

[Operator Instructions]. Our first question comes from Chris Lin with Cowen and Company. Please state your question,

Hi. Good afternoon, and thanks for taking my questions. First, could you just help us unpack the 2021 revenue guidance in a bit more detail? I am curious, what's factored in for testing ASP, volumes and the impact of COVID-19. Why don't I just stop there and start with that.

Yes. Thanks for the question, Chris. At the midpoint of that range, that's a 27% increase in testing revenue. As you heard on the call, we did get in-network and contracted with Highmark and TRICARE West. So, we are continuing to make progress on that front. We anticipate that we will continue to make progress with contracting in-networking and that's going to be accretive to our overall ASP.

And as far as the COVID impact, obviously we don't know if it's over yet, Chris, but we are obviously monitoring that. The one thing I have repeatedly said is that COVID does not cure these autoimmune disorders, and those patients are still out there. So, we will continue to monitor it. We are really happy with the way the year ended last year. And this year, it seems like things have opened up quite a bit, and we hope it continues to do so.

Okay. Kamal, just based on your comments, just to be clear, I guess for 2021, you are expecting testing ASP to be up sequentially relative to 2020? Is that right?

Well, we don't give guidance around our ASP, but what we do anticipate is to continue to get in-network and contracted with the payors.

Okay. Then how would you describe the relationship between the increase in testing revenue relative to testing volumes? Should we expect a similar level of increase or any commentary you want to give there understanding you don't want to quantify it?

Yes. Thanks Chris. We do anticipate our volume to increase. We did mention that we are going to expand the number of territories from 56 to 63 and add a virtual sales rep team based on the success our current decentralized sales force has had, having Zoom calls with the physicians.

Okay. And maybe for just one more question here. Ron, Kamal, we talked about the potential of there being pent-up demand for AVISE testing. And certainly, I think you alluded to that in your prepared remarks, just on the back of panel testing versus serial testing. Can you talk about if that was a tailwind at all in Q4? And secondly, what is built into 2021 guidance as it relates to that dynamic? Are you explicitly factoring that in or would that represent upside to guidance this year?

I think what we saw there with the trend was that COVID has forced doctors to be much more efficient in how they treat patients, especially specialties like rheumatology where these patients are coming in as a PCP referral, and they are all waiting to see their specialists. So, when we talk about serial testing, which is the way a lot of them were trained, that really doesn't work now, not with all these patients coming in. So our tests, because it's so convenient, has 11 of the generic markers that most often overlap with each other plus the best lupus test offers convenience with accuracy. I don't think that's going to go away, at least from the conversations I have had from physicians. Some have said, they dabbled with it before, but now they have to use something to be more efficient to see these patients. So, as far as whether it's in the guidance or not, I think that Kamal looks at everything when he puts these things together, but I don't think that's going to go away, Chris. I think doctors have found that they are much, much more efficient with AVISE CTD than the traditional serial testing, which, as surveys showed, could that take up to six years to get correctly diagnosed.

Okay. That's very helpful. Thanks for taking my questions.

Thanks Chris.

Our next question comes from Brian Weinstein with William Blair. Please state your question.

Hi guys. Thanks for taking the questions. Good afternoon. So understanding that you are going to be spending less time on the promotion here on SIMPONI. So just curious, how much time were your reps actually kind of spending on an average sales call talking about one versus the other, and what I am trying to get at here is, what does that incremental time that they are going to be allotted really do for you guys in terms of being able to drive clinicians to begin to write it for AVISE or order the test, but then also to get deeper into the accounts? Does that give you a little bit more flexibility? What do you do with that extra time, guess?

Yes. Great question, Brian. So the capacity that went into the promotion of SIMPONI was good capacity at the time, but it does free up a little bit more time for us now to engage them in other discussions with our other brands. Now, I will say this that with SIMPONI, it did open doors to doctors that traditionally just treat rheumatoid arthritis patients. So, we will continue to use it to be able to leverage the relationships with our other brands, but the capacity will now go over to our other brands. That has a lot to do with the way we look at the markets. We put something in principle one, principle two, principle three. And right now, it’s principle one, it is definitely AVISE CTD for all calls. So that extra capacity will go. To quantify it, it depends on territories, some territories were heavier with lupus rheumatology treating lupus and others who are heavier with the RA doctors. But in general, I am looking to free up quite a bit of capacity once they move it over to our testing branch.

