Xeris Biopharma Holdings, Inc.

Hello all and a warm welcome to the Zerries Barrow Farmer Holdings first quarter 2023 financial results call. My name is Louisa and I'll be the operator for today. If you would like to ask a question, you will have the opportunity to do so once we've reached the question and answer portion. Kindly press star followed by one on your telephone keypad should you wish to ask a question. I now have the pleasure of handing over to your host today, Alison Way, Senior Vice President of Investor Relations and Corporate Communications to begin. Alison, please go ahead when you're ready.

Thank you, Louisa. Good morning, and welcome to Therese Biopharma's first quarter financial results conference call and webcast. A press release with the company's financial results was issued earlier this morning and can be found on our website. We are joined this morning by Paul Edick, Chairman and CEO, and Steve Piper, CFO. Paul will provide opening remarks. Steve will provide details on our financial results. Then we will open the call for Q&A. Before we begin, I would like to remind you that this call will contain forward-looking statements which may include, and are now limited to, statements concerning our business practices, future expectations, plans, prospects, clinical approvals, commercialization, corporate strategy, and performance, which constitute forward-looking statements within the meaning of the Private Securities and Litigation Reform Act of 1995. Actual results made different materially from those indicated by the forward-looking statements made during this call. as a result of various factors, including our financial position and need for financing, including to fund our product development programs or commercialization effort, whether our products will achieve and maintain market acceptance in a competitive business environment, our reliance on third-party suppliers, including single-source suppliers, our reliance on third parties to conduct clinical trials, the ability of our product candidates to complete successfully with existing and new drugs, adverse effects of macroeconomic conditions on our business operations and clinical activities, and our and collaborators' ability to protect our intellectual property and proprietary technology, as well as other risk factors set forth in our filings with the Securities and Exchange Commission. Any forward-looking statements in this call represent our views only as to the date of this call and should not be relied upon as representing our views as of any subsequent date. Subject to obligations under applicable law, we disclaim any obligations to update such statements. And I would like to turn the call over to Paul.

