Xeris Biopharma(XERS) - 2024 Q2 - Quarterly Report

FORM 10-Q General Information This section provides general information about Xeris Biopharma Holdings, Inc., including company details, filing status, and shares outstanding Company Information Xeris Biopharma Holdings, Inc. is a Delaware-incorporated company with its principal executive offices in Chicago, Illinois. Its common stock trades on The Nasdaq Global Select Market under the symbol XERS - Registrant: XERIS BIOPHARMA HOLDINGS, INC.[1] - State of Incorporation: Delaware[1] - Trading Symbol: XERS on The Nasdaq Global Select Market[1] Filing Status The company is classified as an Accelerated Filer and is not a shell company, having filed all required reports during the preceding 12 months and being subject to filing requirements for the past 90 days - Filing Status: Accelerated filer[2] - Shell Company: No[2] - Compliance: Filed all required reports in the preceding 12 months and subject to filing requirements for the past 90 days[1] Shares Outstanding As of July 31, 2024, Xeris Biopharma Holdings, Inc. had 148,998,825 shares of common stock outstanding Common Stock Outstanding | Date | Shares Outstanding | | :----------- | :----------------- | | July 31, 2024 | 148,998,825 | Financial Statements This section presents the company's condensed consolidated financial statements, including balance sheets, statements of operations, stockholders' equity, and cash flows Condensed Consolidated Balance Sheets As of June 30, 2024, the company reported total assets of $331.7 million, an increase from $322.6 million at December 31, 2023. Total liabilities also increased to $351.0 million from $329.4 million, resulting in a larger stockholders' deficit of $(19.3) million compared to $(6.8) million Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2024 (unaudited) | December 31, 2023 | | :--------------------------- | :------------------------ | :---------------- | | Cash and cash equivalents | $57,604 | $67,449 | | Short-term investments | $19,964 | $5,002 | | Total current assets | $170,340 | $156,264 | | Total assets | $331,733 | $322,602 | | Total current liabilities | $75,488 | $95,193 | | Long-term debt, net | $230,481 | $190,932 | | Total liabilities | $351,019 | $329,384 | | Total stockholders' equity (deficit) | $(19,286) | $(6,782) | Condensed Consolidated Statements of Operations and Comprehensive Loss For the three months ended June 30, 2024, total revenue increased to $48.1 million from $38.0 million in the prior year, and the loss from operations significantly narrowed to $(8.2) million from $(16.0) million. Net loss improved to $(15.0) million from $(19.8) million, with basic and diluted net loss per common share at $(0.10) compared to $(0.14). For the six months, total revenue grew to $88.7 million from $71.2 million, loss from operations decreased to $(22.4) million from $(29.3) million, and net loss improved to $(34.0) million from $(36.7) million, with EPS at $(0.24) versus $(0.27) Condensed Consolidated Statements of Operations and Comprehensive Loss Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenue | $48,065 | $38,008 | $88,703 | $71,204 | | Loss from operations | $(8,187) | $(15,979) | $(22,432) | $(29,256) | | Net loss | $(15,005) | $(19,842) | $(33,985) | $(36,676) | | Net loss per common share - basic and diluted | $(0.10) | $(0.14) | $(0.24) | $(0.27) | | Weighted average common shares outstanding - basic and diluted | 148,345,549 | 137,338,071 | 144,372,512 | 137,250,465 | Condensed Consolidated Statements of Stockholders' Equity (Deficit) The total stockholders' deficit increased from $(6.8) million at December 31, 2023, to $(19.3) million at June 30, 2024, primarily due to the net loss incurred during the period, partially offset by increases in additional paid-in capital from common stock issuance and stock-based compensation Stockholders' Equity (Deficit) Highlights (in thousands) | Metric | June 30, 2024 | December 31, 2023 | | :----------------------------------- | :------------ | :---------------- | | Common Shares Outstanding | 148,936,727 | 138,130,715 | | Additional Paid In Capital | $631,740 | $610,254 | | Accumulated Deficit | $(651,010) | $(617,025) | | Total Stockholders' Equity (Deficit) | $(19,286) | $(6,782) | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2024, net cash used in operating activities decreased to $(30.7) million from $(39.9) million in the prior year. Net cash used in investing activities was $(15.0) million, a significant reduction from $(35.5) million. Financing activities provided $35.9 million, a substantial improvement from $(0.3) million used in the prior year, primarily due to debt refinancing Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :-------------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(30,651) | $(39,884) | | Net cash used in investing activities | $(15,047) | $(35,527) | | Net cash provided by (used in) financing activities | $35,853 | $(307) | | Decrease in cash, cash equivalents and restricted cash | $(9,845) | $(75,718) | | Cash, cash equivalents and restricted cash, end of year | $61,829 | $50,596 | - Cash paid for interest for the six months ended June 30, 2024, was $8.3 million, down from $15.2 million in the prior year[13] - Issuance of common shares in settlement of CVR liability amounted to $15.8 million in non-cash activities for the six months ended June 30, 2024[13] Notes to Condensed Consolidated Financial Statements This section provides detailed notes to the condensed consolidated financial statements, covering organization, accounting policies, revenue, investments, inventory, assets, liabilities, and equity Note 1. Organization and nature of the business Xeris Biopharma Holdings, Inc. is a growth-oriented biopharmaceutical company focused on developing and commercializing clinically meaningful products. It currently markets three products: Gvoke, Recorlev, and Keveyis, and has a pipeline utilizing its proprietary XeriSol and XeriJect