Business context and reporting period
Xeris Biopharma Holdings, Inc. filed this unaudited Form 10-Q for the three months ended March 31, 2023. The company commercializes Gvoke, Keveyis and Recorlev in the United States and is developing products using its XeriSol and XeriJect formulation platforms. Its shares trade on Nasdaq under XERS.
Key financial results
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Total revenue | $33.2 million | $22.1 million; up 50.4% |
| Product revenue, net | $32.3 million | $21.9 million; up 47.3% |
| Operating loss | $13.3 million | $29.1 million |
| Net loss | $16.8 million | $33.7 million |
| Net loss per share, basic and diluted | $0.12 | $0.25 |
| Operating cash flow | $(26.1) million | $(48.4) million |
Product revenue by brand was Gvoke $15.0 million, Keveyis $12.8 million and Recorlev $4.5 million. Cost of goods sold was $5.3 million; the resulting product gross margin was approximately 83.5%. The filing does not present a single overall gross-margin figure. Research and development expense was $4.8 million, selling, general and administrative expense $33.6 million, and amortization of intangible assets $2.7 million. Interest expense was $6.2 million.
At March 31, 2023, cash and cash equivalents were $51.0 million and short-term investments were $44.1 million. Including $4.3 million of restricted cash, cash, cash equivalents and restricted cash totaled $55.3 million. Current assets were $165.5 million and current liabilities $81.4 million. Total debt was $187.6 million net of issuance costs; principal outstanding was approximately $197.2 million, comprising $150.0 million under Hayfin and $47.2 million of convertible notes. Stockholders’ equity was $30.0 million and accumulated deficit was $571.6 million.
Material changes versus the prior comparable period
- Revenue increased $11.1 million, driven by higher sales of all three products. Gvoke revenue rose 20.7%, Keveyis 36.8%, and Recorlev increased to $4.5 million from $0.1 million in its early commercialization period.
- Management said Gvoke prescriptions grew approximately 50%; demand growth was partly offset by lower net pricing. Keveyis growth reflected higher demand and net pricing; Recorlev growth reflected more patients on therapy.
- Operating loss narrowed by $15.8 million, primarily alongside lower R&D and SG&A expenses and higher revenue. Net loss narrowed by $16.9 million.
- Operating cash use declined by $22.3 million, which management attributed primarily to reduced working-capital usage. Investing activities used $44.0 million, mainly to purchase short-term investments; this materially affected reported cash movement.
- Interest expense increased $2.7 million, mainly due to higher principal and interest rates on the Hayfin loan. The company had no short-term investments at year-end 2022; it held $44.1 million at quarter-end.
Outlook, risks and unusual items
- Management expects continued net losses for at least the next 12 months, but believes existing working capital at March 31, 2023 is sufficient to fund operations and capital expenditures for at least 12 months from the financial statements’ issuance date. Additional funding may be needed; availability and terms are uncertain.
- The company commenced a Phase 2 dose-finding study of weekly subcutaneous levothyroxine candidate XP-8121 in April 2023, following positive Phase 1 topline results reported in October 2022. Further development and clinical results remain uncertain.
- The Hayfin facility bears floating-rate interest and is secured by substantially all company assets, including intellectual property, subject to exceptions. If the $47.2 million convertible notes remain outstanding on January 15, 2025 and specified extension or refinancing conditions are not met, Hayfin debt may mature on that date rather than its stated 2027 maturity.
- Strongbridge acquisition contingent value rights had a fair value of $24.3 million at quarter-end. Milestones depend on Keveyis and Recorlev revenue and could be settled in cash, shares, or both at the company’s election.
- An expanded headquarters lease commenced April 1, 2023; the company estimated an approximately $22.8 million initial lease liability and $17.4 million right-of-use asset for the expansion. These amounts were not reflected in the March 31 balance sheet.
- Key risks include substantial ongoing losses and financing needs; competition and generic dichlorphenamide competition for Keveyis; reliance on a small number of customers and third-party manufacturers; reimbursement and pricing pressure; clinical and regulatory uncertainty; and floating-rate debt. Four customers represented 96% of gross product revenue in Q1 2023 and 98% of net receivables at quarter-end.
- The company reported no material legal proceedings and no material changes in internal control over financial reporting; management concluded disclosure controls were effective as of March 31, 2023.
Important facts for investors to verify
- Whether revenue and demand growth, particularly Recorlev’s launch trajectory, can continue and translate into lower cash burn.
- Cash runway assumptions, potential financing requirements, and the effects of the Hayfin covenants, floating rates and 2025 maturity contingency.
- Keveyis sales and pricing trends following generic competition, and the status and potential dilution or cash cost of CVR milestones.
- XP-8121 Phase 2 design, progress, results and funding needs.
- Impact of the expanded lease, customer concentration and single-source or limited-source supplier dependencies on liquidity and operations.