Thanks, Alison. You can take a breath. Good morning, everyone. Thank you for joining us today. Before I highlight our achievements for the first quarter, I think it's important that I reiterate what we're trying to build at Xeris. Every day, everyone at Xeris is intensely focused on building a substantial, patient-centric, commercially focused, self-sustaining biopharma enterprise with multiple products, commercial products in multiple therapeutic areas, a highly targeted development pipeline that has significant long-term promise, and increasingly a significant value-added technology partnership business, literally a three-dimensional enterprise. What you will hear today is that we are continuing to progress very successfully on that journey. We are executing on our vision. As I said just a few short weeks ago, when we reported outstanding 2022 results, our momentum from 2022 has set us up for a great 2023. First quarter 2023 delivered another record of quarterly revenue, strong underlying demand for GVOTE, Coveas, and Rekorolev, another potentially very valuable Zerejec partnership, and a continued healthy cash position. Here are the headlines. We have achieved first quarter total revenue of $33.2 million, representing 50 percent growth compared to first quarter of 22. We ended first quarter 2023 with $95.1 million in cash, cash equivalents and short-term investments. We announced a research collaboration and option agreement with Regeneron for Zerijek formulations. And we are reaffirming our 2023 guidance. of total revenues of 135 million to 165 million, cash utilization from operating activities of between 57 and 77 million, and year-end cash, cash equivalents, and short-term investments of between 45 and 65 million dollars. Steve will go into those in greater detail as we progress. Let's start with the commercial portion of our business, which generated 32 million dollars in the quarter, representing a 47 percent increase over last year in the first quarter. First, GVOC. GVOC had another record quarter of net revenue in prescriptions, just over $15 million in net revenue, a 21% increase compared to first quarter of 22. Total prescriptions for the first quarter were just shy of 46,000, growing 50% compared to the same period last year, and a 10% increase from fourth quarter of 22 which is a very good sign since the first quarter market growth is historically flat to the fourth quarter of the prior year. Since the beginning of the year, market growth is back to double digits, with GVOTE continuing to outpace all other products and driving that market growth. At the end of April, GVOTE market share of new and total prescriptions in the glucagon market grew to approximately 30% and 29% respectively. Ready-to-use glucagon products now represent over 75 percent of the total new prescription market for glucagon. GVOC is also off to a good start in the second quarter, having recently topped 4,000 prescriptions per week for the first time and for two consecutive weeks. I mentioned this on our fourth-quarter call a few weeks ago, but due to the significance, I believe it bears repeating, especially since we're entering an important conference period. While more and more patients on insulin are getting ready to use glucagon, such as GVOC, there are still over 7 million people on insulin who remain at high risk and don't have a ready-to-use GVOC available, just in case. To address this critical situation and motivate healthcare professionals to do more, the American Diabetes Association, the Endocrine Society, the American Association of Clinical Endocrinology and others have recently updated their guidelines and algorithms to include an important focus on the incorporation of ready-to-use glucagon into clinical practice. For example, the Endo Society expanded the definition of those at high risk for severe low blood sugar and strongly recommends that ready-to-use glucagon should be prescribed for all patients with diabetes who are on daily insulin or sulfonylureas, confirming what we've been saying all along. On to RecorLiv. RecorLiv generated $4.5 billion in net revenue for the first quarter, an increase of approximately 18% from the fourth quarter of 22. We continue to see a steady increase in referrals, new patients on drug, and unique prescribers of RecorLiv in the first quarter. For example, we saw an increase in the number of referrals to RecorLiv in the first quarter of nearly 30% from the prior quarter. Interestingly, in the first quarter, more than 30% of patients were prescribed Recorlev as their first drug therapy. This means that healthcare professionals are valuing Recorlev as a first-line treatment for Cushing syndrome post-surgery. Overall, Recorlev is developing exactly as expected. Moving to Coveas. First quarter revenue for Coveas was approximately $13 million, which represents an increase of 37% compared to the first quarter of 22. Since the first generic was approved in late December, it has not had a material impact on Cabeas to date in 2023. In fact, our referral rates and patients on drug remain very steady. That isn't to say there won't be an impact. However, this is a challenging marketplace that requires significant work to identify, initiate, and maintain patients on therapy. We have so far only seen glimpses of how generics may impact that process and the market as a whole. We'll see how it plays out over the course of the year. That said, given the market dynamics historically, we are continuing to invest in Cabeas, despite the entrance of a generic, and believe we can maintain a considerable portion of the business we've worked so hard to build on behalf of the PPP patient community. And we continue to monitor the landscape. Xeris is committed to ensuring everyone who needs access to Record11 Cabeas will receive it. Our dedicated Xeris Care Connections team, patient advocates, and mentors support patients and healthcare providers through the product initiation, reimbursement, and titration process. We will continue that effort. Let's turn to our pipeline and partnered programs. As you know, we are focused on advancing our Xerasol levothyroxine development program to eventual commercialization. We recently began recruiting patients in the phase two study and hope to dose the first patient before the end of the second quarter. The primary objectives of this phase two study are to determine a target dose conversion factor from oral levothyroxine to our liquid ready to use subcutaneous levothyroxine, one week injection, and to assess the safety and tolerability of our Xerosol levothyroxine after once weekly subcutaneous injections in subjects with hypothyroidism. The study will also gather insight on each subject's thyroxine, or T4, and thyroid stimulating hormone, TSH, levels over the course of the study. Data from this phase two study will help inform our proposal to the FDA for a pivotal phase three program. Oral levothyroxine has been the standard of care for treatment of hypothyroidism for many years, and it is one of the most prescribed medicines in the United States generating more than 100 million prescriptions per year. However, 47% of patients have some GI issue or combined GI condition impacting oral absorption, 21% report taking concomitant medications that interfere with absorption, and 17% of patients admit to compliance issues with the daily oral regimen, many of whom may be the same patient. As a result, we believe that our once-weekly subcutaneous levothyroxine if approved, will compete in a potential $2 to $3 billion market segment. Now on to our growing Xeris partnership business. In March, we announced the Xeroject platform partnership, this one with Regeneron, to enable subcutaneous delivery of potentially several monoclonal antibodies. Under the terms of this collaboration and option agreement, Xeris will use our Xeroject formulation to develop ultra-highly concentrated, ready-to-use, small-volume, subcutaneous injections of two undisclosed monoclonal antibodies developed by Regeneron. Regeneron has an option to license clinical development and commercial rights to Xerogec for these molecules and to nominate additional molecules for formulation and potential development and commercialization. This is our third recently disclosed Xeris Technology Partnership. following collaborations with Merck and Horizon, which highlights the unique value proposition of Xeroject, as well as the investment and progress Xeris has been making in advancing Xeroject into clinical GMP readiness. So where are we with Merck and Horizon programs? For Merck, we have completed the Xeroject formulation stability assessment of the molecule, and at this point, Merck is evaluating the product for further clinical development and commercialization. With the Horizon Partnership, we're currently in the initial stages of formulation of TPEZA in our ZERJEC delivery system. Once we meet the agreed upon product profile, we will receive the previously disclosed $6 million from Horizon. If they sign the licensing agreement, giving them exclusive rights in the category, ZERIS would be entitled to future development, regulatory, and sales-based milestones, as well as royalties on future sales. With a great first quarter behind us and from where we stand today, I want to reiterate that we are affirming our total revenue guidance of $135 to $165 million, cash utilization of $57 to $75 million, a year-end cash position in the range of $45 to $65 million, and achieving cash flow breakeven in the fourth quarter without the need for additional capital to fund our operations. I will now turn the call over to Steve for additional details on our first quarter performance.