formulation science. The company has an accumulated deficit of $651.0 million as of June 30, 2024, and expects to incur net losses for at least the next 12 months, but believes its current cash resources are sufficient for this period - Xeris Biopharma is a growth-oriented biopharmaceutical company with three commercial products: Gvoke (severe hypoglycemia), Recorlev (Cushing's syndrome), and Keveyis (Primary Periodic Paralysis)[17] - The company also has a pipeline of development programs utilizing its proprietary XeriSol and XeriJect formulation science[17] - Accumulated deficit as of June 30, 2024, was $651.0 million, and net losses are expected for at least the next 12 months[18] - Current cash resources are believed to be sufficient to sustain operations and capital expenditure requirements for at least the next 12 months[18] Note 2. Basis of presentation and summary of significant accounting policies and estimates The condensed consolidated financial statements are unaudited and prepared in accordance with GAAP for interim financial information. Revenue is recognized from net product sales (Gvoke, Recorlev, Keveyis) and royalty/contract revenue, with significant estimates applied to allowances. Four customers accounted for 97% of gross product revenue for the three and six months ended June 30, 2024. Recent accounting standard adoptions (ASU 2023-03, ASU 2020-06) had no material impact on the financial statements, and pending standards are not expected to have a material impact, though some require evaluation for disclosure effects - Financial statements are unaudited and prepared under GAAP for interim reporting[19] - Revenue is recognized from net product sales (Gvoke, Recorlev, Keveyis) and royalty/contract revenue, with allowances for discounts, rebates, and returns estimated at the time of sale[23] - Four customers accounted for 97% of gross product revenue for the three and six months ended June 30, 2024, and 96% of trade accounts receivable at June 30, 2024[24] - Adoption of ASU 2023-03 and ASU 2020-06 had no material impact on the Company's financial position, results of operations, or cash flows[25][26] - Pending accounting standards (ASU 2024-02, 2023-09, 2023-07, 2023-06, 2020-04/2022-06) are not expected to have a material impact on financial statements, though some require evaluation for disclosure effects[27] Note 3. Disaggregated revenue Total revenue for the three months ended June 30, 2024, was $48.1 million, up from $38.0 million in 2023. For the six months, total revenue reached $88.7 million, compared to $71.2 million in 2023. Recorlev showed the strongest growth, more than doubling its revenue for the six-month period Disaggregated Revenue by Product (in thousands) | Product Revenue, Net | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Gvoke | $20,046 | $15,638 | $36,625 | $30,671 | | Keveyis | $13,128 | $14,088 | $26,213 | $26,843 | | Recorlev | $13,338 | $7,167 | $23,937 | $11,644 | | Product revenue, net | $46,512 | $36,893 | $86,775 | $69,158 | | Royalty, contract and other revenue | $1,553 | $1,115 | $1,928 | $2,046 | | Total revenue | $48,065 | $38,008 | $88,703 | $71,204 | Note 4. Short-term investments The company's short-term investments, classified as available-for-sale, consist entirely of highly-rated U.S. government securities with remaining maturities of less than one year. As of June 30, 2024, the fair value of these investments was $19.96 million, up from $5.00 million at December 31, 2023. No credit loss allowance was recorded for either period - Short-term investments are classified as available-for-sale debt securities, consisting of U.S. government securities[29] - All short-term investments had remaining maturities of less than one year as of June 30, 2024, with an average remaining maturity of 0.2 years[29] Short-term Investments (in thousands) | Metric | June 30, 2024 | December 31, 2023 | | :--------------------- | :------------ | :---------------- | | Total Fair Value | $19,964 | $5,002 | | Amortized Cost | $19,971 | $5,004 | | Gross Unrealized Losses | $(7) | $(2) | - No credit loss allowance was recorded for the three and six months ended June 30, 2024 and 2023[31] Note 5. Inventory Total inventory increased to $43.0 million at June 30, 2024, from $38.8 million at December 31, 2023, primarily driven by an increase in raw materials. Inventory reserves also increased to $3.9 million from $2.4 million over the same period Inventory Components (in thousands) | Component | June 30, 2024 | December 31, 2023 | | :-------------- | :------------ | :---------------- | | Raw materials | $23,910 | $17,404 | | Work in process | $11,302 | $10,959 | | Finished goods | $7,765 | $10,475 | | Inventory | $42,977 | $38,838 | - Inventory reserves increased to $3.9 million at June 30, 2024, from $2.4 million at December 31, 2023[32] Note 6. Property and equipment Net property and equipment decreased slightly to $5.8 million at June 30, 2024, from $6.0 million at December 31, 2023. Total property and equipment before depreciation increased to $12.5 million from $12.0 million, while accumulated depreciation and amortization also increased. Depreciation and amortization expense for the six months ended June 30, 2024, was $0.6 million Property and Equipment (in thousands) | Component | June 30, 2024 | December 31, 2023 | | :----------------------------- | :------------ | :---------------- | | Total property and equipment | $12,476 | $12,007 | | Less: accumulated depreciation and amortization | $(6,643) | $(6,036) | | Property and equipment, net | $5,833 | $5,971 | - Depreciation and amortization expense for property and equipment was $0.6 million for the six months ended June 30, 2024, down from $0.8 million in the prior year period[34] Note 7. Intangible assets Net intangible assets decreased to $104.3 million at June 30, 2024, from $109.8 million at December 31, 2023. The definite-lived intangible assets are Keveyis (5-year life) and Recorlev (14-year life), with total