Research Report Update Investors should consider this report as only a single factor in making their investment decision.

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1 Research Report Update Investors should consider this report as only a single factor in making their investment decision. Please view our Disclosures on pages New York Ave, Huntington, New York, N.Y (800) Fax (631) Rating: Speculative Buy Howard Halpern MXDHF $3.35 (Other OTC) September 11, A 2016 A 2017 A* 2018 E 2019 E Product/service sales (in millions) $15.8 $24.9 $28.3 $38.0 $52.5 Earnings per share ($0.35) ($0.29) ($0.25) ($0.50) ($0.41) 52-Week range $5.90 $3.35 Fiscal year ends: December Shares outstanding a/o 06/30/ million Revenue/shares** (ttm) $0.62 Approximate float 44.9 million Price/Sales (ttm) 5.4X Market Capitalization $201 million Price/Sales (2019) E 3.7X Tangible Book value/shr a/o 12/31/17 $1.16 Price/Earnings (ttm) NMF Price/Book 2.9X Price/Earnings (2019) E NMF * Revenue excludes $7 million of non-recurring patent revenue and $5.3 million in non-recurring royalties ** Product and Service sales only, headquartered in Herstal, Belgium, is a molecular diagnostics company that provides actionable information to personalize the diagnosis and treatment primarily of urologic cancers prostate and bladder. The company's tests are based on proprietary genetic, epigenetic (methylation) and other molecular technologies that assist physicians with the diagnosis of cancer, prognosis of recurrence risk, and prediction of response to a specific therapy. Key Investment Considerations: Maintaining Speculative Buy rating and 12-month price target of $5.00 per share. MDxHealth has substantial growth potential as their ConfirmMDx non-invasive molecular diagnostic prostate cancer test has a US market opportunity of 750,000 US patients who test negative on their first prostate tissue biopsy and the potential to address the needs of up to 10 million men in the US and Europe combined who have an elevated PSA test level. In March 2018, the company raised over $42 million in net proceeds from the issuance of nearly 10 million common shares. At June 30, 2018, MXDHF had cash of nearly $41 million. Product and service revenue growth should accelerate as MDxHealth s diagnostic tests gain physician acceptance and payor approvals from insurers. In 1H18, total US payor agreements for ConfirmMDx (71) and SelectMDx (23) increased nearly 30% to 94 from 73 in 1H17. The company reported 1H18 results (on 08/30/18) that showed product revenue increased 38.6% to $16.6 million from $12 million in 1H17. The net loss was $15.1 million or ($0.27) per share compared to income of $538,000 or $0.01 per share. We projected product revenue of $16.2 million or a loss of ($0.17) per share. We increased our 2018 loss per share estimate to ($0.50) from ($0.28) on a $1.5 million increase in our total sales forecast to $39.1 million. Our increased loss forecast reflects higher than anticipated SG&A expense. For 2019, we forecast total revenue of $54.7 million on product and service sales growth of 38.1% to $52.5 million (prior was $49.2 million) and a loss per share of ($0.41) (prior was ($0.16)). Our forecast reflects increased patient test volumes, as well as a 9% increase in SG&A expenses to support test volume growth.