Thanks, Paul. Good morning, everyone. I will focus my remarks on key financial results for the first quarter 2023, the details of which are in the press release issued this morning. Total revenue was a record $33.2 million, representing a 50% increase over the same quarter last year. Strong underlying patient demand across all three products coupled with revenue from our collaboration partnerships drove this growth in total revenue. GVOC net revenue for the quarter was a record 15 million, representing a 21% increase compared to the same period last year. Continued growth in GVOC prescriptions and market share drove this increase. GVOC prescriptions topped 45,000 for the first time, a 50% increase compared to the same period in 2022. GVOC ended the quarter with total retail market share of approximately 28% compared to approximately 21% in March of 2022. The total glucagon prescription market grew 3% compared to the fourth quarter of 22. Notably, GVOC total prescriptions grew 10% in the same period, once again significantly outpacing the market. More promising, we are seeing this momentum continue into the second quarter, as Paul mentioned, with GVOC weekly prescriptions exceeding 4,000 prescriptions in consecutive weeks. Moving to Cabeas. Cabeas net revenue for the quarter was $12.8 million, representing a 37% increase compared to the same period last year. This revenue growth was driven by an increase in the number of patients on Cabeas. We have not experienced any material negative impact to Cabeas from the launch of a generic. We continue to proactively monitor and defend Cabeas against generic competition while seeking patents to restore our exclusive rights. Moving to Recorlev. Recorlev net revenue for the quarter was $4.5 million, which represents an 18% increase over the fourth quarter. This growth was primarily driven by increases in the number of patients on Recorlev. As Paul mentioned, we continue to see a steady increase in referrals with a 30% increase over the fourth quarter. Additionally, over 30% of our patients in the first quarter were prescribed Recoralev as their first drug therapy. We believe that healthcare professionals are valuing Recoralev as a first-line treatment for Cushing syndrome post-surgery. In addition to total product revenue of $32.3 million, We recognized $900,000 of revenue from collaborations and partnerships. Additionally, we were pleased to announce another partnership with Regeneron in March. Looking ahead for the full year 2023, we affirm our guidance of total revenue between $135 to $165 million. Moving down the P&L, cost of goods sold was $5.3 million, a $1 million decrease compared to the same quarter last year. The decrease was attributable to a one-time contract credit and favorable product mix offset by an increase in product sales. Research and development expenses was $4.3 million, a $1.4 million decrease compared to the same period last year. This decrease was driven by lower product development costs in the period. We continue to practice discipline prioritization and are focusing our 2023 R&D on funding the levothyroxine program the completion of the Record Live Optics study, and continued development work of our proprietary formulation science. We expect these initiatives to drive modest year-over-year increases in R&D expenses. Selling general and administrative expenses were $33.6 million, a $2.3 million decrease compared to the same period last year. This decrease was primarily driven by no restructuring expense in 2023 when compared to 2022. As we discussed in March, we continue to expect total SG&A to be relatively flat in 2023 when compared to 2022. From a cash perspective, as of March 31, 2023, we had total cash, cash equivalents, and short-term investments of approximately $95 million, compared to $122 million at December 31, 2022. Consistent with our experience in prior years and reflected in our March commentary, cash utilization in the first quarter was higher due to changes in working capital. Reiterating our position from March, we expect cash utilization to moderate through the middle of 2023 until the fourth quarter when we expect to achieve cash flow breakeven. With that said, we are affirming our guidance of total cash, cash equivalents, and short-term investments to end the year in the range of $45 million to $65 million, and cash utilized from operating activities to be between $57 and $77 million. Assuming we are performing to our guidance, we project to reach cash flow breakeven in the fourth quarter 2023, and from that point on, we will be a self-sustaining enterprise. As we have discussed, we do not plan to raise capital to fund our operations as we become a self-sustaining enterprise. Operator, please open the line for questions.

Thank you. If you wish to ask a question, please press star followed by one on your telephone keypad now. If you wish to withdraw or feel your question has been answered, kindly press star followed by two. When preparing to ask a question, please ensure your microphone is unmuted locally. Our first question for today comes from Oren Livnat of HG Wainwright. Oren, please go ahead. Your line is open.