gross assets of $132.0 million. Expected amortization expense for the remainder of 2024 is $5.4 million, and $10.8 million for 2025 Identified Intangible Assets (in thousands) | Asset | Life (Years) | Gross Assets | Accumulated Amortization (June 30, 2024) | Net (June 30, 2024) | | :--------- | :----------- | :----------- | :--------------------------------------- | :------------------ | | Keveyis | 5 | $11,000 | $(6,050) | $4,950 | | Recorlev | 14 | $121,000 | $(21,607) | $99,393 | | Total | | $132,000 | $(27,657) | $104,343 | Expected Amortization Expense for Intangible Assets (in thousands) | Year | Amortization Expense | | :------------- | :------------------- | | 2024 remaining | $5,422 | | 2025 | $10,843 | | 2026 | $10,293 | | 2027 | $8,643 | | 2028 | $8,643 | | Thereafter | $60,499 | | Total | $104,343 | Note 8. Other accrued liabilities Total other accrued liabilities remained stable at $23.5 million at June 30, 2024, compared to December 31, 2023. A significant increase in accrued interest expense was offset by decreases in accrued employee costs and other accrued costs Other Accrued Liabilities (in thousands) | Component | June 30, 2024 | December 31, 2023 | | :----------------------------- | :------------ | :---------------- | | Accrued employee costs | $12,825 | $16,956 | | Accrued interest expense | $6,670 | $1,374 | | Accrued supply chain costs | $441 | $523 | | Accrued marketing costs | $803 | $598 | | Accrued research and development costs | $621 | $960 | | Accrued other costs | $2,134 | $3,099 | | Total | $23,494 | $23,510 | Note 9. Long-term debt Long-term debt, net of unamortized debt issuance costs, increased to $230.5 million at June 30, 2024, from $190.9 million at December 31, 2023. This increase is primarily due to a new Amended and Restated Credit Agreement providing $200.0 million in term loans, partially offset by the repayment of the Hayfin Loan Agreement. The company has outstanding 2025 Convertible Notes ($15.2 million) and 2028 Convertible Notes ($33.6 million), and the 2029 Loans under the new credit agreement. Interest expense for the six months ended June 30, 2024, was $15.0 million, up 17.7% year-over-year Components of Long-term Debt (in thousands) | Component | June 30, 2024 | December 31, 2023 | | :-------------------------------------------- | :------------ | :---------------- | | Convertible senior notes | $49,256 | $49,306 | | Less: unamortized debt issuance costs | $(1,186) | $(1,400) | | Loan agreement | $184,722 | $145,569 | | Less: unamortized debt issuance costs | $(2,311) | $(2,543) | | Long-term debt, net of unamortized debt issuance costs | $230,481 | $190,932 | - Outstanding 2025 Convertible Notes: $15.2 million (5.00% interest, due July 15, 2025)[41] - Outstanding 2028 Convertible Notes: $33.6 million (8.00% interest, due July 15, 2028)[41] - New Amended and Restated Credit Agreement (2029 Loans) provided $200.0 million in term loans, maturing March 5, 2029 (subject to earlier maturity if convertible notes are outstanding)[43] - The 2029 Loans incur interest at a floating rate of 6.95% (or 5.95%) plus the greater of SOFR 3-month tenor or 2.00%, with an effective interest rate of approximately 11.4%[43] Future Minimum Principal Payments (in thousands) | Year | Amount | | :------------- | :----- | | 2024 remaining | $0 | | 2025 | $15,200| | 2026 | $0 | | 2027 | $0 | | 2028 | $33,574| | Thereafter | $200,000| | Total | $248,774| - Interest expense for the six months ended June 30, 2024, was $15.0 million, an increase of 17.7% from $12.7 million in the prior year, primarily due to higher principal and interest rates[45] Note 10. Warrants As of June 30, 2024, the company had 94,012 warrants classified as liabilities and 8,268,258 warrants classified as equities. These warrants have various exercise prices ranging from $2.390 to $12.760 and expiration dates from July 2024 to March 2029 Outstanding Warrants as of June 30, 2024 | Classification | Type | Outstanding Warrants | Exercise Price per Warrant | Expiration Date | | :------------- | :---------------------------------------- | :------------------- | :------------------------- | :-------------- | | Liabilities | 2018 Term A Warrants | 53,720 | $11.169 | February 2025 | | Liabilities | 2018 Term B Warrants | 40,292 | $11.169 | September 2025 | | Equities | Warrants in connection with CRG loan agreement | 309,122 | $9.410 | July 2024 | | Equities | Warrants in connection with CRG loan amendment in January 2018 | 978,628 | $12.760 | January 2025 | | Equities | Warrants in connection with Avenue Capital loan agreement | 209,633 | $2.390 | May 2025 | | Equities | Warrants in connection with Avenue Capital loan agreement | 209,633 | $2.390 | December 2025 | | Equities | Warrants in connection with Horizon and Oxford loan agreement | 125,999 | $3.130 | December 2026 | | Equities | Warrants in connection with Armistice securities purchase agreement | 5,119,454 | $3.223 | February 2027 | | Equities | Warrants in connection with Hayfin Loan Agreement | 1,315,789 | $2.280 | March 2029 | Note 11. Fair value measurements The company classifies fair value measurements into Level 1, 2, or 3 based on input observability. As of June 30, 2024, cash, cash equivalents, U.S. government securities, and restricted cash were classified as Level 1. Contingent Value Rights (CVRs) and warrant liabilities were classified as Level 3. The CVR liability decreased significantly to $0.42 million at June 30, 2024, from $20.5 million at December 31, 2023, primarily due to settlement of a milestone and a gain from remeasurement - Fair value measurements are categorized into Level 1 (unadjusted quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (significant unobservable inputs)[48] Fair Value Hierarchy of Assets and Liabilities (in thousands) - June 30, 2024 | Asset/Liability | Total | Level 1 | Level 2 | Level 3 | | :-------------------------------- | :------ | :------ | :------ | :------ | | Cash and money market funds | $57,604 | $57,604 | $— | $— | | U.S. government securities | $19,964 | $19,964 | $— | $— | | Restricted cash | $4,225 | $4,225 | $— | $— | | Contingent value rights - current | $420 | $— | $— | $420 | | Warrant liabilities | $1 | $— | $— | $1 | - As of June 30, 2024, approximately 74.4 million CVRs were outstanding, with potential for up to 8.1 million more upon exercise of rollover options and warrants[54] - The 2023 Keveyis milestone was achieved, leading to the issuance of 7,525,048 shares of common stock in settlement[54] - A gain of $3.0 million from CVR remeasurement was recorded in Q1 2024 due to stock price changes prior to settlement[54] Change in CVR Liabilities (in thousands) | Metric | Amount | | :--------------------------- | :----- | | Balance at December 31, 2023 | $20,488| | CVR settlement | $(16,100)| | Change in fair value of CVRs | $(3,968)| | Balance at June 30, 2024 | $420 | Note 12. Stock compensation plan The company operates several stock compensation plans, including the 2018 Stock Option and Incentive Plan, 2018 Employee Stock Purchase Plan (ESPP), and Equity Inducement Plan, along with Assumed Plans from the Strongbridge acquisition. As of June 30, 2024, there were 8.9 million stock options outstanding and 16.8 million unvested Restricted Stock Units (RSUs). Total stock-based compensation expense for the six months ended June 30, 2024, was $8.0 million, an increase from $5.5 million in the prior year - The company has 1.8 million shares available for future issuance under the 2018 Plan and 1.6 million under the Inducement Plan as of June 30, 2024[56] - As of June 30, 2024, 14.2 thousand shares were available for issuance under the ESPP[56] Stock Option Activity (Six Months Ended June 30, 2024) | Metric | Number of Options | Weighted Average Exercise Price Per Share | | :----------------------------------- | :---------------- | :---------------------------------------- | | Outstanding - December 31, 2023 | 9,199,744 | $5.22 | | Exercised | (229,417) | $2.00 | | Forfeited | (190) | $4.98 | | Expired | (26,962) | $5.44 | | Outstanding - June 30, 2024 | 8,943,175 | $5.29 | | Vested and expected to vest at June 30, 2024 | 8,943,175 | $5.29 | | Exercisable - June 30, 2024 | 8,840,519 | $5.30 | - Unrecognized stock-based compensation expense for stock options was $0.3 million, expected to be recognized over 0.5 years[59] Restricted Stock Unit Activity (Six Months Ended June 30, 2024) | Metric | Number of Units | Weighted Average Grant Fair Value Per Share | | :----------------------------------- | :-------------- | :------------------------------------------ | | Unvested balance - December 31, 2023 | 11,579,548 | $1.83 | | Granted | 9,614,250 | $2.45 | | Vested | (4,140,462) | $2.15 | | Forfeited | (287,447) | $2.02 | | Unvested balance - June 30, 2024 | 16,765,889 | $2.10 | - Unrecognized stock-based compensation expense for RSUs was $28.0 million, expected to be recognized over 2.0 years[61] Total Stock-Based Compensation Expense (in thousands) | Expense Category | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $382 | $632 | $719 | $954 | | Selling, general and administrative | $3,851 | $2,296 | $7,281 | $4,538 | | Total | $4,233 | $2,928 | $8,000 | $5,492 | Note 13. Leases The company has non-cancellable operating leases for office and laboratory space, expiring between 2031 and 2036. The weighted-average remaining lease term is 11.2 years, with a weighted-average discount rate of 11.9%. Total lease cost for the six months ended June 30, 2024, was $3.1 million, an increase from $2.3 million in the prior year. The present value of lease liabilities was $39.3 million at June 30, 2024 - Operating leases for office and laboratory space expire between 2031 and 2036[63] - Weighted-average remaining lease term: 11.2 years[63] - Weighted-average discount rate: 11.9%[63] Lease Expense (in thousands) | Component | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease expense | $1,340 | $1,350 | $2,680 | $1,763 | | Variable lease cost | $325 | $302 | $566 | $652 | | Sublease income | $(52) | $(54) | $(105) | $(108) | | Total lease cost| $1,613 | $1,598 | $3,141 | $2,307 | Maturities of Lease Liabilities (in thousands) | Year | Amount | | :------------- | :----- | | 2024 remaining | $2,290 | | 2025 | $6,080 | | 2026 | $6,232 | | 2027 | $6,389 | | 2028 | $6,549 | | Thereafter | $45,441| | Total lease payments | $72,981| | Less: Effect of discounting | $(33,658)| | Present value of lease liabilities | $39,323| Note 14. Commitments and contingencies The company has a supply agreement with Taro Pharmaceuticals for Keveyis, extended until March 2027, which includes annual minimum marketing spend and purchase order quantities. As of June 30, 2024, unused letters of credit totaled $4.2 million, collateralized by restricted cash. There are no material legal proceedings. Long-term debt maturity is contingent on the status of convertible notes and the company's ability to redeem them - Supply agreement with Taro Pharmaceuticals for Keveyis extended to March 2027, with annual minimum marketing spend and purchase order quantities[68] - Unused letters of credit of $4.2 million as of June 30, 2024, primarily to secure leases, collateralized by $4.2 million of restricted cash[69] - No existing, pending, or threatened legal actions are expected to have a material impact on the financial position or results of operations[70] - Maturity of 2029 Loans under the Amended and Restated Credit Agreement is contingent on the status of 2025 and 2028 Convertible Notes and the company's ability to redeem them[71][72] Note 15. Net loss per common share Basic and diluted net loss per common share are calculated by dividing net loss by the weighted average common shares outstanding. For all periods presented, potentially dilutive securities (Convertible Notes, stock options, RSUs, warrants) were excluded from diluted EPS calculation due to their anti-dilutive effect - Basic and diluted net loss per common share are the same due to