2 Appreciation Potential Maintaining Speculative Buy rating and 12-month price target of $5.00 per share. Our rating is based on 38.1% 2019 revenue growth stemming from the company s global penetration of an estimated two million annual prostate biopsies and a unique billing code for the ConfirmMDx test that became effective January The unique billing code should streamline the reimbursement process, reduce the collection period by the end of 2018, and drive sales growth in The seven comparative diagnostic/genomics testing companies profiled in the chart below had a trailing price to sales multiple of 6X (prior 6.5X) and 2019 price to sales multiple of 6.9X (prior 9.6X on five peers) versus MDxHealth s trailing and 2019 price to sales multiples of 5.4X (prior was 7.1X) and 3.7X (prior was 5.4X), respectively. We anticipate investors should accord Name shares of MDxHealth approaching that of its peers due to product and services income sales increasing by 38.1% in 2019 (see table on right) compared to 15.4% for its peers. We applied a 6X multiple (prior was 6.7X) to our increased 2019 sales per share estimate of $0.91 (prior was $0.82) discounted for execution risk, to obtain a year ahead price target of $5.00 per share, implying a total year-ahead return of nearly 50%. In our view this stock is suitable for risk-tolerant investors. Shares of MXDHF shares are most suitable for investors seeking exposure to a molecular diagnostic stock with high growth potential. Overview MDxHealth, headquartered in Herstal, Belgium, was established in The company has a US headquarters in Irvine, CA, where it operates a CLIA (Clinical Laboratory Improvement Act) diagnostic laboratory, as well as a laboratory in Nijmegen, the Netherlands. MDxHealth s molecular biology technology is focused on cancer diagnostics, primarily urological cancers of the prostate and bladder. The company s development of noninvasive diagnostics is based on epigenetics (defined as the study of changes in organisms caused by modification of gene expression), which uses selected biomarkers to detect the presence of cancer and gauge the extent of its progress by analyzing patients tissue, blood or urine samples. Biomarkers are measurable structures or processes in the body that indicate the presence of a disease and, potentially, the effects of treatments for that disease. History In 2010, the company announced it commenced its transition from a research and licensing company to a commercial clinical diagnostic company through rationalized R&D efforts on a select number of core development projects. In 2017, the company s core portfolio of molecular diagnostic cancer tests evolved to include ConfirmMDx, SelectMDx, and AssureMDx. Core Product Portfolio Symbol Price Epigenomics AG EPGNY GenMark Diagnostics Inc GNMK 8.08 Genomic Health Inc GHDX Myriad Genetics Inc. MYGN Natera Inc. NTRA Qiagen NV QGEN Veracyte Inc. VCYT Company * MXDHF 3.35 Source: Taglich Brothers estimates and Thomson Reuters Market Cap in $mil Trailing P/S 2019 Sales Growth ConfirmMDx is a molecular diagnostic prostate cancer test, developed to overcome the shortcomings of prostate biopsies. ConfirmMDx uses residual tissue from previous negative prostate biopsies to rule out cancer-free men from undergoing unnecessary future biopsies and/or rule in men who may require repeat biopsies and guidance regarding future prostate biopsies. The test has a 96% negative predictive value. 2019E P/S 305 NMF NMF % 5.1 2, % 5.4 3, % 3.5 1, % 5.1 8, % % % % 3.7 *Represents product and service growth 2