All right. Thanks for taking the questions, and congrats on a good quarter. I have a few. On guidance, you reiterated a solid growth year over year, and I'm just trying to get some help on the range of that. It's still quite wide, and you haven't narrowed it, you know, a third of the way through the year, so could you just remind us you know, the major pushes and pulls there. And also, I can't remember if you've mentioned this in the past, but at the top end, does that include revenue recognition potentially for the Horizon formulation? And I have a follow-up. Thanks.

Hey, Oren. It's Paul. Thank you very much. Good morning. Good morning. The answer to the second part of your question is yes. It does include that revenue. In terms of the breadth of the range, we said back in March when we established the range, that as the year progresses, and we'll see how Cabeas plays out and how the generic plays out, and we'll know if we can tighten the range. But there's a lot of unknowns right now.

Okay. On GVOC, you highlighted the share gains, which have been impressive and maybe even accelerating recently. And I'm just wondering, firstly, with the sale of Baximi, Do you think that's going to have any impact on the competitive dynamics in the space, whether they'll get better, worse, or stay the same? And like you highlighted, there was a pretty strong quarter over quarter into your seasonally toughest one. So can you comment, first of all, were growth to net better than expected in this first quarter? And actually, should we expect that to improve through the year as we've normally seen?

Yeah, I can answer the second question, Oren. The gross net, as we, you know, said kind of midway through last year, they've kind of moderated and kind of leveled off. So, no, that's not driving it. We don't expect that to improve over the course of 2023. Okay.

And lastly on – go ahead.

To the first part of your question on GVOTE, You know, we need, and we have said all along, that we want more voices in this marketplace in order to get more market growth. I think the value that Lilly extracted for their product speaks to the potential for the category, and having somebody who is dedicated to endocrinology and to the category, I think, can only help. So we're anticipating that Another voice in the marketplace will increase the market growth, and that'll benefit us in the long run.

Great. And on OpEx, they were both actually quite light. I was surprised to see SG&A down despite, I think it was a fourth quarter Salesforce expansion. Can you just talk about, I guess, how lumpy that is going forward? I know you gave sort of full year characterization, but did you actually trim some core costs across the board?

No, not at all. Not at all. You know, we're expecting SG&A for the full year to be relatively flat. I mean, there could be some lumpiness in terms of, you know, marketing promotional spend, quarter to quarter. But by and large, you know, when we look at it from a full year perspective, Oren, it's going to be relatively flat compared to 2022.

And R&D, it sounds like you said you're focusing on levothyroxine. Is the current run rate, you know, until that phase two really kicks in here, pretty good to go on R&D?

Yeah. Yeah, on R&D, I would expect to see a slight uptick in Q2 and for the balance of the year when you're looking at it from a quarter-over-quarter perspective. Primarily in the second half as that phase two LEVO program really kicks in.

I'll be patient and wrong. Yeah. Appreciate it. Thanks.

Thank you for your question, Oren. Our next question from today comes from Glenn Santagallo of Jefferies. Glenn, please go ahead.

Yeah, thanks for taking my question. Hey, Paul, I also want to follow up on these reimbursement dynamics for GVOC here in 1Q, right? Because if I look at your scripts, right, they were up 10%, and I think there was a price increase. You know, so we can maybe flesh out the reimbursement dynamics a little bit more, but I would have thought with the scripts being as strong as they were, the revenues would have been a little bit better than flat, you know, versus sequentially versus 4Q. So if you could flesh that out a little bit, that'd be great.

Yeah, good morning, Glenn. This is Steve. I'll take that question. So Yeah, what we saw in the first quarter, we were working pretty proactively with our wholesalers, and I think there was a little bit of shift in channel inventory in the first quarter. That happens from time to time. Our wholesalers will tighten up their inventory a bit. If they swing that one or two weeks within the quarter, it makes a difference, and that's what we saw, really. But nothing unusual in nothing concerning about that. It just happens from time to time.

Okay. And then with respect to conveyance, you know, this is kind of four quarters in a row with revs, roughly about 13 million bucks. And I think you said, Paul, in your prepared remarks, right, you're not really seeing any evidence of any generic competition. And so absent that generic competition, is this kind of roughly the right run rate for this product that we should be thinking about? Or, you know, based on sort of your marketing plans, do you see bigger opportunity here? How should we think about, you know, the growth of that product going forward, sort of absent any incremental generic competition?