the anti-dilutive effect of all potentially dilutive securities[73] Anti-Dilutive Securities Excluded from EPS Computation | Security Type | As of June 30, 2024 | As of June 30, 2023 | | :------------------------------------------ | :------------------ | :------------------ | | Shares to be issued upon conversion of Convertible Notes | 15,939,216 | 15,416,667 | | Vested and unvested stock options | 8,943,175 | 9,307,846 | | Restricted stock units | 16,765,889 | 10,602,771 | | Warrants | 8,362,270 | 8,362,270 | | Total anti-dilutive securities | 50,010,550 | 43,689,554 | Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition, results of operations, outlook, strategies, and critical accounting policies Cautionary statements for forward-looking information This section contains forward-looking statements subject to various important factors and risks, including regulatory approvals and market acceptance. The company disclaims any obligation to update these statements - Discussion contains forward-looking statements, identified by words like 'will,' 'expects,' 'plans,' 'anticipates,' 'believes,' 'estimates,' 'predicts,' 'potential,' 'continue'[75] - Actual results may differ materially due to factors such as regulatory approval, market acceptance, and risks discussed in the Annual Report on Form 10-K[75] - Xeris expressly disclaims any obligation to update forward-looking statements[75] Overview Xeris Biopharma is focused on becoming an innovative, self-sustaining, growth-oriented biopharmaceutical company. It leverages three commercial products (Gvoke, Recorlev, Keveyis) and proprietary formulation science (XeriSol and XeriJect) to develop and commercialize clinically meaningful therapies - Company's focus: Building an innovative, self-sustaining, growth-oriented biopharmaceutical company[76] - Key assets: Three commercial products (Gvoke, Recorlev, Keveyis) and proprietary formulation science (XeriSol and XeriJect)[76] Outlook and strategies Xeris aims for self-sustaining growth by driving commercial execution of its three innovative products (Gvoke, Keveyis, Recorlev), leveraging its proprietary XeriSol and XeriJect formulation science for internal product candidates like XP-8121, and pursuing formulation and development partnerships with other pharmaceutical companies - Strategy 1: Drive growth through effective commercial execution of Gvoke, Keveyis, and Recorlev, aiming for financial self-sufficiency[77] - Strategy 2: Leverage proprietary formulation science (XeriSol and XeriJect) to develop internal new product candidates, with immediate focus on XP-8121 (once weekly subcutaneous levothyroxine)[77] - Strategy 3: Collaborate with pharmaceutical and biotechnology companies to apply formulation science to enhance their proprietary products, aiming for commercial licensing agreements[77] Commercial Products Xeris's top priority is maximizing the potential of its three commercial products: Gvoke for severe hypoglycemia ($5.0 billion addressable market), Recorlev for endogenous hypercortisolemia ($3.0 billion addressable market), and Keveyis for Primary Periodic Paralysis (over $0.5 billion addressable market) - Gvoke: Ready-to-use glucagon for severe hypoglycemia, estimated U.S. addressable market of approximately $5.0 billion[78] - Recorlev: Cortisol synthesis inhibitor for endogenous hypercortisolemia, estimated U.S. addressable market of approximately $3.0 billion[79] - Keveyis: First therapy for Primary Periodic Paralysis, estimated U.S. addressable market greater than $0.5 billion[79] Proprietary formulation capabilities Xeris's proprietary non-aqueous XeriSol and XeriJect formulation platforms enable convenient, ready-to-use, room-temperature stable, highly concentrated injectable formulations. These technologies facilitate subcutaneous or intramuscular administration, improve storage, and enhance patient experience, supporting both internal product development and external partnerships - XeriSol and XeriJect platforms enable ready-to-use, room-temperature stable, highly concentrated injectable formulations[80] - Benefits include subcutaneous/intramuscular administration, convenient storage, and improved patient/caregiver experience[80] - These capabilities support internal product development in endocrinology, neurology, and other areas, as well as external formulation partnerships[80] Development of product candidates The company is developing XP-8121, a once-weekly subcutaneous levothyroxine injection, to address challenges with oral formulations for hypothyroidism. Positive Phase 1 data showed slower absorption, lower peak plasma, and extended exposure compared to oral levothyroxine, suggesting a 4x dose conversion factor. A Phase 2 study confirmed this conversion factor and showed high patient satisfaction with the subcutaneous route. An FDA End-of-Phase 2 interaction is expected by year-end to facilitate a Phase 3 pivotal study - XP-8121 is a novel subcutaneous levothyroxine formulation for once-weekly administration, aiming to mitigate challenges of oral formulations for hypothyroidism[81][82] - Positive Phase 1 data showed XP-8121 had slower absorption, lower peak plasma, and higher extended exposure compared to oral Synthroid[82] - Phase 2 study confirmed a 4x target dose conversion factor from once-daily oral levothyroxine to once-weekly XP-8121, with 72% of participants preferring the subcutaneous route[82] - An FDA End-of-Phase 2 interaction is anticipated by year-end to advance to a Phase 3 pivotal study program[83] Patents Xeris owns 178 global patents, including composition of matter patents for its ready-to-use glucagon formulation expiring in 2036. It also has 64 granted patents related to platform technologies and 8 U.S. patents listed in the FDA Orange Book for Recorlev formulations, providing protection through 2040 - The company owns 178 patents globally, including 64 related to its platform technologies[84] - Composition of matter patents for ready-to-use glucagon formulation