3 The ConfirmMDx prostate cancer test uses an epigenetic assay consisting of GST-Pi - an enzyme expressed profusely in tumor cells, the gene RASSF1 - the loss of which is associated with the progression of several different cancers, and APC - a tumor suppression gene of which mutation can result in uncontrolled tumor growth. APC and RASSF1 are key field effect markers that increase the diagnostic sensitivity of the test. Field effect markers describe molecular changes in tissues adjoining a tumor that denote the presence of cancer that cannot be detected by microscopic examination of the tissue. The test is included in the US National Comprehensive Cancer Network (NCCN) Clinical Guidelines for Prostate Cancer Early Detection with the American Medical Association granting a unique billing code for the test, effective January SelectMDx for prostate cancer was developed after the company acquired NovoGendix (September 2015). This test is a non-invasive laboratory based prostate cancer test. SelectMDx is a proprietary messenger RNA (or mrna when a molecule carries a portion of the DNA code to other parts of the cell for processing) urine-based test that identifies men at high risk who may benefit from a biopsy or MRI scan. Alternatively, the test can also identify those men at low risk so they may avoid unnecessary invasive procedures or costly imaging studies. AssureMDx demonstrated in its validation study the ability to predict bladder cancer. This molecular diagnostic bladder cancer test is a non-invasive urine test that combines epigenetic and mutation biomarkers to predict the presence of bladder cancer in patients with micro or macroscopic presence of blood in urine. Growth Strategy The company aims to improve patient outcomes globally by delivering molecular diagnostic solutions for urologic cancers, primarily prostate and bladder. Increase Utilization - US The company s primary sales objective is to increase adoption and utilization of its cancer tests in order to penetrate the US market opportunity of 750,000 US patients who test negative on their first prostate tissue biopsy. Entering 2018, the company s US sales force increased to 50 representatives, up from 33 at the start of The company s sales force should have the capacity to cover the US urological market in order to educate community-based, large group urological practices, and academic urologists on the clinical and economic benefits of tests in its core portfolio. At December 31, 2017, the company had established relationships for its ConfirmMDx prostate cancer test with over 3,500 out of the nearly 19,500 urologists and office-based urologists in the US. Having established relationships should allow for quicker acceptance of its SelectMDx offering and its AssureMDx bladder cancer test that was launched late in In 1H18, the company had established relationships for its SelectMDx test with more than 1,000 urologists who conducted approximately 9,000 patient tests. The company s education efforts will be supported by clinical publications including results for a prospective 4M study that should be published before December 31, Expanded Global Distribution In June 2017, the company launched in Europe its SelectMDx for Prostate Cancer in-vitro diagnostic (IVD) PCR kit that will enable diagnostic laboratories with manual and automated RNA extraction and PCR platforms to perform the SelectMDx liquid biopsy test in their own facility. MDxHealth expects some of its current customers will start using the kits in order to perform the SelectMDx for Prostate Cancer test in their own labs. At the start of 2H17, the company announced that MVZ Dr. Stein & Kollegen medical laboratory signed an agreement to become the first German laboratory to offer the SelectMDx for Prostate Cancer test. MVZ will purchase SelectMDx IVD kits from MDxHealth. In July 2017, MDxHealth announced it signed a commercial agreement with IPS Genomix for the distribution of its SelectMDx for Prostate Cancer test in the Middle East. The agreement calls for IPS Genomix to handle distribution and reimbursement within the Middle East, while MDxHealth will perform the SelectMDx testing service in its ISO 3

4 certified clinical diagnostic laboratory in Nijmegen, the Netherlands. IPS Genomix will reimburse MDxHealth for all testing services performed. In November 2017, the company announced that international privately held pharmaceutical company Ferrer would distribute its SelectMDx test in Spain under a five-year exclusive agreement. Ferrer will have ten sales representatives market directly to 1,000 urologists in Spain with samples sent to MDxHealth s laboratory in Nijmegen, the Netherlands, for analysis. In June 2018, MDxHealth executed a worldwide licensing agreement with Philips N.V. for the rights to manufacture and market Philips' recently validated prognostic biomarker for prostate cancer, as a prognostic (predicting a patient's likelihood of developing a disease) test. The test is based on technology jointly developed by Philips Research and The University of Glasgow. Expand Product Portfolio The company aims to expand its portfolio of molecular diagnostic cancer tests. We estimate R&D spending in excess of $11 million from 2017 to Part of the spending will be used to develop two new molecular diagnostic prostate cancer tests, InformMDx and RecurMDx. InformMDx will let physicians know which patients to treat after positive biopsy results with RecurMDx used for patients that have had prostate removal. Reimbursement Expansion To grow revenue, the company needs to expand reimbursement coverage. The ConfirmMDx product completed the process and the reimbursement code became effective in January In 2018, the company expects to submit a formal application for Medicare coverage through the Local Coverage Determination process for SelectMDx. The AssureMDx product commenced the clinical validation process July In 1H18, the company had 94 (up from 73 in 1H17) commercial US payor agreements for ConfirmMDx and SelectMDx tests combined. The SelectMDx test acceptance by payors should be a steady process as it proceeds along the path to gain a reimbursement code. Projections Basis of Forecast In 2019, we anticipate the company should deliver at least 52,550 molecular diagnostic urological cancer tests for annualized growth of 26% from the 31,300 tests delivered in Test delivered in 1H18 increased 30% to 20,119 from 15,426 in the year-ago period. In 2019, the SelectMDx test should approach 50% of total test volume compared to 35% in The increase reflects the 2017 launch of the in-vitro diagnostic kit in Europe, as well as sales from IPS Genomix that will distribute SelectMDx in the Middle East and Ferrer in Spain. In 2017, the company billed $54.5 million ($49.3 million in 2016) for tests delivered, but a significant portion of the amounts billed will only be recognized when the payment is collected. We consider those unrecognized transactions much like deferred revenue that should translate to future revenues as they either are collected or a payment pattern becomes apparent for given third-party payors. We anticipate at least $9 million (unchanged) and $13.5 million (unchanged) of previous billings being recognized in 2018 and 2019, respectively. In 2018, MDxHealth will no longer earn royalty revenue from Exact Sciences due to the April 2017 signing of a fiveyear collaboration agreement in the fields of epigenetic and molecular diagnostics. Exact Sciences acquired MDxHealth s colorectal cancer patents for a one-time fee of $15 million less royalty payments accrued since July Included in the one-time payment was $7 million for patents. However, the company is likely to received modest royalties and patent income from milestone achieved regarding it patents including a license deal with LabCorp in 1H18. Operations In 2018, we project total revenue of $39.1 million (prior was $37.6 million), which includes product and service income of $38 million (prior was $37.6 million). We are forecasting royalties and patent income of $1.1 million 4

