Xeris Biopharma - Q2 2024

Transcript

Operator (participant)

Hello, everyone, and welcome to today's Xeris Biopharma Q2 2024 Financial Results Call. My name is Drew, and I'll be your operator today. During today's call, there will be a Q&A session. To register a question, please press Star followed by one on your telephone keypad. If you wish to withdraw your question, it's Star followed by two. I will now turn the call over to Allison Wey, Senior Vice President of Investor Relations and Corporate Communications, to begin. Please go ahead.

Allison Wey (SVP of Investor Relations and Corporate Communications)

Thank you, Drew. Good morning, and welcome to Xeris Biopharma's Q2 and First Half 2024 Financial Results Conference Call and Webcast. This morning, we issued our press release, which can be found on our website. We're joined this morning by John Shannon, our new CEO, and Steve Pieper, our CFO. After our prepared remarks, we will open the lines for questions. Before we begin, I would 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 release and risk factors included in our SEC filings.

Any forward-looking statements in this call represent our views only as of the date of this call, and subject to applicable law, we disclaim any obligations to update such statements. I will now turn the call over to John Shannon.

John Shannon (CEO)

Thank you, Allison, and good morning, everyone. I'm honored to speak with you for the first time as the CEO of Xeris. It's an exciting time for our company as we start this new era, and I'm thrilled to serve in this role. As you all saw from this morning's earnings release, we had an outstanding Q2. But before we get into the results, I want to take a moment to outline my near-term priorities as the new CEO.

I'm focused on three key priorities to guide our strategic initiatives and decision-making processes in the near term. These represent important opportunities for creating value for our stakeholders. The first priority is maintaining rapid commercial growth and expanding the reach of our treatments to the patient communities they serve. We have three great commercial products making meaningful impact on patients' lives.

We aim to pursue growth strategies that are both ambitious and sustainable. We're confident that our existing products can continue to deliver meaningful growth in the near and long term, and we intend to consistently optimize how we deploy the resources necessary to drive them. The second priority is a renewed commitment to financial discipline, ensuring investments are made wisely and remain focused on value accretion.

We've built a diverse and resilient business model that can weather market fluctuations and deliver consistent performance. We can achieve our business objectives by employing prudent financial planning, appropriate risk management, and by maintaining a strong cash reserve. We ended the Q2 with a very healthy $77 million in cash and investments, and we intend to deploy those financial resources judiciously as business needs or opportunities warrant.

Given our strong cash position and rapid growth of our business, I do not plan to raise any cash by adding any incremental debt or equity that would result in shareholder dilution. Given our differentiated and enviable portfolio of assets, any M&A activity will be measured and opportunistic. In the near to intermediate term, we expect business development activity will be focused on the addition of new technology partnerships or commercial partnerships that can leverage our existing products, formulations, or commercial capabilities, which add to our growth.

The third priority is to improve the quality of our external communications and guidance. Our external stakeholders are critical to our success, and it is extremely important that we listen closely to feedback and communicate in the best manner possible, setting the right expectations around the ability of our products to deliver growth and value.

To that end, we understand that our initial 2024 revenue guidance suggested that we were not confident in the growth prospects of this business. As I explained with my first priority, we are committed to driving rapid and sustained growth of our commercial products. Given our first half performance and our momentum going into the second half of the year, we are confident in the performance and growth of our business.

Therefore, we are raising the low end of our total revenue outlook for the full year from $175 to 190 million. Our updated total revenue range is now $190 to 200 million. By executing on these three priorities, I expect to build upon the strong foundation we've created, which will drive our overall business performance to new heights.

Now, let's move on to the highlights of the Q2. I'm very pleased to report that we posted an outstanding quarter of total revenue, $48 million, a 26% increase over Q2 last year, driven by continued strong demand of all three products, as well as contributions from our partnerships. Our portfolio of commercially available products, Recorlev, Gvoke, and Keveyis, each of which is a transformative therapeutic in their own respective market, collectively generated more than $46 million in revenue, a 26% increase over the same quarter in 2023.

This marks the 11th quarter in a row of greater than 20% growth. For the first half of 2024, these products are up 25% over the same period last year. Our commercial engine is clearly working. We're enjoying continuing rapid growth in both Gvoke and Recorlev, and a very sturdy commitment to Keveyis from both patients and healthcare professionals. Let's get into a little more of the details, starting with Recorlev.