Great. Thank you for that. Obviously, it doesn't sound like you are expecting anything else to be brought into the bag inorganically this year. But can you talk about, at least, to the funnel of things that you are considering or that you are looking at and what inning, what quarter, what half of a soccer match, however you want to kind of talk about where those things kind of sit in the funnel to the extent that there are anything, any of those things that are out there that might be able to replace that lost revenue and allow you to kind of continue to grow the bag?

Yes. Great question. Because while I can't share with everything that's in our funnel, we have a big funnel. We look at everything that could possibly make sense for us from a ROI wide standpoint, from a reputation standpoint with the rheumatologists. And since we now clearly but dominate this channel at this point with all the products we have and how much commitment we have with rheumatologists. We do get contacted quite a bit. We strain those through our strainer and BD to make sure that it makes sense. And if and when it does make sense and increase value, increase our reputation and leverage our infrastructure, we will take that on. So quick answer is, we have a big funnel. We look at it. And when appropriate, we will put that into our sales bag.

Okay. And then last one for me. You mentioned ROI, as you are thinking about adding things to the bag. But how do you think about the ROI of the sales force? You are up to 63. I wasn't sure if that was the -- I think that's the current number. I wasn't sure if you were looking to go beyond that this year. I understand you have the inside sales reps there. But how do you look at the ROI from both an external but also I am really curious about what you think the ROI is on the inside sales force here and some of the things that they are doing? How do you measure that? Thanks guys.

Thanks Brian. I am just going and to clarify one point. We ended 2020 with 53 sales reps. We have 56 territories. Were now increasing to 63 territories and hiring those additional of sales reps to get to 63. I am going to let Ron speak to for the answer.

So Brian, what we are finding is, when we put a rep in a new territory, what we kind of call white space here, they are quickly getting up to speed with their doctors. It's not like when we launched this product, you had to explain what cell-bound complement activation product is or who we are. By the time the rep goes into these new territories, the doctors are waiting to get the information and the logistics on the package and so forth. So we think the ROI for every additional rep we add in the United States is going to yield a good return even faster. The virtual, what we call virtual or centralized sales force, will augment that in a couple ways. One is, we will use that for white space places we don't have reps yet. And we still don't cover places like Alaska, Hawaii, Puerto Rico, for example. So we will look to increase our presence there. The other thing virtual reps do is when somebody goes out on a medical leave, whether it's pregnancy, hurt ankle, whatever, we won't lose any momentum. So using the two together, it's a lot less expensive to have centralized reps, we think we are going to able to cover everybody in the right capacity to get the reach and frequency necessary to grow these brands.

Thank you guys so much.

Thank you. Our next question comes from Kyle Mikson with Cantor Fitzgerald. Please go ahead with your question.

Hi guys. Thanks for taking the questions. Congrats on the quarter. And Kamal, thanks for the color on the guidance. It was helpful. But I want to start on the SIMPONI agreement. So Ron, we have always talked about how the Prometheus model would be kind of preferred over the type of agreement that you have had with Janssen to this point. With all these [indiscernible] on the market and coming to market obviously, have you thought about pursuing like a traditional companion diagnostic strategy. And obviously that would take time. You will need approval most probably. But would you rule out doing one of those collaborations somewhere down the road? Or maybe I am just thinking about it, especially since you have the relationships already with a lot of those manufacturers on that side already. And I guess where I am kind of getting at is that the future of the DS Rx strategy, because of what's going on with Janssen and the way that you are expecting for 2021. Thank you. I appreciate your perspective.