5 (reflecting 1H18 results) compared to $5.3 million and $7 million of patent sale income in We forecast product and service income growth of 34.9% to $38 million reflecting 1H18 results. We project gross profit of $25.4 million compared to $30.3 million in Gross profit in 2017 included $12.3 million in patent and royalty income compared to $1.1 million in We anticipate product and service gross margin 63.8% or unchanged from We project an operating loss of $29.8 million compared to $12.3 million. We anticipate operating expense margin of 145% from 151% (excluding patent and royalty revenue) in We forecast a $29.6% increase in operating expenses to $55.2 million. We project a 31.6% increase in SG&A to $51.5 million to support global growth of the company s core product portfolio and higher than anticipated amortization expenses related to internally developed intangibles. We project research and development expense to increase by nearly $300,000 to $3.8 million. We project financial expenses (net) of $280,000 compared to $127,000 in Our 2018 net loss forecast is $30.1 million or ($0.50) per share. We previously forecasted a loss of $17.1 million or ($0.28) per share In 2019, we project total revenue of $54.7 million (prior was $49.2 million), which includes product and service income of $52.5 million (prior was $49.2 million). We are forecasting royalties and patent income of $2.2 million compared to $1.1 million. We forecast product and service income growth of 38.1% to $52.5 million on nearly 53,000 delivered molecular tests and at least $13.5 million of previous billings being recognized. The increase from our prior forecast incorporates a slightly higher than anticipate average price per test. We project a 40.7% increase in gross profit to $35.7 million from an estimated $25.4 million in We anticipate product and service gross margin remaining flat at 63.8%. We project operating losses will narrow to $24.5 million from $29.8 million as operating expense margin improves (excluding patent and royalty revenue) to 115% from 145% forecasted in We forecast a 9.1% increase in operating expenses to $60.2 million. We project a 9.2% increase in SG&A to $56.3 million to support global growth of the company s core product portfolio. We project research and development expense to increase $200,000 to $4 million. We project financial expenses of $205,000 compared to $280,000 in 2018 due to lower debt balances, offset in part by higher interest rates. Our 2019 net loss forecast is $24.7 million or ($0.41) per share. Our prior net loss forecast was $9.8 million or ($0.16) per share. The increase from our prior forecast reflects higher than anticipated operating expenses due primarily to increased amortization expense related to internally developed intangibles. Finances For 2018, we project cash burn of $25.8 million and an increase in working capital of $1.1 million due primarily to an increase in receivables. Cash used in operations of $27 million, capital expenditures, and repayment of debt should be more than covered by $42.4 million in net proceeds from the issuance of common shares, increasing cash by $11.8 million to $28.6 million at December 31, For 2019, we project cash burn of $20.4 million and a decrease in working capital of $1.7 million due primarily to an increase in payables, partly offset by an increase in receivables. Cash used in operations of $18.7 million, capital expenditures, and repayment of debt should reduce cash by $20.1 million to $8.5 million at December 31, H18 Results Total revenues were $17.2 million compared to $24.3 million in the year-ago period. The current period included patent income and royalties of $500,000 and $62,000, respectively, compared to patent income of $7 million related to the sale of colorectal cancer patents to Exact Sciences, and royalties of approximately $5.3 million in 1H17. In 1H18, product and service income increased 38.6% to $16.6 million due to worldwide sales of approximately 20,100 patient tests preformed (up 30% from 1H17) from the company s two primarily offerings, ConfirmMDx and 5