As a reminder, Recorlev is a cortisol synthesis inhibitor indicated for the treatment of endogenous hypercortisolemia in patients with Cushing's syndrome for whom surgery is not an option or hasn't worked. Importantly, Recorlev is the only treatment approved for all etiologies of Cushing's syndrome and has been proven in long-term studies to normalize cortisol levels. Cushing's syndrome is an extremely challenging disorder with a 2 to 4 times higher mortality rate than the general population, and comorbidities that drastically impact a person's quality of life.

While there are multiple approved medical treatments available, patients often struggle to gain control over the disease, given its complexities. Clinicians increasingly recognize the burden of hypercortisolemia and are expanding their testing efforts. Not surprisingly, more patients with the disease are being discovered every day. In Q2, Recorlev generated a record number of referrals and a record number of new patient starts. With such favorable dynamics, we're confident Recorlev is entering into a period of accelerating growth.

Moving on to Gvoke. I'm sure you recall that Gvoke HypoPen is our liquid, ready-to-use glucagon in an auto-injector, used for the treatment of severe hypoglycemia in people with diabetes. Owing to the prevalence and preventable hospitalizations and mortality associated with severe low blood sugar, the health advocacy organizations, including the American Diabetes Association and the Endo Society, have reached consensus opinion that any person with diabetes taking either insulin or sulfonylurea should always be carrying a ready-to-use glucagon product like Gvoke.

We estimate that of the approximately 15 million people in the U.S. that should be protected, fewer than 1 million currently are. Thankfully, our ongoing efforts to increase awareness of this discrepancy and the need to protect patients at risk is gaining traction and driving market growth. Total prescriptions for Gvoke in Q2 grew 13% sequentially over Q1, and 27% over the same quarter last year.

Importantly, Gvoke's market share increased to 34%. In the quarters and years ahead, we expect to steadily add more prescribers and protect more and more of the 14 million-plus patients who remain unprotected. Last, but by no means least, we turn to Keveyis. What an amazing story Keveyis continues to be for the patients that need it and for our Xeris business.

Just to remind you, Keveyis is used to treat primary periodic paralysis, or PPP, which is an ultra-rare genetic neuromuscular condition that interferes with the normal functioning of muscle movement. Keveyis lost orphan exclusivity in August of 2022, yet has proven extremely resistant to generic substitution, given the uniqueness of the disorder and the PPP community's critical reliance on Xeris support for both healthcare professionals and our patients.

During Q2, the number of patients being treated with Keveyis was nearly equivalent to Q1, and that trend has continued into Q3, a remarkable achievement. We're increasingly optimistic about the longer-term strength and resilience of Keveyis, and we'll continue to provide services that matter most for the well-being of patients suffering from PPP. Quickly shifting to our pipeline. In late May, we announced positive top-line results of our phase II study of XP-8121, our once-weekly subcutaneous injectable formulation of levothyroxine.

The team is busy preparing for an end-of-phase II meeting with the FDA this fall, during which time we will seek clarification about the phase III requirements necessary to earn approval for this novel product. The more we evaluate the data and market potential of XP-8121, the more excited we get, owing to the size of the hypothyroidism marketplace and the desperate need for innovation to serve patients struggling for control.

Innumerable reports have been published documenting the various compliance and absorption challenges that can interfere with bioavailability of oral levothyroxine. Of note, in our phase II study, 40% of the patients considered stable at the time of screening were found to have their TSH or T4 outside of normal range. Finally, in Q2, we welcomed Beta Bionics to our stable of partners seeking to leverage our formulation technology to create novel medicines.

As announced in May, we're aiding Beta Bionics in the development of a novel, ready-to-use glucagon formulation that could work optimally in their dual hormone pump program. Once again, I couldn't be more excited for Xeris as we enter a new era, and I'm confident that we are well on our way to building an innovative, self-sustaining, fast-growing biopharmaceutical company, committed to making a difference in patients' lives. With that, I'm going to pass over to Steve to walk you through the details of our Q2 financial results.

Steve Pieper (CFO)

Thanks, John. Good morning, everyone. We ended the quarter with net product revenue of $46.5 million, and total revenue of $48.1 million, both increasing by approximately 26% compared to prior year. Year-to-date net product revenue was $86.8 million, and total revenue was $88.7 million, both increasing by approximately 25% compared to prior year.

