Xeris Biopharma Holdings, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Unaudited results are compared with the corresponding 2022 periods. Amounts are in U.S. dollars; financial figures below are in millions except per-share data.
Business context and performance
Xeris commercializes three U.S. products: Gvoke for severe hypoglycemia, Keveyis for primary periodic paralysis, and Recorlev for endogenous Cushing’s syndrome. It is also developing product candidates using its XeriSol and XeriJect formulation platforms. The company reported continued product growth but remained loss-making.
Key financial metrics
| Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 |
|---|---|---|---|---|
| Total revenue | $38.0 | $25.3 | $71.2 | $47.4 |
| Product revenue, net | $36.9 | $25.3 | $69.2 | $47.2 |
| Operating loss | $(16.0) | $(18.9) | $(29.3) | $(48.0) |
| Net loss | $(19.8) | $(26.2) | $(36.7) | $(59.9) |
| Net loss per share, diluted | $(0.14) | $(0.19) | $(0.27) | $(0.44) |
Q2 cost of goods sold was $7.6 million; research and development was $6.1 million; selling, general and administrative expense was $37.6 million; and intangible amortization was $2.7 million. Interest expense was $6.5 million in Q2 and $12.7 million in H1. The filing presents no explicit gross-margin measure.
H1 cash flows: Operating activities used $39.9 million, compared with $69.0 million in H1 2022. Investing activities used $35.5 million, mainly reflecting purchases of short-term investments; financing activities used $0.3 million. Cash, cash equivalents and restricted cash totaled $50.6 million at June 30, 2023.
Liquidity and debt: Cash and cash equivalents were $46.2 million and short-term investments were $34.5 million. Current assets were $155.7 million versus current liabilities of $79.7 million. Long-term debt, net of issuance costs, was $188.2 million; principal outstanding was approximately $197.2 million, comprising $47.2 million of 5% convertible notes and $150.0 million of Hayfin loans. Hayfin bears a floating rate, with an effective rate including issuance-cost amortization of 11.8%. The convertible notes mature in 2025; Hayfin loans are scheduled to mature in 2027, but may mature January 15, 2025 if specified conditions concerning the notes are not met.
Material changes versus prior comparable periods
- Q2 revenue rose 50.2%; H1 revenue rose 50.3%. Recorlev revenue was $7.2 million in Q2 and $11.6 million in H1, compared with $1.0 million and $1.1 million, respectively, in 2022.
- Gvoke revenue grew 36.2% in Q2 and 28.2% in H1; prescription growth was approximately 49.7% in both periods, partly offset by lower net pricing. Keveyis revenue grew 10.0% in Q2 and 21.3% in H1.
- Operating and net losses narrowed, although expenses increased. Q2 SG&A rose 14.1%, and R&D rose 63.7%. Management cited personnel, marketing and new-lease costs for higher SG&A, and Recorlev study and product-development spending for higher R&D.
- Interest expense increased substantially, primarily because of the higher Hayfin principal and interest rates. A gain from revaluing contingent value rights (CVRs) partly improved other income versus 2022.
- Cash and cash equivalents fell from $122.0 million at year-end 2022, while the company invested $34.5 million in short-term securities. Inventory increased to $36.5 million from $24.7 million.
Outlook, commentary and risks
Management said existing working capital at June 30, 2023 was sufficient to support operations and capital expenditure requirements for at least 12 months from the financial-statement issuance date. It nevertheless expects continued net losses for at least the next 12 months and anticipates further spending on commercialization and research and development. The filing provides no numerical revenue or earnings guidance.
The company began a Phase 2 study of once-weekly subcutaneous levothyroxine candidate XP-8121 in 2023. Clinical outcomes, regulatory review and commercialization remain uncertain. Management also highlighted potential need for additional financing, which may not be available on acceptable terms and could dilute shareholders.
Key risks include substantial operating losses and debt service; reliance on a small number of customers (four accounted for 96% of H1 gross product revenue); dependence on third-party and, for some products, single-source manufacturers; reimbursement and pricing pressure; competition, including generic dichlorphenamide competition for Keveyis; and clinical, regulatory and product-safety uncertainty. Hayfin debt is secured by substantially all assets, including intellectual property, subject to exceptions.
Unusual regulatory item: On June 7, 2023, FDA’s Office of Prescription Drug Promotion issued an untitled letter concerning safety and efficacy claims on Recorlev consumer webpages. The company said it responded with a remediation plan and was discussing revisions with FDA. The filing reports no material pending litigation. Disclosure controls were assessed as effective at June 30, 2023.
Important facts for investors to verify
- Whether product demand and net pricing sustain growth, particularly for Gvoke and Recorlev, and how generic competition affects Keveyis.
- Cash usage, funding needs and the basis for management’s stated 12-month liquidity runway, including future financing availability and potential dilution.
- Hayfin’s floating-rate burden, debt covenants and the conditions that could accelerate its maturity to January 2025 alongside the convertible notes.
- Progress and safety results for XP-8121 Phase 2 and other development programs, as well as the status and outcome of FDA’s Recorlev promotional-material concerns.
- CVR milestone exposure: potential payments depend on specified Keveyis and Recorlev revenue or patent milestones, and may be settled in cash, stock or both at the company’s election.