6 SelectMDx. Revenue from ConfirmMDx increased 28% to $11.1 million with SelectMDx contributing $1.1 million compared to approximately $800,000 in the year-ago period. Gross profit decreased to $10.5 million from $19.3 million due primarily to patent income and royalties of $12 million (combined) in the year-ago period. Gross margin from product and service sales improved to 59.9% from 58.4% in 1H17 due to higher testing volumes. Operating expenses in 1H18 increased 36.2% to $25.5 million due to a 32.3% increase in SG&A expenses to $23.7 million reflecting the expansion of the company's commercial operations, including the building out of its US sales force and increased amortization charges on internally developed intangible assets. R&D expense more than doubled to $1.9 million from $832,000 in the year-ago period due to increased development activities related to new diagnostic tests. The company had an operating loss of $15 million compared to a profit of $552,000. The swing to a loss reflects gains in 1H17 from the royalties and the patent income from Exact Sciences, which added over $12 million to total revenue and did not recur in 1H18. Financial expense net of income was $145,000 compared to $70,000 in 1H17. In 1H18, the company had a net loss of $15.1 million or ($0.27) per share compared to a net profit of $538,000 or $0.01 per share. The average shares in 1H18 increased to 56 million from 49.9 million in the year-ago period. Finances In 1H18, the company had cash burn of $12.9 million and an increase in working capital of $2.2 million due primarily to an increase in trade receivables and decrease in trade payables. Cash used in operations of $15.2 million, a positive change in the foreign exchange rate of $1.8 million, and capital expenditures and purchase of intangible assets were covered by proceeds from the issuance common stock in excess of $42 million. Cash increased by $24.1 million to $40.9 million at June 30, Capital Structure At June 30, 2018, the company had total outstanding debt of $690,000, of which $300,000 is short-term and $390,000 is long-term. The company s loans were used to finance the acquisition of laboratory equipment of the US facilities in Irvine. The interest rate is fixed at LIBOR plus 1.2%. These loans are secured by a cash pledge. Molecular Diagnostics Market According to market research firm Grand View Research, the global molecular diagnostics market is expected to grow at a compound annual rate of 12.1% reaching over $18 billion in 2024 from $6.5 billion in The molecular diagnostics industry is effective in diagnosing infectious diseases and performing preventive cancer screening, which aids professionals in prescribing accurate therapeutic interventions in the early stages of diseases. Using molecular diagnostics to obtain early diagnosis is becoming mainstream as technological advancements are delivering rapid and accurate test results. Grand View Research observed that the US market held a market share of approximately 45% in 2015 (latest data available and is projected to become the most influential market for molecular diagnostics. In December 2017, market research store ResearchandMarkets published a report, the Global Molecular Diagnostics Market Forecasts to The report projects the global molecular diagnostics market will increase by 7.8% annually to approximately $12.4 billion in 2025 from $6.1 billion in This firm anticipates the primary drivers will be growth of infectious diseases and various types of cancer, increasing awareness and acceptance of personalized medicine and companion diagnostics, growth in the biomarker identification and advancements in molecular techniques. 6