Sure, Kyle. Thank you. We believe in precision medicine and we believe it's here to stay. Let's just say that. And flat out, as you see more and more quality testing products coming in, you see more and more $60,000 a year biologics coming, you are going to see more and more of a push for precision medicine. I love that because I think we are in pole position to be able to help the rheumatologist and the payors in that area. We had wild success with this strategy at Prometheus with a steroid. And I will say this about SIMPONI. It has been successful for what it was. The problem is, we negotiated this agreement pre-COVID. And then shortly after the agreement was inked, COVID showed up. And that derailed it. But I like the fact it's a biologic. It's the only at-home self-injected biologic. But the reality of the situation is, when s we look at future deals for us in our model, we will look for things we have a little bit more control in the marketing aspect, the pricing aspect as well the sales aspect. When we just have the sales aspect, we really don't get to control the messaging as much. So that's what we will look for in the future. We have not given up on precision medicine. We are still wide open to that. We think marrying up a diagnostic with a pharmaceutical, quite frankly, in many cases it's the ethical thing to do. So thanks, Kyle, for that question. I appreciate it.

Okay. That was helpful, Ron. Thank you. And pretty impressive actually with the added lives over the course of the year. It was kind of quiet for a certain period time but it picked up at the end there. And I am looking, Ron, at all these like clients looking as an in-network partnerships. But should we expect to see more of those in near term like with some of the hospitals in Boston and so forth? Or maybe will we see the payors kind of added on like over the course of 2021? Like which of those should we see more of, just given what's going on with COVID and vaccines and all this uncertainty?

Yes. We know what payors want and we did it. And that's the dossier. And I think we did a wonderful job, as you saw with now both TRICARE East and West and you know they operate separately, with the fourth-largest Blue Highmark and with some of the meetings we have got planned going this year. So I don't expect it to stop because I think it really addresses an issue. You have got to keep in mind that ANA which is considered a lupus test was developed like in the late-40s, like 1947. We haven't had a really, really good test for these doctors in a long time. The other thing that COVID has really brought to the forefront is the disparity in treatment with African-American women and Hispanic women. Well, nine out of 10 lupus patients are female. And of that, the majority are Hispanic and African-American. So we think that awareness along with the fact that we have, what we believe, the best diagnostic on the market for these patients will help us get the payors to do the right thing and take care of these patients. So I have no doubt that we will continue to progress forward. My intent is to get as many of these wrapped up as soon as possible, not only for us, not only for people on the phone, but for the patients. They really need quality testing for autoimmune. And we are here to provide that.

Okay. That was great, Ron. Thanks a lot. The non-Caucasian data is great. But the awareness thing was awesome. And I guess just the last question for me. Kamal, on the gross margin for 2021, obviously you are not expecting shift in revenue, which is 100% margin, obviously. So the revenue is going to set down quite a bit. Is there anything you can help us to model that out? I know the royalty is coming off quite a bit. It's really grown up quite a bit in 2021. So there is that kind of dynamic as I think about. Just help us sort through those moving pieces please, Kamal. Thanks.

Sure. So on testing gross margins, we have seen some significant quarter-over-quarter increases. Going back to Q2 2020, we were at 52% gross margin for the testing business. We increased it to 54% in Q3. And in this past quarter in Q4, we did 60%. So we are continuing to make increases. And you touched on some of those points on the testing that royalties, it takes about 12 month to see that royalty completely go away and it sunset on January 7, 2020. So it should be completely out for the majority of 2021. And then we continue to make efficiencies in the lab. We commented on lower material cost and lower supply cost. And we are looking to automate as much as we can to drive down our labor expenses.

Okay. Perfect. Thank you Kamal. Thanks guys for taking the questions.

Our next question comes from Mark Massaro with BTIG. Please state your question.

Hi guys. This is Vidyun, on for Mark. Thanks for taking the questions. So are you seeing any heightened interest in your mobile phlebotomy side as a result of the pandemic? I know you talked about the efficiency of your virtual sales force. Is the intention there to maintain both of those as COVID eases up?

Can you repeat the backend of that question. I got the mobile part. What's the second part?

