Xeris Biopharma Holdings, Inc. (NASDAQ:XERS) Q3 2023 Earnings Call Transcript

Xeris Biopharma Holdings, Inc. (NASDAQ:XERS) Q3 2023 Earnings Call Transcript November 9, 2023

Operator: Hello, everyone and welcome to the Xeris Biopharma Third Quarter 2023 Financial Results Call. My name is Bruno. I’ll be operating your call today. [Operator Instructions] I will now hand over to your host, Allison Wey, Senior Vice President of Investor Relations. Please go ahead.

Allison Wey: Thank you, Bruno. Good morning and welcome to Xeris Biopharma’s third quarter financial results conference call and webcast. A press release with the company’s financial results was issued earlier this morning and can be found on our website. We are joined this morning by Paul Edick, Chairman and CEO; John Shannon, our Chief Operating Officer; and Steve Pieper, our Chief Financial Officer. After our prepared remarks, we will open the lines for questions. In addition, we will be extending the Q&A portion to answer a number of questions we’ve been routinely receiving from some of our shareholders. Before we begin, I’d like to remind you that this call will contain forward-looking statements concerning the company’s future expectations, plans, prospects and financial performance.

Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those forward-looking statements. For more information on such risks, please refer to our earnings press release and risk factors included in our SEC filings, including our quarterly report on Form 10-Q that will be filed later today. Any forward-looking statements in this call represent our views only as of the date of this call and subject to applicable laws. We disclaim any obligations to update such statements. I’ll now turn the call over to Paul.

Paul Edick: Thanks, Allison. Good morning to everybody and thank you for joining us today. I’m excited to once again say that the entire Xeris organization continues to perform at a very high level, most importantly delivering for patients and we remain focused on building a substantial patient-centric, self-sustaining biopharma enterprise. We recorded total net revenue of $48 million in the third quarter which is a 63% increase from the third quarter of 2022, making this the fourth consecutive quarter of at least 50% net revenue growth from prior year and we posted a 27% increase from the second quarter of this year. We are executing on all 3 pillars of our business. First, our 3 innovative commercial products — Gvoke, Keveyis and Recorlev — collectively generated approximately $42 million in net product revenue in the third quarter, an impressive 41% increase over third quarter last year and 13% increase over second quarter of this year.

Second, our highly targeted new product development pipeline, we’re now over 80% enrolled in our levothyroxine Phase 2 clinical study. And third, our value-added technology partnerships. We successfully formulated the ultra-concentrated ready-to-use subcutaneous version of XeriJect TEPEZZA. And by executing on all pillars, our performance allows us to, once again, tighten our full year 2023 total revenue guidance to between $160 million and $165 million, meaning we expect to hit the top end of our original 2023 guidance. Steve will discuss our financial performance in more detail. For now let’s dig into the commercial business a bit more. Gvoke had another record quarter of net revenue and prescriptions, generating $17.7 million in net revenue which is a 30% increase compared to third quarter of 2022.

Total prescriptions for the third quarter were over 58,000, growing 52% compared to the same period last year and a 14% increase from second quarter of 2023. Market growth for glucagon products is now consistently in double digits and Gvoke continues to outpace all other products by driving the majority of that market growth. Gvoke also continues to capture market share. At the end of October, Gvoke market share of new and total prescriptions in the retail glucagon market grew to approximately 33% and 31%, respectively. The new ready-to-use glucagon products now represent 80% of both new and total prescriptions. As we mentioned in the last call, we have invested in another modest expansion of our inside sales team to continue Gvoke’s momentum in the growing glucagon market.

We have added inside reps in the fourth quarter this year, bringing that sales team to approximately 50. This is a very productive group. They’re quick to generate Gvoke awareness and to drive Gvoke share. Even with steady double-digit market growth, we are just scratching the surface of this opportunity. Less than 10% of people at increased risk of severe hypoglycemia event have a ready-to-use rescue glucagon product on hand, leaving far too many people with diabetes still left without protection against a potentially life-threatening severe low blood sugar event. Obviously, this opportunity is large. Based on recently updated guidelines by ADA, Endo, ACE and ISPAD, also most recently, ASCP introduced hypoglycemia similar management protocols for older patients in long-term care or assisted living.

So all of the professional organizations see this opportunity in the same light. We estimate that approximately 15 million people with diabetes are at increased risk of severable low blood sugar. A primary risk factor is being on insulin and sulfonylureas and those who are should be carrying a ready-to-use rescue glucagon like Gvoke HypoPen. The universe of healthcare professional stakeholders and advocates have declared the addition of ready-to-use rescue glucagon such as Gvoke should be a key element of standards of care. We still need to get healthcare professionals to adopt them as standards of practice. On to Recorlev. Recorlev generated $8.1 million in net revenue for the third quarter, an increase of 221% over the same period in 2022 and an increase of 13% over the second quarter of 2023.

