Xeris Biopharma Holdings, Inc. (XERS) Q2 2026 Earnings Call Transcript

Hello, everyone. Thank you for joining us and welcome to Xeris Biopharma Second Quarter Earnings Conference Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Alison Way, Senior Vice President of Investor Relations. Allison, please go ahead.

Thank you, Leah. Good morning, everyone, and welcome to Zara's BioPharm, a second quarter financial results conference call. Early this morning, we issued a press release detailing our results. This press release can be found on our website. Joining me on today's call is John Shannon, our chairman and chief executive officer, and Steve Piper, our chief financial officer. Following our prepared remarks, we'll open the call for your questions. Before we begin, I'd like to remind you that today's discussion will include forward-looking statements regarding Zaris' future expectations, plans, strategies, objectives, and financial performance. These forward-looking statements are based on management's current assumptions and beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied. For discussion of these risks and uncertainties, please refer to the risk factors described in our filings with the SEC. Any forward-looking statements made on this call speak only as of today's date, and except as required by law, the company undertakes no obligation to update or revise these statements. In addition, during today's call, we will reference certain financial measures that are presented on a non-GAAP basis. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measures is included in our earnings release.

With that, i'll turn the call over to john thank you allison and good morning everyone the second quarter was another record-breaking quarter for xeris one that demonstrated once again that the commercial momentum we have built is durable and accelerating total revenue reached 92 million with net product revenue of $91 million, representing 34% growth year over year. ReCoral have led the way with 81% growth. Covellis delivered another quarter of steady, reliable performance, and GVOC improved sequentially, as we expected. But the second quarter was more than a commercial story. It was a quarter of meaningful strategic progress. We made significant strides in strengthening our intellectual property portfolio across both our commercial franchise and our pipeline. And shortly after quarter end, we completed the full retirement of our convertible notes, simplifying our capital structure and eliminating nearly $3 million in annual interest expense. The progress we achieved reflects the breadth and defensibility of our science, the financial strength we have earned, and reinforces our confidence in the long-term value of what we're building. Taken together, a record commercial performance, a stronger IP portfolio, and an enhanced balance sheet, the second quarter reflects the disciplined, compounding progress we are making to build a high-value biopharmaceutical company. In other words we're executing and we're just getting started based on our strong first-half performance and our conviction in the growth trajectory of this business we are raising the bottom end of our full year 2026 total revenue guidance to 385 to 390 million this reflects our confidence in this team the performance of our diversified commercial portfolio and the long-term growth outlook of our business. With that, let's turn to our brands, beginning with ReCorelev. ReCorelev continues to demonstrate exceptional momentum, and in the second quarter, it delivered yet again. ReCorelev net revenue increased to nearly $57 million in the quarter, representing 81% growth year-over-year, an increase of over $25 million. Behind that number, ReCorelove had a record number of referrals, new patient starts, patients on therapy, new prescribers, and total prescribers. Quarter after quarter, ReCorelove has delivered sustained growth that speaks to the execution of our commercial team, and most importantly, the deepening confidence prescribers have in ReCorelove as their treatment of choice for endogenous Cushing syndrome. We believe ReCoreLev should be the standard of care, and we intend to build on that. Importantly, we are still in the early stages of realizing the benefits of the commercial expansion we completed in January. Throughout the second quarter, our focus was on training and deploying our expanded team. Execution is tracking in line with our expectations, and we are increasingly well-positioned to accelerate growth as these investments gain traction in the second half. Turning to GVOC. After a slow start to the year, GVOC rebounded nicely in the second quarter, delivering net revenue of approximately $23 million and prescription growth of 10% versus the first quarter. I am proud of the team's work to put GVOKE back into growth mode, and the sequential improvement gives us confidence that GVOKE is back on the right track. Looking ahead, the back-to-school season should provide its typical third-quarter lift as families with children managing diabetes ensure they have a ready-to-use GVOKE on hand for the school year. The long-term opportunity for GVOKE remains unaltered, and our commitment to it is unwavering. Of the 15 million people with diabetes who should have a potential life-saving product, like the Gevo Kypapen, only a million or so do. Closing that gap remains an important opportunity for us, and more importantly, a meaningful way to improve patient outcomes. And finally, Coveus. Coveus delivered nearly $12 million in net revenue. Once again, demonstrating the remarkable durability of this brand in an ultra-rare market. Maintaining patients on therapy remains the ultimate proof point, and our results continue to reflect both the clinical value of Coveus and the patient-centric support infrastructure we have built for the PPP community. Our commitment to this brand and this community couldn't be more evident than through our steadfast multi-year effort to secure important IP protection for Coveus. On June 11, we received a notice of allowance from the U.S. Patent Office for a new patent covering Coveus. Once issued, it will provide renewed protection for Coveus through at least 2039. With a clear line of sight to such extended protection and having evidenced such astounding durability during its period of non-exclusivity, we intend to invest incrementally in both Covellis and the PPP community in order to expand efforts to identify and support even more patients in the future. Turning to our pipeline, and specifically XP8121. The second quarter was a busy period for our program. During the quarter, we continued to build an even stronger intellectual property estate around this important product and our proprietary formulation technology. On July 28th, we received our second U.S. patent covering XP8121. Just one week earlier, we also received a notice of allowance for an additional patent application, which when issued will be our third U.S. patent. Our expanding intellectual actual property portfolio speaks to the depth of our innovation and the long-term defensibility of this product. Those achievements build on the significant progress we made during the second quarter. Our technical and clinical teams made great progress in advancing the program through critical milestones. Importantly, we finalized our clinical site selections and those sites are busy preparing in advance of an expected phase three start by year end. We also maintained a strong presence at key medical conferences throughout the quarter. The feedback we received from the endocrinology community has been exceptional, further reinforcing both our conviction in the significant unmet need in hypothyroidism and the multi-billion dollar commercial opportunity we have laid out. All of this momentum makes our planned XP8121 program overview that much more exciting. On Wednesday, September 9th, we will host a dedicated 81-21 webinar where you will hear directly from an important key opinion leader as well as members of our program team. We will walk you through the unmet medical need, the market opportunity, and our planned phase three program in detail, including trial design, primary and secondary endpoints, target patient population, as well as expected development and related regulatory timelines. We believe XP8-121 represents a significant advancement in addressing the real and persistent challenges of treating hypothyroidism, and we believe it has the potential to be a blockbuster. Before I turn the call over to Steve, I want to briefly recap the strong progress we are making against the three critical priorities we outlined in March and continue to keep in our focus. First, driving rapid revenue growth. We delivered 33% growth in the first half, and we are now guiding to full-year revenue growth of 33% at the midpoint. Our commercial business is growing fast. Second, advancing our pipeline. The XP-8121 program remains on track, and on September 9th, we will provide the market with a comprehensive look at the program. We look forward to that conversation. And third, executing with discipline. The full retirement of our convertible notes completed in July is a direct expression of this priority in action. a proactive, planful step made possible by the ever-strengthening financial position of Xeris. With our sustained commercial momentum and disciplined execution against our strategic priorities, I couldn't be more excited about the company we're building. And with that, I'll turn the call over to Steve.