7 In June 2018, IBISWorld projected compound annual growth of 2.6% for the industry to $63.1 billion by 2024 from an estimated $54.2 billion in Industry growth should result from scientific advances that will yield new and improved service capabilities along with an aging US population requiring laboratory testing. We believe clinical pathology services closely mirror MDxHealth s core products. IBISWorld projects clinical pathology service revenue of $10.1 billion in 2018, which should increase to $11.7 billion in 2024, if the percentage within the diagnostic and medical laboratories industry remains stable. Prostate Cancer Market According to the American Cancer Society, there are an estimated 220,000 new cases of prostate cancer diagnosed in the US annually. In the US, The National Cancer Institute rates prostate cancer the second leading cause of death from cancer in men, however, early identification increases the chances of patients being cured due to advanced treatments. In August 2018, market research and consulting firm Grandview Research projects the global prostate cancer diagnostic testing market will reach $5.5 billion in 2025, a 12.3% annualized increase from an estimated $2.5 billion in The increase in demand reflects the increasing prevalence of the disease, constant technological advancements, and increased awareness. In a study conducted by the American Cancer Society, prostate cancer is the third leading cause of cancer-related deaths in US. The US is likely to be the largest and the fastest-growing market during the forecast period due to a shift in the diagnosis and treatment of early-stage prostate cancer via advances in molecular biology, genetics and biotechnology. According to the latest data from the National Cancer Institute, the number of new cases of prostate cancer was 120 per 100,000 men per year. The number of deaths was 20 per 100,000 men per year. The US is considered to be the largest market of prostate cancer stemming from the incidence of prostate cancer in the African American population. In May 2017, MDxHealth reported a retrospective study that demonstrated the ConfirmMDx test improved the identification of African American men at risk for aggressive cancer missed by a prostate biopsy. The study successfully identified men with false-negative biopsy results. Bladder Cancer Market Bladder cancer is a urologic malignancy arising from the epithelial lining of the urinary bladder and is the ninth most common cancer worldwide in men and women, and also has the highest recurrence rate. In April 2017, consulting firm GlobalData predicted that the global market size from the seven largest markets for bladder cancer will more than triple to $1.1 billion in 2025 from $360 million in GlobalData anticipates the primary growth drivers will be increased incorporation of immunotherapy into treatment algorithms, the launch of new combination therapies, and the introduction of new agents for treatment. According to the US National Institutes of Health, approximately 45,000 men and 17,000 women per year are diagnosed with the disease with the global markets for bladder cancer also increasing. Competition The company s ConfirmMDx and SelectMDx products compete in the molecular diagnostics sector with a focus on detecting and/or assessing the grade or aggressiveness of prostate cancer. Its products and services are vulnerable to intervening technology and intense price and service competition. The molecular diagnostic sector is highly competitive in terms of service and price, and will likely continue to undergo consolidation, permitting larger clinical laboratory service providers to increase cost efficiencies and service levels, resulting in more intense competition. 7