expire in 2036[84] - 8 U.S. patents for Recorlev formulations are listed in the FDA Orange Book, providing protection through 2040[84] Financing Xeris has historically funded operations through equity and debt financing, incurring net losses of $34.0 million and an accumulated deficit of $651.0 million as of June 30, 2024. The company expects continued significant expenses and net losses in the near term due to commercialization, R&D, public company operations, and increased borrowing costs - Operations funded primarily by preferred/common stock sales and debt financing[85] - Net losses of $34.0 million for the six months ended June 30, 2024, and an accumulated deficit of $651.0 million[85] - Expects continued significant expenses and net losses for at least the next 12 months due to commercialization, R&D, public company operations, and higher borrowing costs[85] - May seek public equity and debt financing, but availability and terms are not assured[86] Components of our Results of Operations This section defines the key components of Xeris's statement of operations. Net product revenue accounts for gross sales less various allowances. Royalty, contract, and other revenue are recognized as earned. Cost of goods sold includes product costs, manufacturing overhead, and inventory losses. Research and development expenses cover discovery and development activities, including clinical trials and regulatory filings. Selling, general and administrative expenses include personnel, marketing, and professional fees. Amortization of intangible assets relates to Keveyis and Recorlev. Other income (expense) includes interest, debt refinancing costs, and changes in fair value of CVRs - Product revenue, net: Gross product sales less estimated allowances for patient copay assistance, discounts, rebates, chargebacks, service fees, and product returns[88] - Royalty, contract and other revenue: Recognized as earned from research collaborations and royalties[89] - Cost of goods sold: Includes raw materials, contract manufacturing, manufacturing overhead, shipping, distribution, and inventory losses[90] - Research and development expenses: Incurred for product discovery and development, including clinical trials, regulatory activities, and personnel costs[91][92] - Selling, general and administrative expenses: Primarily compensation, marketing, professional fees, and facility costs[94] - Amortization of intangible assets: Relates to Keveyis (5-year straight-line) and Recorlev (14-year straight-line)[95] - Other income (expense): Includes interest income/expense, debt refinancing costs, and changes in fair value of warrants and CVRs[96] Results of Operations For the three months ended June 30, 2024, total revenue increased by 26.5% to $48.1 million, driven by strong Recorlev (86.1% increase) and Gvoke (28.2% increase) sales, while Keveyis revenue decreased by 6.8%. Loss from operations improved by 48.8% to $(8.2) million. For the six months, total revenue grew by 24.6% to $88.7 million, with Recorlev revenue more than doubling (105.6% increase). Net loss improved by 7.3% to $(34.0) million. Research and development expenses decreased by 5.4% for the three months but increased by 24.3% for the six months, while selling, general and administrative expenses increased by 6.3% and 10.0% respectively Summary of Results of Operations (in thousands) | Metric | Three Months Ended June 30, 2024 | Change ($) | Change (%) | Six Months Ended June 30, 2024 | Change ($) | Change (%) | | :----------------------------------- | :------------------------------- | :--------- | :--------- | :----------------------------- | :--------- | :--------- | | Total revenue | $48,065 | $10,057 | 26.5% | $88,703 | $17,499 | 24.6% | | Loss from operations | $(8,187) | $7,792 | (48.8)% | $(22,432) | $6,824 | (23.3)% | | Net loss | $(15,005) | $4,837 | (24.4)% | $(33,985) | $2,691 | (7.3)% | | Income tax (expense) benefit | $(749) | $(1,424) | (211.0)% | $(1,056) | $(1,731) | (256.4)% | Product revenue, net (detailed by product) Gvoke net revenue increased by 28.2% to $20.0 million for the three months and 19.4% to $36.6 million for the six months, primarily due to prescription growth. Keveyis net revenue decreased by 6.8% to $13.1 million for the three months and 2.3% to $26.2 million for the six months, mainly due to lower volume. Recorlev net revenue surged by 86.1% to $13.3 million for the three months and 105.6% to $23.9 million for the six months, driven by higher volume and net pricing Product Revenue, Net Changes (in thousands) | Product | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :------- | :--------------------------- | :--------- | :--------- | :--------------------------- | :--------- | :--------- | | Gvoke | $20,046 | $4,408 | 28.2% | $36,625 | $5,954 | 19.4% | | Keveyis | $13,128 | $(960) | (6.8)% | $26,213 | $(630) | (2.3)% | | Recorlev | $13,338 | $6,171 | 86.1% | $23,937 | $12,293 | 105.6% | - Gvoke revenue growth was primarily driven by increased volume (prescription growth) for both three-month (23.8%) and six-month (16.6%) periods[100] - Keveyis revenue decrease was mainly due to lower volume (9.4% for three months, 8.3% for six months), partially offset by increased net pricing[101] - Recorlev revenue growth was driven by higher volume (67.9% for three months, 84.3% for six months) and increased net pricing[102] Cost of goods sold Cost of goods sold increased by 3.1% to $7.8 million for the three months and 6.9% to $13.8 million for the six months ended June 30, 2024. As a percentage of total product revenue, it decreased to 16.7% for the three months (from 20.5%) and 15.9% for the six months (from 18.6%), primarily due to higher sales of products with lower cost of goods sold Cost of Goods Sold (in thousands) | Metric | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :----------------------------------- | :--------------------------- | :--------- | :--------- | :--------------------------- | :--------- | :--------- | | Cost