Yeah, that's a good question. We're taking kind of a wait and see on that. The potential for Cabeas, we think, is significantly higher. And without a generic or without the threat of a generic, we would add resources and drive Cabeas even harder. Right now, we're driving Cabeas as hard as we can with the current resources that we have and generating good solid quarter over quarter, every single quarter, like you said, 13-ish million. And we need to see how the whole generic thing plays out and what they do relative to payers and discounting and rebating and whether or not a second generic enters the market. And then we also have to see if we are successful in our patent application and the appeal that we have going on in the middle of this year. So as things play out, we could substantially upsize our effort and drive a lot more conveyance over time. But that's just not in the cards right now.

Okay, thanks for the comments.

Thanks, Glenn.

Thanks for your question, Glenn. Our next question today comes from Rana Ruiz of SBB Securities. Please go ahead when you're ready.

Great. Morning, everyone. So a quick question on Recorlev. I was curious if you could update us on if you're seeing anything around how long the titration process has been for patients. As physicians get more comfortable, could that titration period possibly get shorter and you could get patients on drug more quickly?

Yeah, good question, Juana, and good morning. We are starting to see more titration. We're seeing the average dose start to creep up. that's a very good sign. The other thing that we're seeing is the maximum dose, we're not getting to the higher doses that we thought, which I think is also a good sign. The drug is working, and physicians are starting to use it even for drug-naive patients. So all good signs, and we are starting to see the titration. Whether or not it's going to happen faster versus slower over time, we don't have enough to understand that yet.

Got it. Okay. And then I wanted to ask a bit more about your new collaboration with Regeneron. Basically, could you give us a rundown of what makes you really excited about this program and the opportunity for possibly multiple products? And when might we get more clarity on future steps or milestones around these programs?

So there's a lot that we would love to talk about that we just can't talk about. But What excites us about the Regeneron deal is it's a platform deal. I mean, Regeneron is starting out with identification of two products or molecules that they want to put into our system, the status of which we're just getting started. I mean, I think we're just having kickoff meetings and things like that to start the formulation of the first molecule and then the second molecule to follow on soon. The real interesting part is they can nominate additional molecules down the road for formulation and continued development. So the degree to which it could become a platform of products within our formulation is very exciting. And when you think about it, each one of those molecules, depending on if they take them forward into clinical development and eventual approval and commercialization, Each one comes with its own set of milestones and both development, regulatory, and commercial milestones, as well as royalties. So the eventual value could be very significant.

Got it. Thanks. Very helpful.

Thank you, Rana. Our next question today comes from David Aslam of Piper Sandler. David, please go ahead.

Hi, thanks. This is Skylar on for David. First, I was wondering, can you talk about the kind of patients who are getting Recorlev? Are they mainly those with prior exposure to racemic ketoconazole? Can you just speak to the overall patient mix? And then also, what your view is on the potential commercial impact on Recorlev, of course, next-generation cortisol modulator relacorlin, and if you see that as posing a challenge to Recorlev at all. Thanks.

Good morning, Skylar. I will take the second half first. We don't expect the next generation anytime soon, Corecept product, and one would expect that it would probably just cannibalize the product that they have. We're not seeing that as an additional big competitor in the marketplace. To your first question, in terms of patient mix, we tried to hit that in our prepared remarks. We're very excited about the patient mix, because it's not just patients coming from keto. It's patients coming from predominantly two areas. One, other products in, you know, Very specifically, Coralim, because we have a product that is very effective at normalizing cortisol. Coralim doesn't do that. And we've got, you know, we're getting patients from Isterisa and others. The really exciting piece is about 30% of the patients we're getting have not been on any drug, that we're the first drug therapy post-surgery. That says physicians are more and more, and very quickly, we're only a year into this, that one year into experience with Recorilab, physicians are using Recorilab first-line therapy. That's very exciting. So we think the patient mix is surprisingly positive. We did anticipate getting more of the uncontrolled or patients who have been through several products, but the mix we're getting is really good, bodes very well for the future of the drug.

Got it. That's helpful. Thanks so much.

Thank you, Skylar. We have no further questions, so I would like to hand back to the management team for any closing remarks.

Thank you very much. Thanks all for joining us. What you heard today confirms once again that we have a durable business on its way to being self-sustaining. Through continued revenue growth, careful allocation of resources, and prudent expense management, we expect to hit cash flow breakeven in the fourth quarter. And by achieving that milestone, prove we can be self-sustaining biopharmaceutical companies. I'd also like to take this time to thank all of our patients and caregivers for their support and also the Xeris team for the tireless work that they've done over the last several years through just about every headwind you could imagine. We're very excited about our business and very excited about our future prospects. So thank you very much and have a great day.

Thank you all for joining. That concludes today's Xeris BioFarms Holdings First Quarter 2023 Financial Results Call. Have a great rest of your day in Unary Now Disconnect.