This growth in revenue was driven by strong performance from both Recorlev and Gvoke. Recorlev net revenue was $13.3 million for the quarter, increasing 86% compared to prior year. On a sequential basis, Recorlev net revenue increased by an impressive $2.7 million, representing growth of 26%. These increases were driven by the average number of patients on Recorlev, increasing 124% from last year and 25% compared to Q1.

We expect this rapid growth to continue based on our robust pipeline of referrals, growing 31% compared to Q1. Our ability to convert these referrals into patients on Recorlev, as well as our field expansion, which we completed in early July. Gvoke net revenue was $20 million for the quarter, representing a 28% increase compared to the same period last year. This growth was driven by a 27% increase in Gvoke prescriptions.

As we mentioned during our prior quarter remarks, the Change Healthcare cybersecurity breach temporarily impacted Gvoke net revenue in the Q1. Although we do not believe we recovered the lost revenue from the Q1, growth in patient demand, which consistently exceeded 5,000 weekly prescriptions since May, as well as increased orders from our wholesalers, have signaled to us the impact has been resolved.

Keveyis net revenue for the quarter and year-to-date was $13.1 million and $26.2 million. Despite generic competition, revenue only decreased slightly by 2% on a year-to-date basis. As we have repeatedly stated, Keveyis is resilient, and we will continue to invest and defend the brand. Our commitment to this strategy has proven to be successful as we continue to generate a healthy pipeline of patient referrals.

Given the strong performance of all three of our products in the first half of the year and the momentum we are currently generating, we are confident in tightening our total revenue guidance by substantially raising the low end of the range, with revised guidance of $190 to 200 million from the previous guidance of $175 to 200 million.

Moving down the P&L, cost of goods sold as a percentage of total product revenue decreased by 4% for the quarter compared to the prior year. This decrease was primarily the result of an increase in Recorlev revenue, resulting in a product mix with lower costs. Research and development expenses were $5.8 million for the Q2. These expenses were relatively flat compared to the Q2 of 2023 and were primarily comprised of costs for our pipeline, notably XP-8121, and further development of our technology platform, XeriSol and XeriJect.

On a year-to-date basis, research and development expenses were $13.6 million, a $2.4 million increase compared to prior year, which was primarily a result of investments in our pipeline and increased employee costs to support XeriSol and XeriJect.

Consistent with my previous remarks, we are focused on advancing our pipeline and supporting our XeriSol and XeriJect technology platform, which will result in an increase in R&D costs this year compared to 2023. We expect a modest increase in R&D spend relative to the first half. Selling, general, and administrative expenses were $40 million for the quarter and $78.4 million for the year, an increase of 6% and 10% compared to prior year.

These increases were driven by higher personnel costs, primarily due to our field expansion in the fourth quarter of last year. Looking ahead for the full year, we expect a modest increase in second half expenses relative to the first half, as we have made investments that are focused on supporting our revenue growth. Moving to cash, we ended the quarter in a healthy cash position of $77.6 million.

Looking ahead to our year-end, we are tightening our cash guidance to $60 to 75 million from the original $55 to 75 million, which considers our revised revenue guidance, as well as the additional investments we have made in the Recorlev business. We are able to make these investments as a result of continued strong revenue growth. We are seeing great momentum across our business, which is translating to consistent and meaningful revenue growth and driving the financial health of our enterprise. With that, operator, please open the line for questions.

Operator (participant)

Thank you. We will now start today's Q&A session. If you would like to ask a question, please press star followed by one on your telephone keypad. If you wish to withdraw your question, it's star followed by two. Our first question today comes from Roanna Ruiz from Leerink Partners. Your line is now open. Please go ahead.

Roanna Ruiz (Analyst)

Great. Good morning, everyone. So I have a question for Recorlev first. Seems like the new patient starts are growing well in the quarter. How do you think that will trend into the second half this year? And I'm also curious, with the newly expanded field force, could that continue to be a tailwind later this year and possibly into 2025?

John Shannon (CEO)

Hey, Roanna, it's John. Yes, I mean, as I said, we're—it's accelerating. We're growing the new starts and new referrals. We see that are continuing to accelerate in Q3, and we, you know, see that through the end of the year. And we just put the new sales force on out in the additional sales reps out into the field in the last couple of weeks, and they'll start contributing later this year and early next year.