of goods sold | $7,790 | $235 | 3.1% | $13,761 | $887 | 6.9% | | Cost of goods sold as % of total product revenue | 16.7% | -3.7% | | 15.9% | -2.8% | | - Decrease in COGS as a percentage of revenue was primarily due to higher sales of products with a lower cost of goods sold[103] Research and development expenses Research and development expenses decreased by 5.4% to $5.8 million for the three months ended June 30, 2024, mainly due to lower spending on pipeline (XP-8121) and technology development. However, for the six months, R&D expenses increased by 24.3% to $13.6 million, driven by higher spending for pipeline projects and personnel-related expenses Research and Development Expenses (in thousands) | Metric | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :----------------------------------- | :--------------------------- | :--------- | :--------- | :--------------------------- | :--------- | :--------- | | Research and development | $5,759 | $(328) | (5.4)% | $13,580 | $2,655 | 24.3% | | Pipeline expenses | $941 | $(506) | (35.0)% | $4,071 | $1,289 | 46.3% | | Technology development | $301 | $(562) | (65.1)% | $840 | $(168) | (16.7)% | | Personnel related expenses | $3,579 | $394 | 12.4% | $7,007 | $1,081 | 18.2% | - Three-month decrease driven by lower spending for pipeline ($0.5 million, primarily XP-8121) and technology development ($0.6 million), partially offset by increased personnel expenses ($0.4 million)[104] - Six-month increase driven by higher spending for pipeline ($1.3 million) and personnel-related expenses ($1.1 million)[104] Selling, general and administrative expenses Selling, general and administrative expenses increased by 6.3% to $40.0 million for the three months and 10.0% to $78.4 million for the six months ended June 30, 2024, primarily due to higher personnel costs Selling, General and Administrative Expenses (in thousands) | Metric | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :----------------------------------- | :--------------------------- | :--------- | :--------- | :--------------------------- | :--------- | :--------- | | Selling, general and administrative | $39,993 | $2,358 | 6.3% | $78,373 | $7,133 | 10.0% | - Increase in SG&A expenses for both periods was primarily due to higher personnel costs[105] Amortization of intangible assets Amortization of intangible assets remained consistent at $2.7 million for the three months and $5.4 million for the six months ended June 30, 2024 and 2023 Amortization of Intangible Assets (in thousands) | Metric | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :----------------------------------- | :--------------------------- | :--------- | :--------- | :--------------------------- | :--------- | :--------- | | Amortization of intangible assets | $2,710 | $0 | 0% | $5,421 | $0 | 0% | Other income (expense) Total other expense increased by 33.7% to $(6.1) million for the three months and 29.7% to $(10.5) million for the six months ended June 30, 2024. Interest expense increased by 22.0% and 17.7% for the respective periods due to higher principal and interest rates. A significant gain of $4.0 million from the change in fair value of contingent value rights was recorded for the six months, primarily due to CVR liability remeasurement and revaluation related to Recorlev 2024 sales milestone. Debt refinancing costs of $2.7 million were incurred for the six months ended June 30, 2024 Other Income (Expense) (in thousands) | Metric | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :----------------------------------- | :--------------------------- | :--------- | :--------- | :--------------------------- | :--------- | :--------- | | Interest and other income | $1,291 | $68 | 5.6% | $3,214 | $691 | 27.4% | | Debt refinancing costs | $0 | $0 | nm | $(2,690) | $(2,690) | nm | | Interest expense | $(7,964) | $(1,436) | 22.0% | $(14,996) | $(2,252) | 17.7% | | Change in fair value of warrants | $3 | $17 | (121.4)% | $7 | $21 | (150.0)% | | Change in fair value of contingent value rights | $601 | $(180) | (23.0)% | $3,968 | $1,828 | 85.4% | | Total other expense | $(6,069) | $(1,531) | 33.7% | $(10,497) | $(2,402) | 29.7% | - Interest expense increased due to a higher principal amount and increased interest rates[107] - The $4.0 million gain in fair value of CVRs for the six months was primarily due to remeasurement of the CVR liability from stock price changes and revaluation related to the Recorlev 2024 sales milestone[107] - Debt refinancing costs of $2.7 million were recorded for the six months ended June 30, 2024, related to advisory and legal fees for third-party debt arrangements[108] Liquidity and Capital Resources Xeris has historically funded operations through equity and debt, with an accumulated deficit of $651.0 million as of June 30, 2024. While current cash resources are deemed sufficient for the next 12 months, substantial additional expenditures are expected for commercialization and R&D, necessitating potential future financing. Recent financing activities include a $30.0 million private placement in 2022, a $150.0 million Hayfin Loan Agreement in 2022, an exchange of convertible notes in 2023, and a new Amended and Restated Credit Agreement for $200.0 million in 2024 - Operations are funded primarily through private placements of convertible preferred stock, public equity offerings of common stock, and debt financing[109] - Accumulated deficit of $651.0 million at June 30, 2024[110] - Cash resources are believed to be sufficient for operations and capital expenditures for at least the next 12 months[110] - Expects substantial additional expenditures for commercialization of Gvoke, Recorlev, and Keveyis, and ongoing R&D activities[110] - Future capital requirements depend on commercialization success, R&D costs, regulatory actions, new product development, competition, and intellectual property costs[110] - Recent financing activities include a $30.0 million private placement (2022), a $150.0 million