Yes. So the efficiency of your virtual sales force, is the intention there to maintain that as COVID eases up and looking forward to 2021?

Okay, great. A great question. Thank you. The mobile phlebotomy is something we do when there is a reputable mobile phlebotomy event in the area and is not owned by a physician nor does it have links to a hospital because there are some regulations that it has to be truly independent. So we sign those deals up when we find them or they find us and we do like the mobile phlebotomy. We have also introduced two capillary tests, the methotrexate and the hydroxychloroquine, both capillary fashion so you don't need a mobile phlebotomists. And just to say, we have got one rep in particular that reminds a physician that they did go to medical school and learn how to pull blood. So believe in the product, draw the blood yourself and put it in the tube. And I am always fascinated when they say, yes, I guess I can do it myself. It's not a really tough procedure even though you do have to be trained. So the mobile phlebotomy is here to stay, we think in the short term definitely. And we will continue to sign more of those agreements to make sure that every patient and every doctors has access to the asset. Now as far as the effectiveness of the virtual sales reps, they are very effective, especially you compound the fact to how many calls you can make and they don't have to fly, nor do they have windshield time. I think it's here to stay. One of things I think COVID does to society is, we have evolved, I bet five, 10 years faster than we would have in being able to do things like Zoom calls, Zoom conferences, reps on a Zoom call. And I think everybody's gotten used to it to a he point. And quite frankly, I don't think it's going to go away. We it will be the lead part to initiating a new therapy or a new test, probably not. But to augment what's already out there, I think it's a very efficient, cost-effective way to deliver core message to the right audience. Thank you for the question.

Thank you. So just a quick follow-up on your collaboration with Brigham to evaluate the emergence of autoimmune disease and post-COVID-19 infection. Would you anticipate to outcome of the study to drive revenue, has any kind of links you have noticed at this point and when we should expect the final data readout there?

Sure. So the thought process is, if you have COVID you will develop autoimmune diseases faster than if you were in the control group that did not have COVID. There is a lot of scientific papers being written on it currently. Some are already on the web. You can look them up. And the theory actually looks pretty solid that that might be the case. Now we have got to prove it out. And that's what we are going to do. We are really happy to be working with a marquee organization like Brigham and Women's out of Boston and we are really happy that they are using our AVISE test to do this. I mean that's really important. Will it drive additional revenue? We believe so because familiarity with us and the asset will naturally draw doctors more towards us. We know they like esoteric labs like us with white glove service. Anybody at Brigham or any of these institutions, whether it's Tufts, St. Charles that we signed up, the policies that we signed up, Sonora Quest out of Arizona, they know they have access to our Ph.D.'s and M.D.'s 24/7, have access to them to ask any questions. I think that's the type of quality that the marquee institutions want. They don't want a nebulous lab. They want a partner in the lab and that in and of itself will make us more important to them and drive business, as well as very good science for the public.

Okay. Got it. Thank you. Just a final question for me. If you could provide an update on other areas you are thinking of expanding into as additional offerings to lupus patients. So I believe, in the past you have mentioned organ transplant, kidney damage, et cetera?

Yes. I will take it. Kidney damage may be more relevant quickly, the fibro long term. So let me do lupus nephritis first. Lupus nephritis is a very serious issue. BENLYSTA, a biologic from GSK got there approval, I think, late in the fourth quarter last year. And Aurinia just got their voclosporin approved, I think, early in January. So you have got two new pharmaceutical companies coming out pushing for lupus nephritis. And we are really taking a look at the assets that are out there to measure that. These are not really high quality assets. So we do have a monitoring product that has some lupus nephritis markers. And as we have told the physicians and so forth, we will look to enhance that even further since both these products will be drawing a lot of awareness and attention to lupus nephritis. We will have the test to measure that in our AVISE monitoring test. As far as long term and looking at what other add in the bag for rheumatology, fibromyalgia is really important. Big TAM, 15 million patients roughly in the United States and no such thing as a rule-in test. We have had a lot of conversations with payors and they say these fibro patients eat up a lot of resources. They come into the offices. They think they have lupus. And they just do doctor shopping. So having the first rule-in fibro test, I think, will be very important because the rheumatologist now will be able to tell their patient with pretty much definitive with adding it to their clinical diagnoses that they have it or do not have fibro and then the patient can rest assured to what they have. Right now, they get a non-answer for fibromyalgia. And because they end up in a rheumatologist office because they look, smell and act like lupus patients, they do eat a lot of resources there. So really looking forward to seeing the development of that product as well the lupus nephritis asset as well.