Roanna Ruiz (Analyst)

Got it. Helpful. And for Gvoke, I also was curious, would you consider focusing the field force a bit more on, driving back to school, prescribing for Gvoke, to sort of maximize that going into later this year? And could you just remind us, you know, what are the Gvoke reps doing today in terms of tackling some of these prescribers versus other prescribers for adults, et cetera?

John Shannon (CEO)

Yeah. So as you pointed out, the Q3 back to school starts kicking in in, like, this week and next week. And as always, we will focus in that area, and, you know, for that time period, which is primarily pediatric endo. And as we've, you know, shown and you guys understand, Baqsimi has a pretty strong hold on that space, only because they launched right into it several years ago.

So from our perspective, we, you know, we hold on and continue to grow during this time frame. It's our biggest growth quarter every year, and it'll be that way this year. But we also then focus on how do we bring every day, how do we bring more of the 14 million people that are not protected today, on Gvoke?

Roanna Ruiz (Analyst)

Got it. Thanks.

Operator (participant)

Our next question comes from David Amsellem from Piper Sandler. Your line is now open. Please go ahead.

Speaker 7

Hi, thank you. This is Skyler on for David. First, on Recorlev, can you talk about your long-term expectations in the context of the recent catalyst data from Corcept, which showed that 24% of patients with difficult to treat type two diabetes in the study actually had Cushing's syndrome, which might indicate that the true prevalence is higher than previously understood?

And then separately, how are you thinking about Gvoke growth over the remainder of the second half of the year? And touching on the last question, just the degree of seasonality we should expect with the back-to-school season, just so we can better think about the phasing of revenue. Thank you.

John Shannon (CEO)

Okay. Let me start with Recorlev. And I think you're pointing out part of what I had in my prepared remarks is that more and more patients are being tested and screened for high cortisol levels, which is, you know, ideal for the marketplace and ideal for our product, because Recorlev normalizes cortisol.

So, you know, so it fits right in for, you know, why some of the acceleration we're seeing in our growth and how our product fits into what's going on in that space. For Gvoke, you know, we expect, you know, to continue to grow and drive kind of more and more people who aren't protected to, you know, prescribe and/or get Gvoke just in case. Okay?

That will continue strongly through the Q3, which is always our strongest quarter, and then into the Q4 as well. So we look to see, you know, this steady, continuous growth that we've been, you know, pounding out the last several quarters to continue on Gvoke.

Steve Pieper (CFO)

Yeah, maybe just to, This is Steve, Skyler. Just to get a little more specific on Gvoke, I think historically we've seen, you know, in the back half of the year, 20% growth, and we've enjoyed that through the first half of the year. So I would expect that trend to continue, with probably a little bit more dramatic growth in the Q3. But I think that's kind of where I would peg things for the second half of the year.

Speaker 7

Helpful. Thank you, guys.

Operator (participant)

Our next question comes from Chase Knickerbocker from Craig-Hallum. Your line is now open. Please go ahead.

Chase Knickerbocker (Analyst)

Good morning. Thanks for taking the questions. First of all, John, congrats on the new role. Looking forward to watching you execute here. First, just on housekeeping on Gvoke. Net revenue, net sales grew a little bit more than prescriptions in the year year-over-year. Is that some stocking dynamics, or was there a little bit of pricing benefit year-over-year? Just click there.

Steve Pieper (CFO)

Yeah, I'd, Chase, this is Steve. I would say it's probably just a little bit of stocking, maybe a little bit of price, but not nothing material.

Chase Knickerbocker (Analyst)

Got it. Thanks. And maybe so far through the first half of the year, you know, at least in our data, we've seen, you know, some pretty nice share gains, relative to competitors. Can you just speak to kind of what you've seen, in your data, kind of in the first half of the year on new Rx trends here with your ready-to-use competitors with Gvoke?

John Shannon (CEO)

Yeah, I think we see the same thing you do. Yeah, yes, we're gaining share, but we're gaining that share primarily by you know, market growth and capturing an inordinate amount of the market growth directly to Gvoke. So, we're not out there directly getting it from existing Baqsimi patients. We're getting it from the market growth that's out there, and the market growth that we're driving. And we think that trend will continue.

Chase Knickerbocker (Analyst)

Yeah, and so kind of thinking about that through the remainder of the year and, you know, into next, with kind of you guys taking a majority of new patient starts from here, maybe that is a little bit different in Q3, but you would expect that to kind of remain the case outside of maybe that back-to-school seasonality?