Hayfin Loan Agreement (2022), exchange of $32.0 million 2025 Convertible Notes for $33.6 million 2028 Convertible Notes (2023), and a new Amended and Restated Credit Agreement for $200.0 million (2024)[109] Cash Flows For the six months ended June 30, 2024, net cash used in operating activities decreased to $(30.7) million, primarily due to reduced working capital usage. Net cash used in investing activities was $(15.0) million, mainly from net purchases of short-term investments. Net cash provided by financing activities was $35.9 million, driven by the net proceeds from debt refinancing Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :---------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(30,651) | $(39,884) | | Net cash used in investing activities | $(15,047) | $(35,527) | | Net cash provided by/(used in) financing activities | $35,853 | $(307) | - Decrease in net cash used in operating activities was primarily driven by reduced working capital usage, partially offset by changes to the fair value of contingent value rights[113] - Cash used in investing activities in 2024 was primarily due to net purchases of short-term investments[114] - Cash provided by financing activities in 2024 was primarily due to net proceeds of $38.2 million from debt refinancing[115] Critical Accounting Policies and Use of Estimates and Assumptions There have been no significant changes to the company's critical accounting policies since December 31, 2023, as detailed in its Annual Report on Form 10-K - No significant changes to critical accounting policies since December 31, 2023[116] New Accounting Standards Information regarding recent accounting pronouncements applicable to the financial statements is provided in Note 2 - Refer to Note 2 for a description of recent accounting pronouncements[117] Quantitative and Qualitative Disclosures About Market Risk This section discusses the company's exposure to market risks, including interest rate fluctuations and foreign currency exchange rate changes Interest Rate Risk The company is exposed to interest rate fluctuations on its cash, cash equivalents, restricted cash, and investments, where a one-percentage point change would impact annual interest income by approximately $0.8 million. Its long-term debt includes both fixed-rate convertible notes (5.0% and 8.0%) and floating-rate borrowings under the Amended and Restated Credit Agreement (SOFR-indexed plus a margin), subjecting it to variable interest rate risk - A hypothetical one-percentage point increase or decrease in interest rates would impact annual interest income by approximately $0.8 million[118] - Long-term debt includes fixed-rate 2025 Convertible Notes (5.0%) and 2028 Convertible Notes (8.0%), which do not subject the company to interest rate risk[118] - Borrowings under the Amended and Restated Credit Agreement incur interest at a floating rate (SOFR-indexed plus a margin), exposing the company to interest rate risk[118] Foreign Exchange Risk The company contracts with international research organizations, exposing it to foreign currency exchange rate fluctuations. However, net foreign currency gains and losses did not materially affect results of operations for the three and six months ended June 30, 2024 - Exposure to foreign currency exchange rate fluctuations from contracts with research organizations outside the United States[119] - Net foreign currency gains and losses did not have a material effect on results of operations for the three and six months ended June 30, 2024[119] Controls and Procedures This section details management's evaluation of disclosure controls and procedures and reports on any changes in internal control over financial reporting Evaluation of Disclosure Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2024, ensuring timely and accurate reporting of information required under the Exchange Act - Management, with CEO and CFO participation, evaluated disclosure controls and procedures[120] - Conclusion: Disclosure controls and procedures were effective as of June 30, 2024, for timely and accurate reporting[120] Changes in Internal Control Over Financial Reporting No changes in internal control over financial reporting occurred during the three months ended June 30, 2024, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting - No material changes in internal control over financial reporting during the three months ended June 30, 2024[121] Part II. Other Information This section covers other required information, including legal proceedings, risk factors, equity sales, defaults, mine safety, and exhibits Legal Proceedings The company is not currently subject to any material legal proceedings and does not believe any existing or threatened actions would have a material adverse effect on its financial position or operations - Not currently subject to any material legal proceedings[122] - No existing, pending, or threatened legal actions are expected to have a material adverse effect on financial position or results of operations[122] Risk Factors The company highlights material changes to its risk factors since its last Annual Report, focusing on ongoing regulatory obligations, employment matters, and general risks. Key concerns include compliance with post-approval regulations, potential loss of marketing approvals, dependence on key management, and the evolving landscape of data privacy laws and artificial intelligence risks - Material changes to risk factors since the Annual Report on Form 10-K for the year ended December 31, 2023, are presented[124] Risks Related to Ongoing Regulatory Obligations The company faces risks related to ongoing compliance with U.S. and non-U.S. regulations for manufacturing, distribution, and promotion of approved products. Failure to comply or discovery of new safety data could lead to restrictions, withdrawal of products, or other penalties. Recent developments, such as the U.S. Supreme Court's July 2024 decision, introduce uncertainty rega