Good morning, everyone. As John highlighted, our momentum from the first quarter carried into the second, reflecting solid execution and growing confidence in the performance of our business. Net product revenue of $91 million, up 34%, or over $23 million year-over-year, is the headline for this quarter. This performance drove total revenue to $92.1 million, representing 29% year-over-year growth and reflects the sustained commercial momentum John just described. Rekorlev generated net revenue of $56.8 million, representing growth of 81% year-over-year, an increase of $25.3 million, reflecting continued expansion of our patient base. New patient starts continued at a strong pace, and the underlying commercial metrics all support momentum accelerating in the back half of the year, where we expect to see incremental contributions from our commercial expansion completed at the start of the year. GVOKE net revenue of $22.5 million in the second quarter, up 8% sequentially and was in line with our expectations. We expect GVOKE's performance to normalize and track more consistently with historical seasonal patterns in the second half of the year. Coveus delivered another solid quarter, generating net revenue of $11.7 million, reflecting modest improvements in both net pricing and the number of patients on therapy compared to prior year. Gross margin for the second quarter was approximately 86%, an improvement of nearly 400 basis points compared to last year, driven by favorable product mix. Turning to operating expenses. R&D expenses totaled $10.7 million in the quarter, an increase of $2.6 million compared to prior year. This increase reflects continued investment, advancing XP81-21 toward Phase 3 initiation planned for later this year. SG&A expenses were $61 million for the second quarter, driven primarily by the full deployment of our expanded Rekorolev commercial team and patient support infrastructure. Adjusted EBITDA for the second quarter was $19.3 million, an improvement of $6.7 million versus the prior year, representing over 50% growth year over year, even as we made incremental commercial and R&D investments this quarter. I also want to take a moment to discuss our balance sheet and specifically the full retirement of our 2028 convertible notes because it will be visible in our GAAP results this quarter. In July, we completed the full retirement of our convertible notes, settled through a combination of cash and equity. As of July 15th, not a single convertible note remains outstanding. The exchange agreement we signed on June 10th with certain holders of the convertible notes triggered a remeasurement of the convertible notes under GAAP, resulting in a one-time non-cash charge of approximately $31 million recognized in the second quarter. This charge does not impact adjusted EBITDA, and there will be no additional income state charge related to these notes in Q3. The bottom line, we eliminated $34 million of debt, creating approximately $3 million in annual interest savings and a meaningfully cleaner balance sheet this was a proactive step made possible by the consistent financial performance of our business moving to our 2026 outlook we are raising the bottom end of our full year total revenue guidance and tightening the range to 385 to 390 million. This outlook reflects the strong performance we delivered in the first half of the year, as well as our confidence that this momentum will continue as our expanded Rekorolev commercial team moves from build to yield, and we continue to see G-Vote rebound from its slow start this year. On SG&A, at the start of the year, we outlined an expected full-year increase of approximately $45 million versus 2025. Based on our strong first-half results and current outlook, we are making further incremental investments in our commercial enterprise, resulting in a full-year SG&A increase of approximately $50 million. We see meaningful opportunities across our portfolio and remain committed to investing where we can create sustainable long-term value. Let me summarize our full year 2026 guidance. Total revenue is now expected to be between $385 to $390 million. Gross margin remains consistent with our prior expectation of a modest improvement compared to 2025. R&D remains consistent with prior expectations. We expect an increase of approximately $25 million compared to 2025. SG&A is now expected to increase an additional $5 million versus our prior guidance of a $45 million increase compared to last year. And lastly, we continue to expect adjusted EBITDA to increase on an absolute dollars basis compared to 2025. I want to close with this. Our business continues to strengthen, and with it, our financial condition. We remain committed to the priorities that John outlined and are confident that we can maintain a path toward a continuing expansion of adjusted EBITDA, even as we make incremental investments to support a rapid growth of our enterprise. With that, I'll hand the call over to the operator for Q&A.

