Xeris Biopharma Holdings, Inc. Q3 FY2022 Earnings Call

Good evening or good afternoon. And welcome to the Xeris Biopharma Third Quarter 2022 Financial Results Call. My name is Adam, and I will be your operator today. I will now hand the floor over to Allison Wey, Senior Vice President of Investor Relations and Corporate Communications, to begin. So, Allison, please go ahead when you are ready.

Thank you, Adam. Good morning. And welcome to Xeris Biopharma’s third quarter 2022 financial results and corporate update conference call and webcast. A press release with the company’s third quarter 2022 financial results was issued earlier this morning and can be found on our website. We are joined this morning by Paul Edick, Chairman and CEO; and Steve Pieper, our CFO. Paul will provide opening remarks, Steve will provide details on our financial results, and after a few closing remarks by Paul, we will open up the call for Q&A. Before we begin, I would like to remind you that this call will contain forward-looking statements concerning Xeris’ business practices, future expectations, plans, prospects, clinical approvals, commercialization, corporate strategy, performance, and the impact of COVID-19 on Xeris’ business practices. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including uncertainties related to the COVID-19 pandemic. We specifically disclaim any obligations to update such statements. I will now turn the call over to Paul.

Thanks, Allison. Good morning to everyone and thank you for joining us today. Before getting into the results of the quarter, I want to reiterate a few things we talked about on our second quarter call regarding what we are trying to build at Xeris. The most important aspect of building multiple successful companies as a team has been knowing where we are, where we want to be, how we plan to get there, and executing against that strategy with absolute clarity. We have evolved considerably over the last few years, growing from a development company with one end of Phase II asset and two unique technologies to a full-fledged commercial business with three growing products, targeted pipeline development, and potentially meaningful technology partnerships. Reiterating what I said on the second quarter call, where we want to be and what we focus on at the beginning and end of each day, is building a substantial, patient-centric, commercially focused, self-sustaining biopharma enterprise, with multiple products in multiple therapeutic areas, a highly targeted development pipeline that has significant long-term promise and increasingly value-added technology partnerships. What you will hear today is that we are continuing to progress successfully on that journey. Our 2022 momentum continued through the third quarter and into the early part of the fourth quarter. We continued delivering record growth in patient demand and net revenues for all three of our marketed products through the quarter. We also advanced our levothyroxine pipeline program. With the solid year-to-date performance of all three products and the disciplined management of expenses and cash, we are confident. I believe that a result at any point in our range of net product revenue guidance would be exceptional commercial performance for 2022. At this point in the year, we have a good line of sight to where we may end the year and are thus narrowing our net product revenue guidance from $105 million to $120 million to $105 million to $110 million. At the same time, we are raising our previous year-end 2022 cash balance guidance, which was $90 million to $110 million, to now $110 million to $120 million. And we are reiterating our expectation that our cash position is adequate to fund our operations to cash flow breakeven, currently expected to happen by year-end 2023 without needing to tap the equity markets for funding ongoing operations. I will now go into some specific highlights for each product behind this performance. Gvoke had another strong quarterly performance with record revenues and prescriptions. Gvoke net revenue in the third quarter was a record $13.7 million, a 24% increase compared to Q3 last year and a 19% increase from last quarter. Year-to-date, Gvoke net revenues increased 35% compared to the same period last year. In Q3, Gvoke total prescriptions were over 38,000, growing more than 40% compared to the same period last year. Year-to-date, Gvoke total prescriptions were over 103,000 growing approximately 60% compared to the same period in 2021. The total glucagon market grew an additional 9% in Q3 versus the prior year, fueled considerably by Gvoke’s performance. Gvoke continues to outpace and drive market growth quarter after quarter. Gvoke’s market share grew to approximately 24% at the end of October, and ready-to-use glucagon products now represent approximately 70% of the glucagon market. It’s great to see that more people with diabetes who are on insulin, and therefore at serious risk of a severe low blood sugar event, are getting a ready-to-use glucagon prescription such as Gvoke. However, we have a long way to go until all patients on insulin, who are at high risk, have a ready-to-use Gvoke available just in case. Moving to Keveyis. Keveyis had another record quarter with $13.4 million in net revenue, an increase of approximately 17% compared to Q3 2021 and an increase of 4% from last quarter. Year-to-date, Keveyis net revenue has grown 19% over the same period in 2021 on a pro forma basis. Comparing Q3 2022 to Q3 2021, we saw a 9% increase in patient demand. In 2022, on a year-to-date basis, patient demand has increased 10% compared to the same period in 2021. Looking at Recorlev. During the quarter, we generated a meaningful number of patient referrals and an increase in the number of patients starting on therapy. We are also seeing patients that have started on therapy begin to titrate up their average daily dose, which is a positive sign. This performance resulted in $2.5 million in net revenue for the third quarter, 160% revenue growth from the second quarter. It’s still very early in the launch of Recorlev, but it continues to grow and shows great long-term growth potential. Now I’d like to turn to XeriSol levothyroxine. A few weeks ago, we reported very encouraging results from the Phase 1 pharmacokinetic comparison of oral Synthroid versus subcutaneous XP-8121, our small volume ready-to-use formulation of levothyroxine utilizing our XeriSol technology. The study results offer initial proof-of-concept that our subcutaneous formulation has the potential to provide patients with a once-weekly dosing, potentially improving treatment adherence. In the first phase of the study, we compared single 600 microgram doses in a crossover design with normal volunteers. Subcutaneous XP-8121 provided a lower maximum concentration relative to oral Synthroid. We continued the study with two additional ascending doses of XP-8121 and confirmed linear dose proportionality. Throughout the course of the study, no major safety concerns were identified. All data from this Phase 1 study were then combined to develop a population pharmacokinetic model. This model allowed us to perform simulations of various chronic dosing scenarios. The model estimated that 1,200 micrograms of once-weekly XP-8121 could provide similar exposure to 300 micrograms of daily oral Synthroid. At present, the FDA has granted our request for a Type C meeting to review our Phase 1 data and proposal for a single Phase 2/3 registration study. We expect their feedback by the end of this year. Patients remain in need of improved treatment options. Our levothyroxine has been the standard-of-care treatment for hypothyroidism for several decades. Conservatively, if we take 10% of patients with multiple issues, this could represent a $2 billion to $3 billion market segment in which we believe our once-weekly subcutaneous levothyroxine could compete effectively. At this point, I will turn it over to Steve for details on our financial performance.