8 The market for assessing men at risk for prostate cancer is large and includes companies that possess substantially greater resources and experience in dealing with third-party payors. Additionally, companies and institutions are developing tests to detect proteins, nucleic acids, or the presence of fragments of mutated genes in the blood that are associated with prostate cancer. Companies and subsidiaries within large companies in the molecular diagnostic market include, Luminex Corporation, Danaher Corp., Siemens, Hologic, Seegene, Roche Diagnostics and Abbott Molecular Diagnostics. Risks Losses MDxHealth operations have yet to turn profitable. In 1H18, the company s accumulated deficit reached $111.1 million, up from $56 million in While operating losses should continue through 2019, they should diminish to under $24.5 million from $29.8 million in Lack of profitability could result in the company s inability to execute its growth strategy. Dilution In March 2018, the company obtained net proceeds in excess of $42 million from the issuance of nearly 10 million common shares. While this most recent capital raise should provide the company with enough capital through our forecast period, MDxHealth may require additional equity or debt funding in order to satisfy business challenges or take advantage of new business opportunities. If the company were to issue additional common shares in connection with additional financing, it would dilute the ownership interest of current shareholders. Regulatory The company s laboratory-based diagnostic tests and other products could be subject to regulatory clearance in the US and other overseas markets. Delays in, or failure to secure regulatory approval, could delay the launch of newly developed products and services. Reimbursement The company s molecular diagnostic tests depend on the availability of coverage and adequate reimbursement from government and private insurance companies (payors). Favorable insurance coverage and reimbursement are essential to MDxHealth s commercial goals. The company does not recognize revenue for test results delivered without a contract for reimbursement or without a history of consistent payment. In 2017, the company had a total net amount of approximately $54.5 million that was billed for tests delivered in 2017, but a large portion will only be recognized when the payment is collected. Competition The company s ConfirmMDx and SelectMDx products compete in the molecular diagnostics sector with a focus on detecting and/or assessing the grade or aggressiveness of prostate cancer. Its products and services are vulnerable to intervening technology and intense price and service competition. The molecular diagnostic sector is highly competitive in terms of service and price, and will likely continue to undergo consolidation, permitting larger clinical laboratory service providers to increase cost efficiencies and service levels, resulting in more intense competition. Technology Larger, more financially secure companies may have an established market presence within the molecular diagnostic testing sector. Based on direct comparisons for certain indications, MDxHealth s tests may provide superior outcomes compared to existing competitive products, but new diagnostic tests could potentially gain market share. Product Liability The marketing, sale and use of MDxHealth s tests could lead to product or professional liability claims against it if someone were to allege that its tests failed to perform as they were designed, or if someone were to misinterpret test results or improperly rely on them for clinical decisions. Although MDxHealth maintains product and professional liability insurance which is deemed to be appropriate and adequate, it may not fully protect the company from the financial impact of defending itself against product liability or professional liability claims or any judgments, fines or 8

9 settlement costs arising out of any such claims. Furthermore, any product liability lawsuit could harm its reputation, which could impact its results of operations. Execution The company has achieved some revenue growth momentum based on its presence in the US market for prostate cancer diagnostics, but achieving critical mass will require better penetration that will hinge on acceptance of SelectMDx, leverage of the sales infrastructure, and broader reimbursement coverage. Shareholder Control Four large shareholders collectively own 33.8% of the outstanding voting stock (as of the company s 2017 annual report published April 2018). This group could potentially greatly influence the outcome of matters requiring stockholder approval, which may or may not be in the best interests of the other shareholders. Miscellaneous Risk The company s financial results and equity values are subject to other risks and uncertainties, including competition, operations, financial markets, regulatory risk, and/or other events. These risks may cause actual results to differ from expected results. Trading Volume The company has a float of 44.9 million shares and shares outstanding of 59.9 million. Average daily US volume over the three-month period ending September 10, 2018 was 100 shares traded a day. The stock is traded mainly on a European exchange, where it had average daily volume over the three-month period ending September 7, 2018 of 91,000. 9

10 Consolidated Balance Sheets FY2015 FY2019E (in thousands) Source: Company reports and Taglich Brothers estimates 10

11 Annual Income Statement FY2015 FY2019E (in thousands) Source: Company reports and Taglich Brothers estimates 11

12 Income Statement Model Semi Annual FY2017A 2019E (in thousands) Source: Company reports and Taglich Brothers estimates 12

13 Cash Flow Statement FY2015 FY2019E (in thousands) Source: Company reports and Taglich Brothers estimates 13

14 Price Chart Taglich Brothers Current Ratings Distribution Investment Banking Services for Companies Covered in the Past 12 Months Rating # % Buy 3 12 Hold Sell Not Rated