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand to withdraw your question press star one again we ask that you pick up your handset when asking a question to allow for optimum sound quality if you are muted locally please remember to unmute your device please stand by while we compile the q a roster your first question comes from the line of dennis ding with jeffries your line is open please go ahead hi uh thank you for

I had a question about raising the low end of your guidance. I see that you raised it again to 385 but held the 390 top. And given the core of the momentum, and as you said, the expansion benefit is still mostly ahead in the second half. I guess what's capping the ceiling? And then on the expansion, you notice that, you know, it's tracking in line.

Operator or somebody, we cannot hear this question at all.

Are you able to hear me now? Much better.

Much better.

Thank you, Georgia. Oh, sorry about that. Okay. So on the guidance raise, you raised the low end again in Q2 to 385, but held the top at 390. Given RecordLive's momentum, and you've said the expansion benefit is, you know, still mostly ahead in the second half, I guess what's capping the ceiling there? And then on that, you know, sales expansion, you noted that the execution is tracking in line and still early. Maybe can you unpack, you know, what in line looks like underneath, which leading indicators, referrals, new starts, et cetera, that you're watching to confirm that the H2 setup is materializing? Thank you.

So thanks for the questions, Georgia. On the guidance, yeah, I mean, just another great quarter gave us the confidence to raise the bottom end. And, you know, we've, you know, tightened it to a range of 5 million at this point. We're confident that we can hit that. It still reflects some significant growth in the back half of the year. And again, that points to, you know, the contributions we're expecting from the Rekorolev commercial expansion, as well as growth from GVOC in the back half of the year. So, yeah, really confident in the guidance that we provided, and it reflects over 30% revenue growth. And then on the second question, I think the second question was just around Rekorolev and what we're seeing. Yeah, I think we're seeing early signs of, you know, contributions from that expansion. We saw that in the second quarter. again this is our third time doing this expansion and you know the contributions we're seeing are tracking exactly in line with our expectations and we see it you know continuing into the third quarter which gives us all the confidence in the world to meet the revenue guidance that we outline great thank you so much your next question comes from the line of Brandon folks with H.C.

