Xeris Biopharma Holdings, Inc.

Hello, everyone. Thank you for joining us and welcome to Xeris Biopharma Second Quarter Earnings Conference Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Allison Wey, Senior Vice President of Investor Relations. Allison, please go ahead.

Thank you, Leah. Good morning, everyone, and welcome to Xeris Biopharma's second quarter financial results conference call. Early this morning, we issued a press release detailing our results. This press release can be found on our website. Joining me on today's call is John Shannon, our Chairman and Chief Executive Officer, and Steve Pieper, our Chief Financial Officer. Following our prepared remarks, we'll open the call for your questions. Before we begin, I'd like to remind you that today's discussion will include forward-looking statements regarding Xeris' future expectations, plans, strategies, objectives, and financial performance. These forward-looking statements are based on management's current assumptions and beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied. For discussion of these risks and uncertainties, please refer to the risk factors described in our filings with the SEC. Any forward-looking statements made on this call speak only as of today's date, and except as required by law, the company undertakes no obligation to update or revise these statements. In addition, during today's call, we will reference certain financial measures that are presented on a non-GAAP basis. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measures is included in our earnings release. With that, I'll turn the call over to John.

Thank you, Allison, and good morning, everyone. The second quarter was another record-breaking quarter for Xeris, one that demonstrated once again that the commercial momentum we have built is durable and accelerating. Total revenue reached $92 million, with net product revenue of $91 million. representing 34% growth year-over-year. Recorilab led the way with 81% growth. Caveas delivered another quarter of steady, reliable performance. And GVOC improved sequentially, as we expected. But the second quarter was more than a commercial story. It was a quarter of meaningful strategic progress. We made significant strides in strengthening our intellectual property portfolio across both our commercial franchise and our pipeline. And shortly after quarter end, we completed the full retirement of our convertible notes, simplifying our capital structure and eliminating nearly $3 million in annual interest expense. The progress we achieved reflects the breadth and defensibility of our science, The financial strength we have earned and reinforces our confidence in the long-term value of what we're building. Taken together, a record commercial performance, a stronger IP portfolio, and an enhanced balance sheet, the second quarter reflects the disciplined, compounding progress we are making to build a high-value biopharmaceutical company. In other words, we're executing and we're just getting started. Based on our strong first half performance and our conviction in the growth trajectory of this business, we are raising the bottom end of our full year 2026 total revenue guidance to $385 to $390 million. This reflects our confidence in this team, the performance of our diversified commercial portfolio, and the long-term growth outlook of our business. With that, let's turn to our brands, beginning with Recoralev. Recoralev continues to demonstrate exceptional momentum, and in the second quarter, it delivered yet again. Recoralev net revenue increased to nearly $57 million in the quarter, representing 81% growth year over year, an increase of over $25 million. Behind that number, Rekorlov had a record number of referrals, new patient starts, patients on therapy, new prescribers, and total prescribers. Quarter after quarter, Rekorlov has delivered sustained growth that speaks to the execution of our commercial team, and most importantly, the deepening confidence prescribers have in Rekorlov as their treatment of choice for endogenous Cushing syndrome. We believe RecorLev should be the standard of care, and we intend to build on that. Importantly, we are still in the early stages of realizing the benefits of the commercial expansion we completed in January. Throughout the second quarter, our focus was on training and deploying our expanded team. Execution is tracking in line with our expectations, and we are increasingly well-positioned to accelerate growth as these investments gained traction in the second half. Turning to GVOC. After a slow start to the year, GVOC rebounded nicely in the second quarter, delivering net revenue of approximately $23 million and prescription growth of 10% versus the first quarter. I am proud of the team's work to put GVOC back into growth mode, and the sequential improvement gives us confidence that GVOC is back on the right track. Looking ahead, the back-to-school season should provide its typical third-quarter lift as families with children managing diabetes ensure they have a ready-to-use GVOC on hand for the school year. The long-term opportunity for GVOC remains unaltered, and our commitment to it is unwavering. Of the 15 million people with diabetes who should have a potential life-saving product like the GVOC Hypopen, only a million or so do. Closing that gap remains an important opportunity for us, and more importantly, a meaningful way to improve patient outcomes. And finally, Caveas. Caveas delivered nearly $12 million in net revenue, once again demonstrating the remarkable durability of this brand in an ultra-rare market. Maintaining patients on therapy remains the ultimate proof point. and our results continue to reflect both the clinical value of Cabeas and the patient-centric support infrastructure we have built for the PPP community. Our commitment to this brand and this community couldn't be more evident than through our steadfast multi-year effort to secure important IP protection for Cabeas. On June 11, we received a notice of allowance from the U.S. Patent Office for a new patent covering Cabeas. Once issued, it will provide renewed protection for Cabeas through at least 2039. With a clear line of sight to such extended protection and having evidenced such astounding durability during its period of non-exclusivity, we intend to invest incrementally in both Cabeas and the PPP community in order to expand efforts to identify and support even more patients in the future. turning to our pipeline and specifically XP-8121. The second quarter was a busy period for our program. During the quarter, we continued to build an even stronger intellectual property estate around this important product and our proprietary formulation technology. On July 28th, we received our second US patent covering XP-8121. Just one week earlier, We also received a notice of allowance for an additional patent application, which when issued will be our third U.S. patent. Our expanding intellectual property portfolio speaks to the depth of our innovation and the long-term defensibility of this product. Those achievements build on the significant progress we made during the second quarter. Our technical and clinical teams made great progress in advancing the program through critical milestones. Importantly, we finalized our clinical site selections, and those sites are busy preparing in advance of an expected Phase III start by year-end. We also maintained a strong presence at key medical conferences throughout the quarter. The feedback we received from the endocrinology community has been exceptional. further reinforcing both our conviction and the significant unmet need in hypothyroidism and the multi-billion dollar commercial opportunity we have laid out. All of this momentum makes our planned XP8121 program overview that much more exciting. On Wednesday, September 9th, we will host a dedicated 8121 webinar where you will hear directly from an important key opinion leader, as well as members of our program team. We will walk you through the unmet medical need, the market opportunity, and our planned phase three program in detail, including trial design, primary and secondary endpoints, target patient population, as well as expected development and related regulatory timelines. We believe XP8121 represents a significant advancement in addressing the real and persistent challenges of treating hypothyroidism, and we believe it has the potential to be a blockbuster. Before I turn the call over to Steve, I want to briefly recap the strong progress we are making against the three critical priorities we outlined in March and continue to keep in our focus. First, driving rapid revenue growth. We delivered 33% growth in the first half, and we are now guiding to full-year revenue growth of 33% at the midpoint. Our commercial business is growing fast. Second, advancing our pipeline. The XP8121 program remains on track, and on September 9th, we will provide the market with a comprehensive look at the program. We look forward to that conversation. And third, executing with discipline. The full retirement of our convertible notes completed in July is a direct expression of this priority in action. A proactive, planful step made possible by the ever-strengthening financial position of Xeris. With our sustained commercial momentum and disciplined execution against our strategic priorities, I couldn't be more excited about the company wearability. And with that, I'll turn the call over to Steve.