Good morning, everyone. I will focus my remarks on a few of the key financial results, the details of which are in the press release issued this morning. Total net product revenue was a record $29.6 million for the third quarter, representing a 31% increase over the same quarter last year on a pro forma basis. This increase was driven by growth of all three of our products and strong underlying demand for both Gvoke and Keveyis, as well as new patient starts on therapy for Recorlev. Breaking it down by product, Gvoke net revenue for the quarter was $13.7 million, representing a 24% increase compared to the same period last year. This increase in revenue was driven by continued growth in prescriptions topping $38,000 for the first time. Year-to-date, Gvoke net revenue was $37.6 million, representing a 35% increase compared to the same period last year. Moving to Keveyis, net revenue for the quarter was $13.4 million, representing a 17% increase compared to the same period last year. Year-to-date, Keveyis net revenue was $35.5 million, representing a 19% increase compared to the same period last year. Recorlev net revenue for the quarter was $2.5 million, more than double compared to the second quarter of 2022 and a direct result of the steady growth of patients on therapy. Year-to-date, Recorlev net revenue was $3.6 million. We are pleased with our initial financial performance of Recorlev and encouraged by the outlook given the weekly growth of new patient referrals. As Paul mentioned, we are tightening our guidance of total net product revenue to $105 million to $110 million. From a cash perspective, as of September 30th, Xeris had total cash, cash equivalents, and short-term investments of $93.4 million. Based on our current cash position and forecasted spend, we expect to end 2022 with more cash than previously guided. We are increasing our year-end 2022 cash guidance from a range of $90 million to $110 million to a new range of $110 million to $120 million. We believe that Xeris is in a unique position with a healthy balance sheet and three growing commercial assets that will help us reach cash flow breakeven by the end of 2023.

