Xeris Biopharma(XERS) - 2021 Q3 - Quarterly Report

Part I. Financial Information Item 1. Financial Statements The unaudited condensed consolidated financial statements for the period ended September 30, 2021, reflect increased net sales driven by Gvoke, a widening net loss, and a balance sheet showing decreased cash and investments, increased liabilities, and a stockholders' deficit, with the Strongbridge acquisition details provided in notes as a subsequent event Condensed Consolidated Balance Sheets As of September 30, 2021, total assets decreased to $131.3 million from $159.2 million, while total liabilities increased to $133.7 million from $125.4 million, resulting in a stockholders' deficit of $2.5 million compared to a $33.8 million positive equity at year-end 2020 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2021 (unaudited) | Dec 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $59,492 | $37,598 | | Short-term investments | $33,491 | $96,190 | | Total current assets | $124,367 | $152,212 | | Total assets | $131,260 | $159,151 | | Liabilities & Equity | | | | Total current liabilities | $37,285 | $28,207 | | Long-term debt, net | $87,713 | $87,021 | | Total liabilities | $133,721 | $125,390 | | Total stockholders' (deficit) equity | ($2,461) | $33,761 | Condensed Consolidated Statements of Operations and Comprehensive Loss For the three and nine months ended September 30, 2021, net sales significantly grew due to Gvoke, but increased operating expenses, especially in SG&A, led to a higher net loss for both periods, though net loss per share improved from ($1.78) to ($1.11) for the nine-month period Financial Performance Summary (in thousands, except per share data) | Metric | Q3 2021 | Q3 2020 | YTD 2021 | YTD 2020 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $11,035 | $9,404 | $27,921 | $13,066 | | Gross profit | $7,840 | $6,616 | $19,732 | $7,342 | | Research and development | $5,663 | $3,876 | $15,078 | $15,811 | | Selling, general and administrative | $26,535 | $16,484 | $71,539 | $55,734 | | Loss from operations | ($24,358) | ($13,744) | ($66,885) | ($64,203) | | Net loss | ($26,009) | ($16,000) | ($71,935) | ($69,283) | | Net loss per common share | ($0.39) | ($0.35) | ($1.11) | ($1.78) | Condensed Consolidated Statements of Cash Flows For the nine months ended September 30, 2021, net cash used in operating activities was $66.6 million, offset by $61.4 million from investing activities and $27.1 million from financing, resulting in a net increase in cash and cash equivalents of $21.9 million Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | ($66,589) | ($69,689) | | Net cash provided by (used in) investing activities | $61,362 | ($34,654) | | Net cash provided by financing activities | $27,122 | $122,738 | | Increase in cash and cash equivalents | $21,894 | $18,367 | Notes to Condensed Consolidated Financial Statements The notes detail the company's business, the significant post-quarter-end acquisition of Strongbridge for $169.1 million adding Keveyis and Recorlev, accounting policies, and debt structure including $47.2 million in convertible notes and a $43.5 million senior secured loan, alongside a $26.9 million equity offering in March 2021 - On October 5, 2021, after the reporting period, the company completed its acquisition of Strongbridge Biopharma. The transaction is not reflected in the Q3 2021 balance sheet or income statement[20][43] Preliminary Acquisition Consideration for Strongbridge (in thousands) | Component | Fair Value | | :--- | :--- | | Xeris Biopharma Holdings, Inc. common shares | $137,655 | | Unexercised Strongbridge options assumed | $6,404 | | Strongbridge warrants | $2,467 | | Contingent consideration (CVRs) | $22,531 | | Total consideration | $169,057 | - The acquisition adds Keveyis® (approved for primary periodic paralysis) and Recorlev® (a clinical-stage candidate for Cushing's syndrome with a PDUFA date of January 1, 2022) to the company's portfolio[27] Unaudited Pro Forma Operating Results (in thousands) | Metric | Q3 2021 | YTD 2021 | | :--- | :--- | :--- | | Revenue | $22,556 | $58,081 | | Net loss attributable to Xeris | ($23,965) | ($82,183) | Management's Discussion and Analysis of Financial Condition and Results of Operations Management highlights the Strongbridge acquisition as a strategic expansion into rare diseases, focusing on commercializing Gvoke and Keveyis and preparing for Recorlev's launch, with Gvoke