We’re very pleased with the steady increase in Recorlev revenue quarter-over-quarter. Patient referrals continue to be robust and the underlying patient demand grew 12% over the second quarter. We anticipate continued double-digit patient growth in the fourth quarter as well. Our healthy pipeline of patient referrals and over is the key indication that Recorlev as seen by the healthcare community as an important option for their Cushing’s patients. Given Recorlev’s multipronged approach to suppressing cortisol production, healthcare professionals are also often value Recorlev as a first-line treatment for Cushing’s syndrome post-surgery. As with Gvoke, to take advantage of our momentum in the growing Cushing’s market, we have added modestly to the sales team as well, as well as the patient support team to handle increased referrals and accelerate conversion referrals to patients on therapy.

Moving to Keveyis. Keveyis had another great quarter in terms of revenue and new referrals and the steady number of patients on therapy continues to show tremendous durability in the face of an approved generic. Third quarter revenue for Keveyis was $15.9 million which represents an increase of approximately 19% compared to the same period in 2022 and an increase of 13% from the second quarter of this year. The medical community recognizes the value of our Xeris CareConnections team which provides patient advocates and mentors to support PPP patients and support providers by processing referrals to assist in securing reimbursement authorization as well as initiation and maintenance of therapy. Now our XeriSol levothyroxine, a potential once-weekly sub-Q injection.

As I mentioned earlier, the Phase 2 study which we began enrolling in the second quarter, is now over 80% enrolled which means patients enrolled being that patients have been dosed. Our goal is to complete the study in the first half of next year with data available midyear. And as I’ve said previously, data from the Phase 2 study will help inform our proposal to the FDA for a pivotal Phase 3 program. Now an update on our formulation technology business. Again, as I mentioned, we announced that we successfully formulated the prespecified target product profile of XeriJect TEPEZZA and as such, we see the associated $6 million success payment from Amgen which was recently acquired by — which recently acquired Horizon. We are waiting on their decision whether they want to exercise their option for an exclusive license to XeriJect technology in the primary indication to further the development of XeriJect subcutaneous TEPEZZA.

If the option is executed and Amgen continues clinical development and eventual commercialization of XeriJect sub-Q TEPEZZA, we may be entitled to receive development milestones, regulatory milestones, sales-based milestones and royalties based on future sales. As for the Regeneron collaboration, we are currently formulating the 2 molecules of the platform program and expect to deliver the prespecified XeriJect formulations for evaluation to Regeneron. Regeneron also has the option to nominate additional molecules for formulation development at any time or to execute a license for further clinical development and commercialization of any of the molecules in the platform. In addition, we continue to discuss additional XeriJect collaborations with numerous companies.

Our delivery system provides unique and significant advantages over other available formulation technologies in delivering large molecules and biologics subcutaneously. In summary, we have delivered another great quarter of record revenue from the growth of our commercial portfolio and successful delivery of the target formulation with one of our partners. We continued strong commercial performance, prudent allocation of resources and disciplined expense management. We also continue to maintain a healthy cash position which supports our ability to continue to be a self-sustaining enterprise. We are not providing 2024 financial guidance at this time. However, I want to share a quick high-level outlook. We expect total net revenue to grow from 2023 levels, operating expenses to remain flat, continuing to reduce our cash burn and to again have enough cash at the end of the year to fund our company, meet our obligations and continue to invest in the growth of the enterprise.

More specific 2024 financial guidance will be provided in March when we report fourth quarter and full year 2023. I will now turn the call over to Steve for additional details on our third quarter financial performance.

Steven Pieper: Thanks, Paul and good morning, everyone. As Paul mentioned, we are executing on all fronts. We have continued to generate net revenue growth across all 3 products. We succeeded in formulating the prespecified target product profile of XeriJect TEPEZZA. We continued to demonstrate disciplined cash management. We exited the third quarter in an extremely healthy cash position and are on track to hit cash flow breakeven for the fourth quarter. Lastly, we created significant financial flexibility to run our business by exchanging approximately 2/3 of our 5% convertible senior notes due in 2025 for 8% convertible senior notes due in July 2028, leaving only $15 million of the 2025 convertible notes remaining and no other debt due until 2027.

