Xeris Biopharma Holdings, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Dollar amounts below are in millions unless otherwise noted. Xeris commercializes Gvoke, Keveyis and Recorlev in the U.S. and is developing products using its XeriSol and XeriJect formulation platforms.
Financial performance
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Total revenue | $48.3 | $29.7 | $119.5 | $77.1 |
| Product revenue, net | $41.7 | $29.6 | $110.9 | $76.7 |
| Operating loss | $(4.9) | $(18.8) | $(34.2) | $(66.8) |
| Net loss | $(12.2) | $(21.8) | $(48.9) | $(81.7) |
| Net loss per share, basic and diluted | $(0.09) | $(0.16) | $(0.36) | $(0.60) |
| Operating cash used | — | — | $(54.5) | $(86.8) |
- Q3 total revenue increased 62.6% year over year; nine-month revenue rose 55.0%. Product revenue increased 41.1% and 44.5%, respectively.
- Q3 product revenue: Gvoke $17.7 million, Keveyis $15.9 million and Recorlev $8.1 million. For nine months, the respective amounts were $48.4 million, $42.7 million and $19.7 million. Management attributed growth to higher demand; Gvoke growth was partly offset by lower net pricing.
- Royalty, contract and other revenue was $6.6 million in Q3 and $8.7 million for nine months, versus $0.2 million and $0.4 million in the comparable 2022 periods.
- Q3 operating expenses were $53.2 million, up 9.7%; nine-month expenses were $153.7 million, up 6.8%. Nine-month SG&A increased 5.0%, while R&D was nearly unchanged.
- Product gross margin, calculated as product revenue less reported cost of goods sold and excluding intangible amortization, was approximately 80.3% in Q3 2023 versus 82.2% in Q3 2022; for nine months, approximately 81.0% versus 78.7%.
Financial position and liquidity
- At September 30, 2023, cash and cash equivalents were $46.1 million and short-term investments were $19.8 million, for $66.0 million combined. Restricted cash was $4.4 million. Cash and equivalents were $122.0 million at December 31, 2022.
- Current assets were $158.1 million and current liabilities $87.0 million. Total assets were $327.8 million, total liabilities $323.9 million and stockholders’ equity $3.9 million. Accumulated deficit was $603.6 million.
- Long-term debt, net of issuance costs, was $190.4 million; reported principal payments due total $198.8 million. Debt includes $150.0 million under the secured Hayfin facility and convertible notes, including $15.2 million due 2025 and $33.6 million due 2028.
- Interest expense was $19.6 million for the first nine months, compared with $9.7 million a year earlier; cash interest paid was $22.1 million. Hayfin bears a floating rate, with an effective rate reported at approximately 11.8%.
- Nine-month investing cash use was $20.9 million, primarily reflecting purchases of short-term investments. Financing cash use was $0.4 million. Cash, equivalents and restricted cash declined $75.7 million from year-end 2022.
Material changes, outlook and risks
- Net loss narrowed year over year, primarily alongside higher revenue and a lower operating loss, but losses and operating cash use continued. Management expects net losses for at least the next 12 months.
- Management stated that existing working capital and current operating plans are expected to fund operations and capital expenditures for at least 12 months from the financial statements’ issuance date. It also cautioned that additional financing may be needed and may not be available on acceptable terms.
- On September 29, 2023, the company exchanged $32.0 million of 5.00% notes due 2025 for $33.6 million of new 8.00% notes due 2028. The exchange generated a $2.8 million extinguishment loss. The Hayfin facility may mature January 15, 2025 if the 2025 notes remain outstanding and specified extension or funding conditions are not met.
- CVR fair value fell by $3.1 million over the first nine months, producing a gain in earnings. The CVRs have up to $1.00 per right tied to Keveyis and Recorlev revenue milestones and may be settled in cash, stock or both at the company’s election.
- The company began a Phase 2 dose-finding study of XP-8121, a proposed once-weekly subcutaneous levothyroxine treatment. The filing provides no quantitative revenue or profitability guidance.
- Key risks include continued losses and financing needs, debt and interest costs, competition (including generic Keveyis), dependence on a small number of customers and third-party manufacturers, reimbursement and pricing pressure, and clinical and regulatory uncertainty. Four customers represented 97% of gross product revenue for the first nine months.
- FDA issued an untitled letter in June 2023 concerning Recorlev consumer website claims; the company revised the relevant sections, and FDA issued a close-out letter in August stating its concerns appeared addressed. No material legal proceedings were reported.
Important facts for investors to verify
- Whether the reported sales growth, prescription trends and net pricing can be sustained, especially amid generic competition for Keveyis.
- The composition and durability of the $6.6 million of Q3 royalty, contract and other revenue.
- Cash burn and financing needs against the stated 12-month liquidity outlook, including the Hayfin maturity provisions and floating-rate exposure.
- Achievement and valuation of the 2023 and 2024 CVR milestones, and whether any settlement could dilute shareholders.
- Potential dilution: 43.98 million potentially dilutive securities were excluded from diluted EPS as anti-dilutive at September 30, 2023.