Wainwright. Your line is open. Please go ahead.

Hi, thanks for taking my questions and congratulations on the quarter. Can you just further detail the second half of the year in the core of the growth drivers? Just how much is driven by prior territories versus sort of the new sales reps? You know, any way to just characterize where those new reps are in terms of productivity? And then any other tailwinds you're expecting in the second half of the year, whether it's the average dose, persistency, just how those sorts of metrics are tracking. Thank you.

Yeah, Brandon, thanks for the question. You know, in terms of, you know, the back half of the year, you know, we made this expansion to increase not only the breadth of our calls, so we expanded our targets, but the depth within our calls. So it's going to come across uh existing prescribers and new prescribers and it's going to come across all territories new and existing so we we see it coming across everywhere and and and that's kind of how we set up the the expansion um in terms of of you know changes to all of you know anything like dosing or anything else like that with the amount of expansion we're going through and the number of new starts we we are watching all those metrics but we don't expect them to materially change um in this time and and period of of growth at these rates so so we continue to monitor those we track them um and and all of those trends are are tracking as we expected and within line and until they become more material we really won't change our expectations around some of those things.

Great. Thanks very much. And maybe just one on 8121. Can you just elaborate on what still needs to be done before the phase three initiation? And do you expect all of that to be done by the time you host the webinar? And if not, sort of how should we think about timing or what needs to be done?

Thank you. Yeah, I think, yeah, I've said this before is we're not going to start that phase three trial to we have the go to market present commercial presentation ready to go into that phase three trial and that's what we're doing is we're you know going through all of the work it takes to be able to take to have the commercial ready product device formulation everything so um and we will we'll be in a real solid we're a great position by the the webinar to you know will tell you where exactly all those timelines are. I will tell you they're all on track. They're all tracking to what we said back last June in terms of start of the trial, data, regulatory submissions, and approval. So we're still on track for all that for a 2030 launch.

Your next question comes from the line of David Amsalem with Piper Sandler. Your line is open. please go ahead.

Hey, thanks. So just a couple for me. First on Rekorlev, can you talk about prescriber breadth and depth? And sorry if I missed this, but can you give color on how many prescribers there are and repeat prescribers? So that's number one. Number two is on 8121. Can you talk to how long you think it's going to take to enroll the phase three? And do you think results could be a 28 event? And then lastly, business development, M&A, just given the commercial infrastructure in place, how aggressive are you going to be in terms of looking for assets where you can leverage that infrastructure? Thanks.

Okay. Start with Recorla. So what we have said is we we have we have 12 000 targets that we basically aligned our sales efforts against and what i can tell you is that those are new and existing prescribers and they're all you know good targets for cortisol normalization and hypercortisolemia and cushing syndrome so um So we are targeting those, we are successfully covering them, and it really goes to, you know, us having a record quarter of new prescribers as well as existing prescribers. So all of those metrics are growing and growing at the pace that we expected in our in our guidance. So and we continue to see that for the balance of the year and going forward as we go deeper and deeper in those in those accounts. The next question was on 81, 81, 81, and I think it was related to data by 28 data by 28. We'll be able to give you a lot more clarity around that whole clinical program and timing on September 9th. You'll be able to see all that. So the clinical and regulatory timelines will be really, really clear at that point.

And business development.

Oh, and as business development, and we've said this before, is, you know, we're focused on driving top line growth and making investments that'll continue to drive more and more growth within our company. And so from a business development standpoint and with our financial position where it's at, we're looking at more and more opportunities that can deliver growth between now and even before the launch of 8121 and 2030. And those are all the kinds of things that we would focus on, especially ones that leverage our endocrinology footprint and or our rare product capabilities that we have within Xeris.

Thank you.

Your next question comes from the line of Chase Knickerbocker with CHLM. Your line is open. Please go ahead.

