Xeris Biopharma(US:XERS)2022-08-10 20:16Part I. Financial Information This section presents the company's unaudited condensed consolidated financial statements, management's discussion and analysis, market risk disclosures, and internal controls Item 1. Financial Statements The unaudited condensed consolidated financial statements for the period ended June 30, 2022, show a significant increase in total revenue driven by the acquisition of Strongbridge and growth in Gvoke sales. However, the company continues to report a net loss, with an accumulated deficit of $520.0 million. The balance sheet reflects increased assets and liabilities, primarily due to the acquisition and new debt financing. Cash flows from operations remain negative, while financing activities provided a significant cash inflow from new debt and equity offerings Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $95,340 | $67,271 | | Total current assets | $161,206 | $142,596 | | Intangible assets, net | $126,029 | $131,450 | | Total assets | $318,616 | $304,361 | | Liabilities & Equity | | | | Total current liabilities | $64,545 | $79,040 | | Long-term debt, net | $138,068 | $88,067 | | Total liabilities | $244,673 | $209,130 | | Total stockholders' equity | $73,943 | $95,231 | Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $25,306 | $8,906 | $47,379 | $17,101 | | Loss from operations | $(18,916) | $(25,787) | $(47,990) | $(42,527) | | Net loss | $(26,185) | $(27,515) | $(59,899) | $(45,926) | | Net loss per share | $(0.19) | $(0.41) | $(0.44) | $(0.72) | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(69,018) | $(43,978) | | Net cash provided by investing activities | $18,584 | $42,857 | | Net cash provided by financing activities | $78,504 | $27,121 | | Increase in cash and cash equivalents | $28,069 | $26,001 | - The company has an accumulated deficit of $520.0 million as of June 30, 2022, and expects to continue incurring net losses for at least the next 12 months. However, management believes existing cash and access to an additional $50.0 million from a credit agreement are sufficient to sustain operations for at least the next 12 months21 Notes to Condensed Consolidated Financial Statements This section provides detailed notes on disaggregated revenue, the Strongbridge acquisition, new debt financing, and the revaluation of Contingent Value Rights Disaggregated Revenue by Product (in thousands) | Product | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Gvoke | $11,479 | $23,932 | | Keveyis | $12,812 | $22,136 | | Recorlev | $969 | $1,102 | | Total Product Revenue, net | $25,260 | $47,170 | - The acquisition of Strongbridge on October 5, 2021, was accounted for as a business combination, with total consideration valued at $169.1 million. This added Keveyis and Recorlev to the company's portfolio475051 - In March 2022, the company entered into a new Credit Agreement with Hayfin Services LLP for an initial loan of $100.0 million, with access to an additional $50.0 million. Proceeds were used to repay a previous $43.5 million loan and for general corporate purposes92 - Contingent Value Rights (CVRs) issued in the Strongbridge acquisition are revalued each period. The fair value of the CVR liability increased from $22.5 million at year-end 2021 to $30.2 million at June 30, 2022, resulting in a $7.7 million loss recognized in the period116 Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 184% year-over-year revenue growth for Q2 2022 to the inclusion of Keveyis and Recorlev sales following the Strongbridge acquisition, alongside a 29.9% increase in Gvoke net revenue. Operating expenses rose due to the expanded commercial infrastructure for the three products. The company secured $100 million in new debt financing in March 2022 and believes its current capital is sufficient to fund operations and capital expenditures for at least the next 12 months, despite continuing net losses - The company's core strategy focuses on four pillars: - Maximizing the commercial potential of its three products: Gvoke, Keveyis, and Recorlev - Achieving profitability through commercial execution - Leveraging its technology platforms (XeriSol and XeriJect) to develop new product candidates - Collaborating with other pharmaceutical companies to apply its technology platforms163165 Results of Operations Comparison (in thousands) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Total revenue | $25,306 | $8,906 | 184.1% | | Cost of goods sold | $4,810 | $3,383 | 42.2% | | R&D Expenses | $3,718 | $5,383 | (30.9)% | | SG&A Expenses | $32,984 | $25,927 | 27.2% | | Net loss | $(26,185) | $(27,515) | (4.8)% | - Gvoke net revenue grew 29.9% for the three months and 41.7% for the six months ended June 30, 2022, compared to the same periods in 2021, driven by prescription growth of 60.4% and 72.6% respectively, though partially offset by lower net pricing187 - The company believes its cash, cash equivalents, investments, expected product revenue, and access to an additional $50.0 million from the Hayfin Loan Agreement are sufficient to fund operations and capital expenditures for at least the next 12 months173199 Quantitative and Qualitative Disclosures About Market Risk The company is primarily exposed to market risks from interest rate fluctuations on its cash, investments, and variable-rate debt. Foreign currency exchange risk is considered immaterial as of the reporting date - The company's primary market risk is interest rate risk, affecting interest income on cash and investments and interest expense on its SOFR-indexed long-term debt under the Hayfin Loan Agreement208209 - Foreign exchange risk is currently minimal, with only immaterial liabilities denominated in Australian Dollars as of June 30, 2022210 Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2022. No material changes to internal control over financial reporting were identified during the quarter - The Principal Executive Officer and Principal Financial Officer concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by this report211 - There were no changes in the company's internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls212 Part II. Other Information This section covers legal proceedings, significant risk factors, unregistered equity sales, other disclosures, and a list of filed exhibits Legal Proceedings The company is not a party to any material legal proceedings. It may become involved in various legal actions in the ordinary course of business, but none are expected to have a material adverse effect - As of the report date, the company is not a party to any legal proceedings that are expected to have a material adverse effect on its business213 Risk Factors The company faces numerous significant risks that could materially affect its business. Key risks include the ongoing impact of the COVID-19 pandemic, a limited operating history with significant losses, dependence on the commercial success of its three products, reliance on third-party suppliers, potential for clinical trial failures, competition, and the ability to protect its intellectual property - The business may be adversely affected by the ongoing COVID-19 pandemic, which could disrupt supply chains, impact customer demand, and delay regulatory reviews215216 - The company has a limited operating history, has incurred significant losses since inception (accumulated deficit of $520.0 million as of June 30, 2022), and may not achieve or sustain profitability219220 - The business depends entirely on the commercial success of its products Gvoke, Keveyis, and Recorlev, and its product candidates, which may not be accepted in the marketplace237 - The company relies on third-party, and in some cases single-source, suppliers for manufacturing its products, which could harm its ability to commercialize them if these suppliers fail to perform246 Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - There were no unregistered sales of equity securities in the reported quarter414 Other Information There is no information to be reported under this item for the quarter - The company reported no information for this item419 Exhibits This section lists the exhibits filed as part of the Quarterly Report on Form 10-Q, including amendments to agreements and officer certifications - Exhibits filed with the report include an amendment to the API Supply Agreement with Bachem Americas, Inc., and certifications from the Principal Executive Officer and Principal Financial Officer423