Okay. Awesome. Thanks for taking the questions, guys.

Thank you.

Our next question comes from Paul Knight with KeyBank. Please state your question.

Hi Ron. Congrats on the reallocation away from SIMPONI. I know with just your success on your test is fabulous. On the fibro, could you kind of give us a little bit of time line on when you would expect data and the progress on that or the years ahead for starters? And then could you quantify your virtual sales force? Is it 10 people, is it going to 15? A couple of metrics on that.

Sure. So as far as fibro time line, as a CEO, of course I am very anxious to get this quality product on the market as soon as possible. So I always have got to be careful not to rush my scientists too much because it's the good science that will lead good product development. So the stages here for fibro, obviously we are working with Ohio State on this, is to develop the analytical validation and enrollment has picked up recently, which is really nice. I think that has to do with COVID dissipating a little bit in some of these areas. And then we have to do the clinical utility and clinical validation. These studies for a big product with a big TAM needs a higher end number. And we are going to do everything we can to get this product out to the public as soon as possible. I would rather not give stamp a date. I mean I talk to my science people all the time and they know that the urgency is there to get this on the market. But I want the studies done correctly. I want the dossier fully baked and launch it correctly into the marketplace. So we are moving as fast as we can on that model. As far as the virtual sales reps, we are looking to have seven right now and we are doing pretty good job of recruiting the right type of people. It's a little different type of skill set that you need for this type of person. But I am excited about it. I would not have believed this pre-COVID that they would be as effective as they are. But I think the one thing that COVID has done has made doctors ready for zoom calls with a virtual rep. You send them a Grubhub lunch and you can sit there and have a good conversation with them. So Paul, I think it's a good different change that a lot of us are doing is adding virtual sales calls to your decentralized sales representatives.

Okay. Great. And then, did you quantify the number of covered lives under Highmark?

We did. Mark, do you have that in front of you?

Yes. Absolutely. Covered lives for Highmark is about 5.6 million.

And that's in Q1 here, correct?

Yes. We have the coverage decisions from Highmark in Q4. And the in-network was a Q1 event. TRICARE West, which we also disclosed, is a Q1 event as well.

And then obviously you quote the 99% sequential ordering retention rate. How do you feel like that compares to a year ago? Do you ever really have dropouts? It seems pretty sticky.

It's very sticky. Very few dropouts. And I think that's a testimony to the quality of product as well as the fact they really didn't have much before we entered the marketplace. Like I said, ANA, anti-dsDNA, anti-Smith, they are very old products and they all have issues of either being too many false positives or too many false negatives. So once a doctor looks and uses our product and it appears 11 to be a magic number, 11 or more times in a quarter, they stick at 99%. I am fascinated because I did have the number one Crohn's product at one time. I can never get that thing to stick more than 75%. So this is really a testimony to the value that it adds to the physicians and the patients. And it has been that way. You are absolutely right, Paul. It's been sticking at 99% and that's just a terrific testimony to the asset.

Okay. Thank you.

Thank you. There are no further question at this time. I will turn it back to management for closing remarks.

Yes. I want to thank everybody for participating in the call. We are very excited about what we have done with Exagen so far and we are really impressed with what we have got in place for the future. As we continue to build this company, you have to know that our goal is to make sure that we take care of every patient that is out there because we believe that helping one autoimmune patient may not change the world but it will change the world for that one patient. And that's the way we were looking at it. So thank you again for your time on the call. Really appreciate it. And I look forward to a terrific 2021.

Thank you. This concludes today's conference. All parties may disconnect. Have a good evening.