For the third quarter, total revenue was a record $48.3 million, representing more than a 60% increase over the same quarter last year. The increase was driven by strong patient demand for all 3 products, coupled with the successful formulation of the prespecified target product profile for XeriJect TEPEZZA which triggered a one-time revenue recognition in the quarter of $6 million. Gvoke net revenue for the quarter was a record $17.7 million, representing a 30% increase compared to the same period last year. Year-to-date net revenue was $48.4 million, representing a 29% increase compared to last year. In the quarter, Gvoke prescriptions topped 58,000 for the first time, a 52% increase compared to the same period in 2022. In the third quarter, the total glucagon prescription market grew 16% versus prior quarter.

Gvoke total prescriptions grew 14% in the same period, ending the quarter with total retail market share of approximately 29%. Gvoke’s strong performance has continued into October, ending the month with a total retail prescription market share of over 31%. Moving to Recorlev. Recorlev net revenue was $8.1 million for the third quarter and $19.7 million on a year-to-date basis. Compared to Q2 2023, net revenue increased by 13% due to an increase in patient demand and net pricing. We are encouraged by Recorlev’s steady patient demand growth. Furthermore, referrals continue to remain strong which bodes well for the future growth of Recorlev. Moving to Keveyis. Keveyis net revenue for the quarter was $15.9 million, representing a 19% increase compared to the same period last year.

Year-to-date net revenue was $42.7 million, representing a 20% increase compared to the same period last year. Consistent with my previous remarks, our strategy to invest in Keveyis and defend brand prescribing has been successful to date. We will continue to invest in Keveyis and Xeris CareConnections as they offer the best-in-class therapy and support for PPP patients. Before I move on to our technology partnerships, I wanted to mention that we have received questions regarding the Keveyis CVR milestone. We wanted to acknowledge that the year-to-date 2023 Keveyis revenue is over $42 million, exceeding the CVR Keveyis milestone of $40 million. This achievement will trigger the CVR milestone in 2023 which will be settled with Xeris equity in late Q1 2024.

Moving over to our technology partnership business. As previously mentioned, we successfully formulated the prespecified target product profile for XeriJect TEPEZZA which triggered a one-time revenue recognition of $6 million in the quarter. We subsequently received the payment in October. Looking ahead for the full-year 2023, based on our overall year-to-date results and achievements in our formulation technology collaborations, we are raising the low end of our previously issued revenue guidance which was $155 million to $165 million to $160 million to $165 million. This means we will come in at the high end of our original 2023 revenue guidance. Moving down the P&L. Cost of goods sold in the third quarter was $8.2 million, a 56% increase compared to the same quarter last year.

For the year, cost of goods sold was $21.1 million, an increase of 29% compared to the same period last year. These increases are mainly driven by higher product sales. Research and development expenses were $5 million for the quarter and $16 million on a year-to-date basis which is flat to prior year. Selling, general and administrative expenses were $37.3 million for the quarter, an increase of approximately $2.8 million relative to the same period last year. This increase was primarily driven by an increase in personnel costs from last year’s fourth quarter sales force expansion. Compared to, however, the last quarter, SG&A actually decreased by $300,000 in the quarter. And looking ahead, we expect to further decrease the SG&A expenses in the fourth quarter.

On a year-to-date basis, SG&A was $108.5 million, an increase of only approximately $5 million or 5% versus year-to-date 2022. This is consistent with our previous guidance that SG&A would be relatively flat for the year compared to 2022. We ended the quarter with a very healthy cash position. As of September 30, we had total cash of approximately $66 million compared to $81 million at June 30. We are executing on our strategy and, as we previously mentioned, we expected cash utilization to moderate through the middle of 2023 until the fourth quarter when we expected to achieve cash flow breakeven. We remain firmly on track to achieve cash flow breakeven for the fourth quarter, the drivers of which include additional cash flow from our products and partnerships, including the one-time payment from Amgen, a reduction of SG&A expenses in the fourth quarter and timing of various vendor payments.

We have previously guided to finishing 2023 with at least $65 million to $70 million of cash. Given our ending cash in Q3, we will finish 2023 with at least $66 million of cash, cash equivalents and short-term investments. This would imply cash utilization for the full year 2023 of no more than $56 million, a significant improvement over 2022 cash utilization of over $100 million, really a dramatic improvement. As Paul mentioned, while it is still too early to provide specific 2024 guidance, our initial outlook for 2024 assumes revenue will continue to grow from 2023 levels and total operating expenses will remain relatively flat which coupled together will continue to reduce our overall net cash outflow in 2024. We believe we will have enough cash at the end of the year to meet our obligations while continuing to invest in the growth of the enterprise and remain a self-sustaining business.

we will provide specific 2024 guidance in March when we announce full year 2023 financial results. Operator, please open the line for questions.