John Shannon (CEO)

Yeah, if you went back and just mapped this out over the last couple of years, you'd see that we have share gains pretty consistent every quarter, and then we get to the Q3, and it kind of flattens out in terms of increases, and then it picks up again in Q4. That trend will probably continue this year, this quarter.

Chase Knickerbocker (Analyst)

Got it. And then just on Recorlev, I mean, just kind of taking a step back and looking at the market as a whole, can you help me kind of parse through what is maybe just some increased diagnosis of Cushing's here, versus, you know, you guys, you know, making competitive gains from some that have failed other therapies, maybe just doing better there? And then, I might have missed this. Sorry, I'm jumping around. But just speak to the pipeline as far as kind of sequential growth there, and how that kind of informs you guys' confidence in the back half of the year. Thanks.

John Shannon (CEO)

Let me try to answer your Recorlev question, 'cause there's a couple dynamics there. There's more and more people being tested and more and more people being diagnosed, and with high, you know, elevated cortisol. And again, we normalize cortisol. There's also a level of complexity in terms of treating this, and there's no perfect product for anybody.

So there's some bouncing around between therapies, and, you know, we benefit from that. So we're picking up patients from, you know, new starts to, you know, people that have switched to people that have tried other things and now are moving over. So people are coming from all places in terms of new starts. And I don't know that I understood your last question about the pipeline. Are you referring to the Recorlev pipeline?

Chase Knickerbocker (Analyst)

Just on the pipeline of patients for Recorlev. Yeah, for the Recorlev pipeline. Yeah.

John Shannon (CEO)

Yeah, it's stronger than ever. And it continues to build for us. And like I said, it's coming from all places.

Chase Knickerbocker (Analyst)

Then just lastly, on Keveyis, would you expect kind of a consistent kind of treatment from payers kind of through the remainder of the year? And, you know, that kind of informs some of the confidence here. And then when was, you know, we typically think kind of Q1 for potential payer changes, that would kind of be the next time where there would, you know, be something that we should think about from an investor perspective.

John Shannon (CEO)

Yeah, I would think about Q1. As you pointed out, that's when, you know, kind of new, there's all kinds of resets going on there. What we saw in Q2 and what we're seeing in Q3 is we're adding new patients at a very, very strong pace. And as I said in my opening, in my prepared remarks, we were basically even Q2 to Q1 in terms of patients, and we see that trend continuing for the rest of the year.

Chase Knickerbocker (Analyst)

Thanks for the questions, guys. Congrats on a really nice quarter.

John Shannon (CEO)

Thanks, Chase.

Operator (participant)

We will now take our final question from Rohan Mathur from Oppenheimer. Your line is now open. Please go ahead.

Rohan Mathur (Equity Research Associate)

Hi, this is Rohan on for Leland Gershell. Congratulations on another strong quarter. Just a couple from me. On Recorlev, can you give some detail on how the payer reception and coverage has been in the last quarter and how it's changed over time? And this is on Keveyis. Any granularity you could provide on the sturdiness of the business and how you think about how resilient the franchise might be in the coming years? Thank you.

John Shannon (CEO)

Okay, so, let me talk about payer coverage with Recorlev. And I, you know, it's really not changed. What happens is you spend more and more time in these spaces with these, you know, rare brands, you get better and better at moving patients from a referral through the payer process, and you know, do it faster and you do it more efficiently. So I think that's where, you know, that's what's also leading to when you have a really strong referral pipeline that you can, you know, turn that into new starts. And we saw both of those accelerate in the Q2 and continue to see that going into the Q3.

And for Keveyis, you know, we said, I think we've done an amazing job of kind of managing this space for the benefit of the patients with PPP. We see that in the resilience that patients and physicians are willing to, you know, fight for brand. So we see that continuing. Now, you know, could it get, you know, maybe another player coming in or something would maybe potentially disrupt that. But, you know, until that happens, we're really confident that this, that it's gonna hold its resiliency.

Rohan Mathur (Equity Research Associate)

Great. Thank you.

Operator (participant)

We have no further questions in the queue at this time, so I'll hand back over to the team for closing remarks.

John Shannon (CEO)

Well, thank you, everyone, for listening today. As you've just heard, Xeris is stronger than ever. I'm confident that by executing on the three priorities I talked about earlier, we will deliver a robust business result that will ultimately translate into meaningful shareholder value. Thank you again for your time this morning.

Operator (participant)

That concludes today's call. Thank you for joining. You may now disconnect your line.