Thanks, Steve. As we finish the year and head into 2023, we expect to build upon our 2022 momentum and continue creating shareholder value through revenue growth, careful allocation of resources, and prudent expense management. Operator, would you please open the line for questions at this point?

Of course. And our first question today comes from Glen Santangelo from Jefferies. Glen, your line is open. Please go ahead.

Thanks for taking my question. Paul, I wanted to dive into the glucagon market a little bit more. You said that this quarter, your total market grew 9%. It seems encouraging, but it’s also a slight deceleration from where we were in Q2. I am wondering if you could talk about that from a high level. Beyond that, speaking with one of your competitors who manufactures a generic legacy kit, they seem to be very excited about the upcoming sunset of two manufacturers’ legacy kits. They believe the price differential between the ready-to-use products and generic products might be enough to steer the market towards ready-to-use products. Can you give us your assessment of this market, especially moving into 2023?

Thanks, Glen. I'll take that in reverse order, because your latter comments are likely most pertinent to the marketplace dynamics. I would describe the legacy products relative to the new ready-to-use products as impossible to use. There is no issue of price in this marketplace, as evidenced by the speed at which 70% of this market has transitioned from legacy products to ready-to-use products. The critical need is a usable form factor. The new ready-to-use products are easy to use for caregivers and self-administration. Additionally, self-administration has never really been an option with the complicated nature of the kit when a severe hypo occurs. I think that’s crucial to understanding market dynamics. Regarding growth, we have seen growth pre-pandemic as high as 25% to 30%. Despite pandemic fluctuations, we consistently maintain double-digit growth. Gvoke and Xeris are substantially contributing to market growth. As Lilly and Novo increase their market activity, we will gain attention. There are 7 million people on insulin at high risk of severe lows who need ready-to-use products like Gvoke.

Thanks for the context, Paul. I wanted to follow up on the guidance. You've reduced the midpoint by $5 million. What changed compared to what you thought 90 days ago?

The answer is in your first question. We expected double-digit market growth, but we observed high single-digit market growth.

As for the debt, we currently have $100 million outstanding with Hayfin and a convertible that has roughly 47%. We plan to draw the additional $50 available under the Hayfin facility, which will bring it to $150 million.

I would reiterate relative to our guidance that we initially anticipated variability with the launch products. However, all three products are growing incredibly well at double digits year-over-year. Anywhere within that guidance range would be excellent performance for us.

Can you talk about payer dynamics surrounding Recorlev and what you are hearing in the field? Any patient-specific metrics would also be helpful?

Regarding glucagon, the market dynamics show a decline in the use of legacy kits. Allowing the new ready-to-use products will capture a greater market segment. With the discontinuation of older kits, we're positioning Gvoke favorably for future growth. In terms of Recorlev, patient referrals and initiations are high. There’s a process involving initial testing before patients start on Recorlev, which generally takes time, but physician receptiveness has been strong. We're confident of our position with Recorlev regarding market dynamics.

Could you discuss your year-end cash flow breakeven expectations mainly driven by Recorlev growth? Should we expect growth from backlog conversions as patients come on board?

Recorlev is essential in our growth, relying on timely patient referrals and insurance negotiations for quicker patient onboarding. The rate of titration impacts growth, together with continued growth in Gvoke product sales.

Can you share insights on competitive dynamics between Gvoke and BAQSIMI?

Competitive dynamics are as expected. While Lilly actively promotes BAQSIMI, we continue to grow our share of the ready-to-use market. If both products grow, we’ll both benefit. The generic companies can increase production, but they still lack usability. On Recorlev, we expect average maintenance doses to be around 500 to 600 micrograms. Regarding holiday dynamics, no special strategies are adhered to as patient risks increase due to holiday behaviors. Thank you for your continued support over the last few years. We appreciate your belief in what we are building. Our business is strong, we continue to affirm our guidance, and we’re managing expenses aggressively.

This concludes today’s call. Thank you for your attendance. You may now disconnect your lines.