Xeris Biopharma Holdings, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. The unaudited results include Gvoke, Keveyis and Recorlev; Keveyis and Recorlev were added through the October 2021 Strongbridge acquisition, so comparisons with 2021 reported results are not fully like-for-like.
Financial performance
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Total revenue | $25.3 million | $8.9 million | $47.4 million | $17.1 million |
| Product revenue, net | $25.3 million | $8.8 million | $47.2 million | $16.9 million |
| Operating loss | $18.9 million | $25.8 million | $48.0 million | $42.5 million |
| Net loss | $26.2 million | $27.5 million | $59.9 million | $45.9 million |
| Net loss per share, basic and diluted | $0.19 | $0.41 | $0.44 | $0.72 |
| Operating cash flow | Not separately reported for the quarter | Not separately reported for the quarter | $(69.0) million | $(44.0) million |
- Q2 product revenue comprised Gvoke $11.5 million, Keveyis $12.8 million and Recorlev $1.0 million. Gvoke revenue grew 29.9%; prescription growth was 60.4%, partly offset by lower net pricing. Six-month Gvoke revenue grew 41.7%.
- Product revenue less cost of goods sold, before intangible amortization, implies gross margins of approximately 80.9% for Q2 and 76.5% for the first half. Cost of goods sold was $4.8 million and $11.1 million, respectively.
- Q2 SG&A rose 27.2% to $33.0 million, primarily reflecting commercial staffing; R&D fell 30.9% to $3.7 million. Six-month SG&A rose 53.1% to $68.9 million, including increased sales-force and Recorlev launch costs.
- Q2 net loss improved year over year, but six-month net loss increased. First-half results included $7.7 million of expense from revaluing contingent value rights (CVRs), higher interest expense and $5.4 million of intangible amortization. The CVR revaluation loss was $4.9 million in Q2.
Liquidity, debt and capital
- At June 30, cash and cash equivalents were $95.3 million and short-term investments were $16.2 million. Current assets were $161.2 million versus current liabilities of $64.5 million.
- Reported long-term debt, net of issuance costs, was $138.1 million. Principal outstanding was approximately $147.2 million: $100.0 million under the Hayfin facility and $47.2 million of 5.00% convertible notes. Hayfin debt carries a floating rate and is secured by substantially all assets, including intellectual property, subject to exceptions.
- In March 2022, the company refinanced and repaid $43.5 million of prior debt using a $100 million Hayfin term loan; up to a further $50 million is available as delayed-draw borrowing, subject to conditions. The Hayfin loan generally matures in March 2027, but may mature in January 2025 if specified convertible-note conditions are not met.
- First-half financing cash flow was $78.5 million, including $30 million from a January equity private placement and net Hayfin proceeds. The company issued 10.2 million shares and warrants to purchase 5.1 million shares in the placement. Shares outstanding were 135.9 million at June 30.
- Management said existing resources, expected product revenue and access to the remaining Hayfin draw were expected to fund operations and capital expenditures for at least 12 months from issuance. It also expects losses for at least the next 12 months. First-half operating cash use was $69.0 million.
Outlook, risks and notable items
- No specific revenue or profitability guidance was provided. Management’s stated priorities are commercial growth for Gvoke, Keveyis and Recorlev, development of its formulation-technology pipeline, and potential partnerships.
- XP-8121, a once-weekly levothyroxine candidate, was in Phase 1; the company planned to assess data in the second half of 2022 before determining a potential later-stage path. Other programs were undergoing prioritization review, including glucagon candidates.
- Management cited ongoing COVID-19 effects on customer access and longer supplier lead times, while stating it did not then anticipate supply interruptions. Risks include reliance on third-party and single-source manufacturers, reimbursement and pricing pressure, clinical and regulatory uncertainty, and the need for additional capital.
- CVRs from the Strongbridge acquisition may pay up to $1.00 each, based on Keveyis and Recorlev milestones, and may be settled in cash, shares or a combination at the company’s choice. The liability was $30.2 million at June 30. The Keveyis milestone includes a 2023 revenue target of $40 million; Recorlev milestones include targets of $40 million in 2023 and $80 million in 2024.
- The company reported no material legal proceedings and no material changes to internal control over financial reporting; disclosure controls were considered effective. Restructuring costs were expected to total approximately $11.1 million, fully recorded by June 30, with completion anticipated substantially by Q4 2023.
Important facts for investors to verify
- Whether commercial growth in Keveyis and Recorlev, and Gvoke prescription gains, translate into sustained net revenue and improved cash generation.
- The timing and conditions for drawing the remaining $50 million Hayfin commitment, the floating-rate borrowing cost, covenant compliance and the potential January 2025 maturity trigger.
- Actual progress toward CVR milestones and the eventual settlement amount and form, which could affect cash needs or dilute shareholders.
- Supplier capacity and lead times, particularly for single-source products and Keveyis supply commitments; the remaining Taro obligation was $8.0 million at June 30.
- Pipeline prioritization decisions, clinical results and regulatory requirements, as well as the effect of reimbursement, pricing and competition on product adoption.