It was a milestone second quarter for precision diagnostics company MDxHealth SA.
The company achieved its first quarter of operating profitability; it reported positive adjusted EBITDA of $1.4 million, up from a loss of $4.9 million a year ago.
Revenue increased 20% to $26.6 million, marking the 17th consecutive quarter of 20% or more quarterly revenue growth.
“We’ve done it by expanding our menu through both acquisitions and what I call channel growth opportunities,” Chief Executive Michael McGarrity told the Business Journal.
The company appears to be regaining the confidence of Wall Street after hitting its lowest stock price ever of $1.35 in April. In the trading session following the Aug. 5 report, the shares jumped as much as 18%; at press time, the stock traded at $2.93 with a $152 million market cap (Nasdaq: MDXH).
The company also announced that it has entered into an agreement to acquire the Exosome Diagnostics business from Minneapolis-based Bio-Techne Ltd. for $15 million, with $5 million of stock to be paid at closing and the remainder paid over the next four years. The transaction is expected to close in September. MDxHealth said it anticipates the business to contribute more than $20 million in revenue in 2026.
One-Stop Shop for Prostate Cancer Diagnostics
MDxHealth has a portfolio of five noninvasive tests for prostate cancer.
McGarrity arrived as chief executive at MDxHealth in 2019 when it had one product and about $11.8 million in annual sales. This year, the company is projecting between $108 and $110 million for full-year revenue.
MDxHealth has become a one-stop shop for prostate cancer diagnostics, offering liquid and tissue-based tests that cover the entire process from seeing if a patient needs to have a prostate biopsy to confirming results post-biopsy.
Tissue-based test volume increased 26% to 12,623 while liquid-based test volume rose 18% to 13,012 for the second quarter.
The company also recently introduced a molecular test for detecting pathogens in urinary tract infections.
“It’s somewhat uncommon in our space to have that full offering,” McGarrity said. “I think most of the companies tend to offer one test that serves a specific need.”
MDxHealth in 2021 raised around $45 million in an initial public offering priced at $12 per share. In 2023, the company’s stock dropped 35% in one day after the company revealed a $40 million offering of American Depositary Shares at $4 each.
“As the market has evolved over the last few years, our sector has been under some stock pricing pressure,” McGarrity said.
He said with the $40 million recapitalization of the company, MDxHealth is fully funded in a market where “it’s very difficult to raise capital.”
“It’s really unfortunate that a lot of companies with good technologies and where we were five years ago are finding it difficult to move forward and put together what we have today, which is a really established sales channel, a full operation and being fully funded,” McGarrity said.
Adds New Liquid Biopsy Test to Portfolio
MdxHealth is adding Exosome Diagnostic’s ExoDx Prostate test to its portfolio with the acquisition.
“We saw this as an opportunity to upgrade our menu,” McGarrity said.
Historically, patients with a high amount of prostate-specific antigen (PSA) are referred to getting an initial prostate biopsy. Elevated PSA levels can be indicative of various prostate conditions, including prostate cancer.
Biopsies, however, can carry risks of complications of bleeding and infection.
“It’s really not the ideal path for a patient to go right from elevated PSA to initial biopsy,” McGarrity said.
The ExoDx urine test assesses whether a patient needs a biopsy or can return to annual screenings.
It may replace a similar existing urine-based test that MDxHealth currently offers called SelectMDx.
“We have a product for that, but the market moved a little bit on us with the advent of the pandemic creating the opportunity for home collection kits,” McGarrity said.
Unlike Select, ExoDx doesn’t require a digital rectal exam (DRE) and has an at-home collection kit that can be shipped directly to patients.
In response to whether the company will discontinue the Select test, MDxHealth will provide more details as the transaction moves forward, McGarrity said during the earnings call.
“The acquisition appears to be a positive strategic and financial addition,” Craig Hallum analysts Bill Bonello and John Wilkin wrote in an Aug. 6 note to investors.
“We believe that there could be cross-selling opportunities, with the potential for Exosome customers to adopt both Confirm and GPS.”
The firm issued a Buy rating and $8 price target for MDxHealth following the company’s preliminary second quarter results.
Laboratory Business Model
MDxHealth, founded in 2003, has dual headquarters in Belgium and Irvine. It’s the fifth largest medical diagnostics company in Orange County with 144 local employees.
The company has research labs in Texas and soon Massachusetts with the acquisition of Bio-Techne’s Exosome business.
MDxHealth is acquiring its 35,000-square-foot CLIA-approved laboratory that’s said to be capable of producing more than 1,500 liquid biopsy tests per day.
McGarrity said that the additional facility will fit into the company’s “laboratory model.”
The company’s sales team sells tests to clinicians, who then send samples directly to its lab in Irvine, according to McGarrity.
“We really partner with our customer base,” he said. “They consider MDxHealth a laboratory partner for their practice, and that’s how we’ve been really effective in building our customer base, our loyalty, and candidly, our revenue growth.”