Morning, everyone. Thanks for taking the questions. This is Jake on for Chase. Nice. First, just on ReCoreLev, I was hoping that you could characterize the growth in the market we are seeing as you all do have better data than us. How many patients do you think are currently on therapy for hypercortisolism and what share of new patient starts do you think you are capturing?

Wow. We haven't really dug into that in the past. um so and and it's really hard to triangulate that because we don't have good external data sources that you know could could tie back to that um but what i will tell you is that more than 60 percent of our patients are new to their uh first time on drug so i would say that points to a couple things one is the majority of our patients are market growth um and us capturing a significant share of those. And the fact that the dynamics in this marketplace with everybody growing in it says that there's still a lot of opportunity for market growth. And having said that, there doesn't seem to be an increase in switching. So we're all getting and driving more screening more detection and more growth in the marketplace um and really you know kind of positioning our product um you know in a sense to kind of win those new patients thanks for that color um and then second how do you think we should think about the new caveats patent obviously this represents a barrier to any potential future generic should we also be thinking about this as a you know relevant to the current generic that's on the market right now Well, I think the way we think about it is with this kind of protection, we for sure are really confident in investing more, in finding more patients, and getting them on therapy. um so from from that perspective we have we have maintained this brand for the last year and a half um based on driving new patients in a space with a non-exclusive situation so we know we can grow it in a non-exclusive situation and it only gets better if it somehow becomes more exclusive later on. But for now, we're excited in and of itself that we can continue to grow this and really drive some growth in the future.

Great. Thanks for that commentary.

Your next question comes from the line of Rowana Ruiz with Lee Rink. Your line is open. Please go ahead.

Hey, guys. You have Ryan on for Rowana. Thanks for taking our question and congrats on the quarter. Maybe just two from us. Can you help frame how discontinuation rates are looking for ReCoreLev? And are you seeing any signs of patients reentering the funnel that may have previously dropped off therapy? And then maybe as you think about peak sales for ReCoreLev, what are the key levers here that could potentially accelerate the timeline to that peak sales of a billion dollars? Thank you.

So discontinuation rates have been pretty steady and stable. We don't really see any movement in that. We do see small amounts of patients that go off and come back and, you know, things like that. So, and again, none of those trends have really changed, but they've been pretty, pretty consistent. In terms of, you know, peak, I think this is an important point for everybody is this is a market where it takes a lot of effort. These are complex patients that need to be diagnosed, screened, and treated. So it's more of a scalable kind of process to get these patients on drug and get them stabilized on drug, get them titrated, and keep them on drug. So it's one of those areas where continued investment will be required, both from a commercial standpoint, but also from a data generation and or data dissemination standpoint. Those are critical aspects to really sustaining the long-term growth of this category.

Your next question comes from the line of Leland Gershaw with OPCO. Your line is open. Please go ahead.

Hi, this is Tracy on for Leland. Congrats on the quarter and thanks for taking your question. Just one from us. Can you give us a sense of how to think about the SP8121 Phase 3 program's impact on OPEX going forward?

Yeah, so I think, Tracy, thanks for the question. I'll take this one. You know, we guided to an increase in R&D this year of $25 million. And that increase is almost entirely for XP8121 and starting the trial later this year. Um, so it's everything that goes into that. Um, as the trial unfolds next year, uh, I think it's reasonable to expect a similar increase, um, uh, in R&D spend as the trial ramps up. um and so we'll lay that out in terms of our our guidance uh early next year specifically um and you'll be able to understand exactly how that kind of tracks out with everything that we're laying out in terms of the program in september uh at the webinar sounds good thank you for the color sure there are no further questions at this time i will now turn the call

back to John Shannon for closing remarks.

Thanks everyone. As you just heard, the second quarter marked another remarkable period for Xeris, underscoring sustained commercial momentum and disciplined execution against our strategic priorities. ReCorelev is growing and driving the business. GVOC is back on track and Covey has delivered a landmark IP win. At the same time, we continue to advance the next phase of our growth story. Our XP8121 program is progressing well, and with phase three initiation expected before year end, we believe we're approaching an important inflection point for the program. Our XP8121 program overview on September 9th will provide investors with a closer look at what we are building. In closing, we enter the second half of 2026 with strong commercial momentum a strengthened financial foundation and a pipeline that positions us well for continued growth thank you for joining us today and thank you for your continued support and interest in xeris biopharma this concludes today's call thank you for attending