Xeris Biopharma(US:XERS)2022-11-09 21:15Part I. Financial Information This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis for Xeris Biopharma Holdings, Inc Item 1. Financial Statements This section presents Xeris Biopharma's unaudited condensed consolidated financial statements as of September 30, 2022, and for the three and nine months then ended Condensed Consolidated Financial Statements The statements show total assets of $303.0 million as of September 30, 2022, with total revenue of $77.1 million and a net loss of $81.7 million for the nine months ended September 30, 2022 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2022 (unaudited) | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $84,109 | $67,271 | | Total current assets | $148,919 | $142,596 | | Total assets | $303,017 | $304,361 | | Long-term debt, net | $138,507 | $88,067 | | Total liabilities | $247,977 | $209,130 | | Total stockholders' equity | $55,040 | $95,231 | Condensed Consolidated Statement of Operations Highlights (in thousands) | Account | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $29,725 | $11,060 | $77,104 | $28,161 | | Loss from operations | $(18,780) | $(24,358) | $(66,770) | $(66,885) | | Net loss | $(21,831) | $(26,009) | $(81,730) | $(71,935) | | Net loss per share | $(0.16) | $(0.39) | $(0.60) | $(1.11) | Condensed Consolidated Statement of Cash Flows Highlights (in thousands) | Account | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(86,772) | $(66,589) | | Net cash provided by investing activities | $25,293 | $61,362 | | Net cash provided by financing activities | $78,317 | $27,122 | | Increase in cash and cash equivalents | $16,838 | $21,894 | Notes to Condensed Consolidated Financial Statements The notes detail accounting policies, the Strongbridge acquisition, revenue disaggregation, debt structure, and contingent value rights, confirming sufficient cash for the next 12 months - The company has three commercially available products: Gvoke for severe hypoglycemia, Keveyis for primary periodic paralysis, and Recorlev for Cushing's Syndrome1618 - Despite an accumulated deficit of $541.8 million, management believes existing cash resources are sufficient to sustain operations for at least the next 12 months1618 Disaggregated Revenue by Product (in thousands) | Product | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Gvoke | $13,663 | $37,595 | | Keveyis | $13,371 | $35,506 | | Recorlev | $2,520 | $3,623 | | Total Product Revenue, net | $29,554 | $76,724 | - The acquisition of Strongbridge on October 5, 2021, was accounted for as a business combination with a total consideration fair value of $169.1 million, adding Keveyis and Recorlev to the company's portfolio4651 - As of September 30, 2022, total long-term debt was $138.5 million, comprising $47.2 million in Convertible Notes and a $96.1 million loan facility from Hayfin, entered into in March 20229098 - The fair value of the Contingent Value Rights (CVRs) liability from the Strongbridge acquisition increased to $30.1 million as of September 30, 2022, from $22.5 million at the end of 2021, resulting in a $7.6 million loss recognized during the nine-month period116 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) The MD&A provides management's perspective on financial condition, operational results, and liquidity, detailing the impact of the Strongbridge acquisition and product performance Overview This section outlines the company's biopharmaceutical business with three commercial products, its strategic pillars, development programs, and the ongoing impact of COVID-19 - The company's strategy is built on four pillars: maximizing the commercial potential of its three products, creating momentum towards profitability, leveraging its technology platforms for new candidates, and collaborating with other pharmaceutical companies164166 - Active development programs include XP-8121 (Levothyroxine) in Phase 1, with several other programs unfunded and available for licensing169174 - The COVID-19 pandemic has adversely impacted customer demand due to disruptions in patient access to healthcare and sales personnel access to customers, though the supply chain has remained intact170171172 Results of Operations This section details the financial results for Q3 2022 versus Q3 2021, showing 168.8% revenue growth to $29.7 million driven by Gvoke and the Strongbridge acquisition, alongside increased operating expenses Q3 2022 vs Q3 2021 Performance (in thousands) | Metric | Q3 2022 | Q3 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $29,725 | $11,060 | $18,665 | 168.8% | | Cost of Goods Sold | $5,260 | $3,220 | $2,040 | 63.4% | | SG&A Expenses | $34,491 | $26,535 | $7,956 | 30.0% | | Loss from Operations | $(18,780) | $(24,358) | $5,578 | (22.9)% | | Net Loss | $(21,831) | $(26,009) | $4,178 | (16.1)% | - Gvoke net revenue increased by 23.8% for the three months ended September 30, 2022, compared to the same period in 2021, driven by a 40.9% growth in prescriptions, partially offset by lower net pricing190 - Keveyis and Recorlev, acquired through the Strongbridge transaction, contributed net revenues of $13.4 million and $2.5 million, respectively, for the three months ended September 30, 2022191 - The increase in Selling, General and Administrative (SG&A) expenses was primarily driven by higher personnel-related costs to support Keveyis and the launch of Recorlev, as well as an expansion of the endocrinology sales force195 Liquidity and Capital Resources The company has historically funded operations through equity and debt, and management believes existing cash and access to an additional $50.0 million from its Hayfin loan are sufficient for at least the next 12 months - The company has funded operations through multiple equity offerings, convertible notes, and debt facilities, including a $100.0 million term loan from Hayfin in March 2022 with access to an additional $50.0 million198200 - Management believes existing cash and access to the remaining $50.0 million from the Hayfin loan are sufficient to sustain operations and capital expenditure requirements for at least the next 12 months201 Cash Flow Summary (in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(86,772) | $(66,589) | | Net cash provided by investing activities | $25,293 | $61,362 | | Net cash provided by financing activities | $78,317 | $27,122 | Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the company's exposure to market risks, primarily interest rate risk from its cash, investments, and floating-rate debt, while foreign exchange risk is considered immaterial - The company is exposed to interest rate risk on its cash equivalents, investments, and its floating-rate Hayfin Loan Agreement, while Convertible Notes have a fixed rate210211 - Foreign exchange risk is considered immaterial, with only minor liabilities denominated in Australian Dollars as of September 30, 2022212 Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2022, with no material changes to internal control over financial reporting identified - Management concluded that disclosure controls and procedures were effective as of September 30, 2022213 - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls214 Part II. Other Information This section covers legal proceedings, risk factors, unregistered sales of equity securities, defaults, mine safety, and exhibits Item 1. Legal Proceedings The company states that it is not currently subject to any material legal proceedings, acknowledging potential claims in the ordinary course of business - The company is not currently subject to any material legal proceedings215 Item 1A. Risk Factors This section provides a comprehensive overview of the numerous risks and uncertainties associated with the company's business, including financial, operational, regulatory, and competitive challenges Risks Related to the Impact of the COVID-19 Pandemic The COVID-19 pandemic poses ongoing risks, including potential disruptions to sales, marketing, and supply chains, and could delay regulatory reviews, with the ultimate impact remaining uncertain - The COVID-19 pandemic continues to pose risks, potentially disrupting sales, marketing, and supply chains, and could delay regulatory reviews218219220 Risks Related to our Financial Position and Need for Financing The company has a limited operating history with significant losses and an accumulated deficit of $541.8 million, requiring potential additional capital that could be dilutive or unavailable, and faces default risks on its substantial debt - The company has a limited operating history and an accumulated deficit of $541.8 million as of September 30, 2022, with an expectation of continued losses in the near term222223 - Additional capital may be required to sustain the business, which could lead to stockholder dilution or may not be available on favorable terms229 - The company has significant debt, including $47.2 million in Convertible Notes and $100.0 million outstanding under the Hayfin Loan Agreement, and failure to make payments could lead to default and acceleration of debt232235 Risks Related to the Commercialization and Marketing of our Products and Product Candidates The company's success depends entirely on the commercial success of its products, which face risks related to market acceptance, reliance on single-source third-party suppliers, and reimbursement challenges - The business depends entirely on the commercial success of Gvoke, Keveyis, and Recorlev, which face risks related to market acceptance by physicians, patients, and payors239240 - The company relies on third-party suppliers, including single-source suppliers like Bachem, Pyramid, SHL Pharma, and Taro, which could harm its ability to commercialize its products if supply is disrupted248 - Reimbursement decisions by third-party payors and pricing pressures from healthcare cost-containment efforts could adversely affect pricing and market acceptance of the company's products256 Risks Related to the Product Development and Regulatory Approval of Our Product Candidates Product candidates face clinical failure risks, and obtaining regulatory approval is lengthy and uncertain, with potential delays or market withdrawal due to undesirable side effects or loss of orphan drug benefits - Clinical failure can occur at any stage, and positive results from early trials do not guarantee success in later-stage trials273 - The company's products may have undesirable side effects that could delay or prevent marketing approval, or if approved, lead to restrictive labeling or market withdrawal279 - The company has received orphan drug designation for several products/candidates but may not be able to maintain the benefits, including market exclusivity, which expired for Keveyis on August 7, 2022283 Risks Related to our Industry and Ongoing Legal and Regulatory Requirements The company is subject to extensive regulatory requirements and strict anti-kickback and fraud laws, facing intense competition from major pharmaceutical companies and potential generic competition - Approved products are subject to ongoing regulatory requirements for manufacturing, labeling, and marketing, and failure to comply could lead to loss of approval299 - The company faces intense competition from established players like Eli Lilly, Novo Nordisk, and Corcept Therapeutics, who have greater resources314315317 - Generic competition is a risk; for example, Amphastar's generic glucagon kit was approved, and Keveyis's orphan drug exclusivity has expired318 Risks Related to Our Intellectual Property The company's success depends on maintaining patent and trade secret protection, but the patent landscape is uncertain, and it faces risks of challenges, invalidation, circumvention, and costly infringement lawsuits - Success depends on the ability to obtain and maintain patent protection, but the patent process is uncertain and may not provide a meaningful competitive advantage320321 - The company could become subject to costly patent litigation from third parties claiming infringement, which could prevent the marketing of its products343 - Using the 505(b)(2) regulatory pathway subjects the company to the risk of patent infringement lawsuits, which can trigger an automatic 30-month stay on FDA approval352 Risks Related to Employee Matters, Managing Growth and Ongoing Operations The business could be harmed by disruptions at regulatory agencies, loss of key management, inability to attract and retain qualified employees, and stock price volatility, while incurring significant public company costs - Disruptions at the FDA and other government agencies due to funding shortages or health concerns could hinder the review and approval of new products366 - The business is dependent on key members of senior management, and the loss of their services could disrupt operations369 - The company's stock price has been and will likely continue to be volatile, influenced by commercial performance, regulatory actions, and market conditions373 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reports no recent sales of unregistered securities and states that the use of proceeds from its initial public offering is not applicable for this reporting period - There were no unregistered sales of equity securities in the period418 Item 3. Defaults Upon Senior Securities The company reports that this item is not applicable - Not applicable422 Item 4. Mine Safety Disclosures The company reports that this item is not applicable - Not applicable423 Item 5. Other Information The company reports that there is no other information to disclose for this item - None424 Item 6. Exhibits This section refers to the Index to Exhibits, which lists the documents filed as part of the Quarterly Report on Form 10-Q - Refers to the Index to Exhibits for a list of filed documents425