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Q&A Session

Operator: [Operator Instructions] We do have our first question comes from David Amsellem from Piper Sandler.

David Amsellem: Just a few. First on Recorlev. Can you go into some specifics on what the patient footprint is like? And what you’re seeing in terms of patients who are treatment naive versus treatment experience? And how you’re thinking about the trajectory in 2024? And then secondly, on Recorlev, just competitive landscape longer term. Can you talk to the potential presence of Corcept’s relacorilant and then how that could impact Recorlev? And then lastly on Gvoke, can you just talk to how you’re thinking about the presence of Amphastar in the market with Baqsimi and what your view is regarding share of voice in the space with the product changing hands?

Paul Edick: Thanks, David. I’m going to do my best. I’m kind of losing my voice here. I may need to go to John Shannon for some of these answers. Let me start at the end of your question, Gvoke, share voice and competition. We think the market actually — and I’ve said this many, many times. We need other voices in this market. The goal is to have 15 million people who are on insulin or sulfonylureas to be protected to have that fire extinguisher in the home to be carrying their Gvoke HypoPen or any ready-to-use rescue glucagon. That’s the goal because people can die. So more voice, more activity, more people talking about rescue glucagon, ready-to-use products, we think is a really good thing. We’re hoping Lilly would be — continue to be loud in the market.

But we’re looking forward to Amphastar helping to build market penetration. In terms of Corcept and the new product or the replacement product, I think it’s going to be pretty much that. At least our view is it’s going to be pretty similar in performance and they’re going to be trading out business. As you know and as we’ve talked about, Korlym is a pretty big product and one that doesn’t really normalize cortisol. We normalize cortisol. And so we think we’ve got a better product. We think it performs better and we’re starting to see, as a result, physicians who are beginning to use Recorlev first line. That says a lot about a product that’s so young in its life span. And then, Recorlev in terms of patient footprint, I’m not quite sure what you mean by that.

And then the competitive environment with Recorlev, can you help?

David Amsellem: What I meant is how many patients are on drug. That’s what I meant.

Paul Edick: You sneaky guy, you. We are — for competitive reasons, we don’t really talk about that. And I know that’s a metric that everyone would love to have. But right now, we’re too new in the business and we’re growing and — but relative to that, we’re being — we’re having great success versus the competition. And our referral base continues to be strong. And the variability in Recorlev is the speed with which we convert those referrals into actual patients on drug.

Operator: Our next question comes from Juan Luis from Blaire Partners.

Juan Luis: So another Recorlev question for me. I was curious, just broad strokes, what proportion of existing Recorlev patients have reached stable or maintenance doses? And anecdotally, could you talk about what’s discontinuation rates you’re seeing, if any, for Recorlev so far?

Paul Edick: So it’s too early to have a sense of the DC rate but I would tell you it’s very, very low, single digits. And reasons could vary in terms of end of the year insurance, various other things. So it’s too early to have a handle on an ongoing DC rate but so far negligible. In terms of patients being stable at whatever dose, we’re still really early in the whole titration. I mean, we’re seeing people who sort of level out in the 400 range but are not at the end of their titration. We’re seeing people who remain at starting doses for quite a while. So physicians aren’t being terribly aggressive at the titration but we are starting to see titration. The optimal dose in the 500 to 600 range, very few have really gotten there yet.

Juan Luis: Got it. And one question for Gvoke as well. I was curious if you could talk a little bit more about any back-to-school trends you might have seen in the quarter or other drivers of the revenue growth in 3Q.

Paul Edick: Yes. I mean, our — I think we did well in back-to-school. As you know, back-to-school is very much a pediatric endocrinology period. Lilly has historically been very strong in pediatric endocrinology. Also, it’s a really tiny segment of the market. And by and large, has been saturated over time. Most kids have something and most parents make sure they have something. But it’s a pretty small segment. Where we’re getting the vast majority of our growth and is really with adults. And that’s where the opportunity is. Of the 15 million, probably 14 million are adults and not kids. So that’s really what we’re targeting as adult. And during the period back-to-school, we did well in peds but we also did really well in adult during that period and continued to grow both our total scripts and share.

Operator: I would now like to turn the call over to Alison Way for additional Q&A. Over to you.

Allison Wey: Thanks, Rene. At this time, the team will take questions that we’ve been receiving from some of our shareholders. So we’ve grouped the questions by topic. So let’s start with the financial question, Steve. Is Xeris committed to cash flow positive and no dilution?