15 Important Disclosures As of the date of this report, we, our affiliates, any officer, director or stockholder, or any member of their families do not have a position in the stock of the company mentioned in this report. Taglich Brothers, Inc. does not currently have an Investment Banking relationship with the company mentioned in this report and was not a manager or co-manager of any offering for the company with in the last three years. All research issued by is based on public information. In February 2016, the company paid Taglich Brothers a monetary fee of $4,500 (USD) representing payment for the creation and dissemination of research reports for the first three months. In August 2016, the company began paying Taglich Brothers a monthly monetary fee of $1,500 (USD) for the creation and dissemination of research reports. General Disclosures The information and statistical data contained herein have been obtained from sources, which we believe to be reliable but in no way are warranted by us as to accuracy or completeness. We do not undertake to advise you as to changes in figures or our views. This is not a solicitation of any order to buy or sell. is fully disclosed with its clearing firm, Pershing, LLC, is not a market maker and does not sell to or buy from customers on a principal basis. The above statement is the opinion of and is not a guarantee that the target price for the stock will be met or that predicted business results for the company will occur. There may be instances when fundamental, technical and quantitative opinions contained in this report are not in concert. We, our affiliates, any officer, director or stockholder or any member of their families may from time to time purchase or sell any of the above-mentioned or related securities. Analysts and members of the Research Department are prohibited from buying or selling securities issued by the companies that has a research relationship with, except if ownership of such securities was prior to the start of such relationship, then an Analyst or member of the Research Department may sell such securities after obtaining expressed written permission from Compliance. Analyst Certification I, Howard Halpern, the research analyst of this report, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities and issuers; and that no part of my compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report. Public Companies mentioned in this report: Veracyte Inc. (NASDAQ: VCYT) Foundation Medicine Inc. (NYSE: FMI) Natera Inc (NASDAQ: NTRA) GenMark Diagnostics Inc. (NASDAQ: GNMK) Pacific Edge (NASDAQ: PFGTF) Genomic Health Inc (NASDAQ: GHDX) Epigenomics (NASDAQ: EPGNY) Exact Sciences Corporation (NASDAQ: EXAS) 15

16 Meaning of Ratings Buy The growth prospects, degree of investment risk, and valuation make the stock attractive relative to the general market or comparable stocks. Speculative Buy Long-term prospects of the company are promising but investment risk is significantly higher than it is in our BUY-rated stocks. Risk-reward considerations justify purchase mainly by high risk-tolerant accounts. In the short run, the stock may be subject to high volatility and could continue to trade at a discount to its market. Neutral Based on our outlook the stock is adequately valued. If investment risks are within acceptable parameters, this equity could remain a holding if already owned. Sell Based on our outlook the stock is significantly overvalued. A weak company or sector outlook and a high degree of investment risk make it likely that the stock will underperform relative to the general market. Dropping Coverage Research coverage discontinued due to the acquisition of the company, termination of research services, non-payment for such services, diminished investor interest, or departure of the analyst. Some notable Risks within the Microcap Market Stocks in the Microcap segment of the market have many risks that are not as prevalent in Large-cap, Blue Chips or even Small-cap stocks. Often it is these risks that cause Microcap stocks to trade at discounts to their peers. The most common of these risks is liquidity risk, which is typically caused by small trading floats and very low trading volume which can lead to large spreads and high volatility in stock price. In addition, Microcaps tend to have significant company-specific risks that contribute to lower valuations. Investors need to be aware of the higher probability of financial default and higher degree of financial distress inherent in the microcap segment of the market. From time to time our analysts may choose to withhold or suspend a rating on a company. We continue to publish informational reports on such companies; however, they have no ratings or price targets. In general, we will not rate any company that has too much business or financial uncertainty for our analysts to form an investment conclusion, or that is currently in the process of being acquired. 16