net sales increasing to $27.9 million for the first nine months of 2021 from $13.1 million, despite higher SG&A expenses and $6.2 million in acquisition costs, while maintaining sufficient cash for the next 12 months - The company's key priority is the commercialization of Gvoke and Keveyis, and the pre-commercialization preparations for the anticipated launch of Recorlev in Q1 2022, subject to FDA approval[152] Gvoke Net Sales (in millions) | Period | 2021 | 2020 | | :--- | :--- | :--- | | Three Months Ended Sep 30 | $11.0 | $9.4 | | Nine Months Ended Sep 30 | $27.9 | $13.1 | - The increase in SG&A expenses for the nine months ended Sep 30, 2021 was primarily driven by a $10.3 million increase in personnel costs from sales force expansion and $6.2 million in transaction-related expenses for the Strongbridge acquisition[60][182] - The company believes its cash resources as of September 30, 2021, are sufficient to sustain operations and capital expenditure requirements for at least the next 12 months[28][186] Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from interest rate fluctuations affecting income and floating-rate debt expenses, while foreign currency risk is currently considered immaterial - A hypothetical one-percentage point change in interest rates would impact annual interest income by approximately $0.9 million[197] - The company's long-term debt under the Amended Loan Agreement has a floating interest rate based on LIBOR, but a 1% increase would have no impact as the current rate is below the 2.43% floor. The Convertible Notes have a fixed 5.0% interest rate[198] Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of September 30, 2021, with no material changes in internal control over financial reporting during the quarter - The Principal Executive Officer and Principal Financial Officer concluded that disclosure controls and procedures were effective as of September 30, 2021[200] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[201] Part II. Other Information Legal Proceedings The company is not currently subject to any material legal proceedings, and no ordinary course legal actions are expected to have a material adverse effect - As of the report date, the company is not a party to any claim or litigation that is reasonably expected to have a material adverse effect on the business[203] Risk Factors The company outlines numerous risks, emphasizing the integration of the Strongbridge acquisition, the ongoing impact of the COVID-19 pandemic, and its financial position, including potential failure to realize merger benefits, continued operating losses, reliance on Gvoke and Keveyis, manufacturing dependence, reimbursement challenges, and risks in clinical development, regulatory approval for Recorlev, intellectual property, and competition - A primary risk is the failure to successfully integrate the businesses of Xeris Pharma and Strongbridge, which could prevent the realization of anticipated cost savings and operational synergies[205] - The COVID-19 pandemic continues to pose a risk by potentially disrupting patient access to healthcare, sales and marketing efforts, and the operations of third-party suppliers and manufacturers[211][213] - The company has a history of significant losses ($409.3 million accumulated deficit as of Sep 30, 2021) and expects to incur further losses as it commercializes its products and develops its pipeline[216][217] - The business is highly dependent on the success of its commercial products Gvoke and Keveyis, and its late-stage candidate Recorlev. Market acceptance, physician adoption, and third-party payor reimbursement are critical[231][233][235] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period, and the use of IPO proceeds is not applicable for this reporting period - There were no unregistered sales of equity securities in the period[458] Defaults Upon Senior Securities Not applicable, as the company reported no defaults upon senior securities - Not applicable[460] Mine Safety Disclosures Not applicable, as the company has no mine safety disclosures - Not applicable[461] Other Information There is no other information to report for the period - None[462] Exhibits This section lists the exhibits filed as part of the Quarterly Report on Form 10-Q, including officer certifications and XBRL data files Signatures The report is duly signed by the company's Chief Executive Officer and Chief Financial Officer on November 10, 2021