EXAGEN INC. (XGN) stock intrinsic value fair value estimate & owner earnings analysis

Exagen runs a single specialty laboratory in Vista, California that sells blood tests to rheumatologists across the United States. Its main product, AVISE CTD, helps doctors diagnose lupus and related connective-tissue diseases using proprietary cell-bound complement biomarkers; more than one million have been delivered since its 2012 launch. The company is paid by insurers, Medicare and patients, so revenue depends on both test volume and how much payers actually pay per test. The record: revenue grew from $42.0 million in 2020 to a record $66.6 million in 2025 (up 19.7% last year, from about 11% more tests and a 7% higher average price, now $441 per AVISE CTD test). Gross margin was 58.3%. Since CEO John Aballi arrived in October 2022, the company has cut costs, raised prices through payer appeals and new biomarkers, and narrowed losses. But it has never earned money. Measured as cash the owners could actually take out (operating cash flow, less stock pay, less the equipment needed to keep the lab running, ignoring working-capital swings), the business lost $20.9 million in 2023, $14.2 million in 2024 and $16.1 million in 2025, roughly 75 cents to $1.18 a share each year. The first half of 2026 improved: revenue rose 14% to $37.2 million and operating cash outflow fell to $6.4 million from $13.6 million a year earlier, a run rate near $14 million of annual losses. We measure the business from 2023, after the turnaround began; 2022 and earlier had a much larger cost base and a goodwill write-off and describe a different company. The median of 2023 to 2025 is a loss of about 78 cents a share. Last year the loss widened by about 14% in dollars (partly higher interest on the new loan and higher staff costs); for 2026 we assume a loss of about $14 million, an improvement supported by the first-half 2026 results rather than by management targets. Management's stated goal of positive adjusted EBITDA excludes stock pay and interest, so we did not use it. How we built the cases. From 2023 to 2025 revenue rose $14.0 million while the annual loss narrowed $4.7 million, about 34 cents per extra dollar of revenue, but the loss widened from 2024 to 2025, so the base and bear cases assume each extra dollar of revenue adds 25 cents to owner earnings and the bull case 30 cents. The cases differ in how fast revenue grows and how long the earnings last. The patents on the AVISE Lupus algorithm expire between 2032 and 2034 and the licensed T-cell biomarker patent in 2035, and patents on diagnostic algorithms are weak protection in any case, so no case assumes earnings last forever. The loan. Exagen owes $25 million to Perceptive Advisors under a secured loan that pays interest only (at least 11.75% a year, about $2.9 million) and is due in full on April 25, 2030. Because every case ends, either when patent protection runs out or because the business never pays for itself, we do not assume the loan can be rolled over indefinitely: in all three cases the $25 million is repaid when due in April 2030, and interest stops after that. The company had $24.6 million of cash on June 30, 2026; after setting aside $5 million as an operating balance (the loan requires at least $3 million at all times) and $9.4 million of bills owed to suppliers and accrued expenses, about $10.2 million goes toward the repayment, and the rest of the repayment is charged against each case. Together, the cash applied and the repayment reduce every case by about $9.8 million in today's money, roughly 40 cents a share, and ending the interest adds back about $2.9 million a year from 2030 onward for as long as each case lasts. Base case: revenue grows 12% a year through 2029, in line with the recent record, then 9% (a little below the roughly 10% a year the company averaged from 2020 to 2025) to about $176 million by 2035. Losses shrink each year, the company breaks even around 2031 and earns about $14 million in 2035, and those earnings then fade to zero over the following ten years as patent protection ends. Before breakeven, the losses plus the 2030 loan repayment require about $50 million more than the company has available, which must come from new shares or new borrowing. Discounted at 6%, and after repaying the loan, the base case is worth about $0.48 a share. Bear case: the payer headwinds the company disclosed in the second half of 2025 and the slower-than-expected payment for its new biomarkers persist, and growth runs near 2024's 6% and fades to 4%. The company never reaches breakeven before its patent protection ends in 2035, when the case stops. The $25 million loan must still be repaid in April 2030, and with continued losses the repayment and the losses would have to be funded with about $85 million of heavily dilutive stock sales, or lenders would take control. In this case the business consumes about $69 million more in today's money than it ever returns, including the loan repayment, or roughly -$2.83 a share: on this path the company owes its lender and needs from future funders about $69 million more than the business is worth, and existing shares would likely be worth nothing. Bull case: the new T-cell and PAD4 biomarkers get paid for more widely, growth runs 16% through 2029 and then 10 to 11%, revenue reaches about $218 million by 2035, and every extra dollar of revenue adds 30 cents. Breakeven comes around 2030, but the company still needs roughly $35 to $40 million of new money to cover losses and repay the loan that April. Earnings reach about $31 million in 2035, hold for five years and then fade to zero over ten as patent protection ends. After repaying the loan, that is worth about $6.78 a share. Accounting choices that matter: stock compensation is treated as a real cost. Payments on equipment leases and equipment loans (about $1 million a year) are treated as equipment spending, because the lab gets its analyzers that way rather than purchasing them outright. Office and lab rent is treated as an ordinary cost. One-time non-cash charges from the 2025 refinancing (a warrant revaluation and a debt write-off, about $2.5 million) do not reduce owner earnings. The figures reconcile fully to the audited cash-flow statements. What changed: our earlier estimate did not say how the $25 million loan was handled and kept charging its interest through the end of each case. We now repay it from each case's cash when it falls due in 2030, using cash on hand first, and stop the interest after that. The two effects roughly offset in the bear case (now -$2.83 a share, from -$2.80) and add value in the base case (now $0.48, from -$0.10) and the bull case (now $6.78, from $5.78), because the loan's interest rate is well above our 6% discount rate. What this means: with the base case under a dollar, no margin-of-safety price applies on price alone; it would need proof that the business can fund itself. If Exagen produces a full year of positive owner earnings without issuing new shares while still growing revenue at least 10%, the bull path becomes the likely one and the margin-of-safety price is about $2.50, a wide discount for a small, single-lab company that depends on insurer payment decisions and must repay its loan in 2030. The estimate would be too pessimistic with faster payer adoption of the new biomarkers. It would be too optimistic with another price cut from a major payer, or a costly equity raise before breakeven.