Good morning, everyone. As John highlighted, our momentum from the first quarter carried into the second, reflecting solid execution and growing confidence in the performance of our business. Net product revenue of $91 million, up 34%, or over $23 million year over year, is the headline for this quarter. This performance drove total revenue to $92.1 million, representing 29% year-over-year growth and reflects the sustained commercial momentum John just described. Recorlove generated net revenue of $56.8 million, representing growth of 81% year-over-year An increase of $25.3 million, reflecting continued expansion of our patient base. New patient starts continued at a strong pace, and the underlying commercial metrics all support momentum accelerating in the back half of the year, where we expect to see incremental contributions from our commercial expansion completed at the start of the year. GVOC Net Revenue of $22.5 million in the second quarter, up 8% sequentially, and was in line with our expectations. We expect GVOC's performance to normalize and track more consistently with historical seasonal patterns in the second half of the year. Caveas delivered another solid quarter, generating net revenue of $11.7 million, reflecting modest improvements in both net pricing and the number of patients on therapy, Gross margin for the second quarter was approximately 86%, an improvement of nearly 400 basis points compared to last year, driven by favorable product mix. Turning to operating expenses, R&D expenses totaled $10.7 million in the quarter, an increase of $2.6 million compared to prior year. This increase reflects continued investment advancing XP81-21 toward Phase III initiation planned for later this year. SG&A expenses were $61 million for the second quarter, driven primarily by the full deployment of our expanded Recorilev commercial team and patient support infrastructure. Adjusted EBITDA for the second quarter was $19.3 million, an improvement of $6.7 million versus the prior year, representing over 50% growth year over year, even as we made incremental commercial and R&D investments this quarter. I also want to take a moment to discuss our balance sheet, and specifically the full retirement of our 2028 convertible notes, because it will be visible in our GAAP results this quarter. In July, we completed the full retirement of our convertible notes, settled through a combination of cash and equity. As of July 15th, not a single convertible note remains outstanding. The exchange agreement we signed on June 10th with certain holders of the convertible notes triggered a remeasurement of the convertible notes under GAAP. resulting in a one-time non-cash charge of approximately $31 million recognized in the second quarter. This charge does not impact adjusted EBITDA, and there will be no additional income state charge related to these notes in Q3. The bottom line, we eliminated $34 million of debt, creating approximately $3 million in annual interest savings and a meaningfully cleaner balance sheet. This was a proactive step made possible by the consistent financial performance of our business. Moving to our 2026 outlook. We are raising the bottom end of our full year total revenue guidance and tightening the range to 385 to 390 million. This outlook reflects the strong performance we delivered in the first half of the year as well as our confidence that this momentum will continue as our expanded RecoraLove commercial team moves from build to yield and we continue to see GVote rebound from its slow start this year. On SG&A, at the start of the year, we outlined an expected full-year increase of approximately $45 million versus 2025. Based on our strong first-half results and current outlook, We are making further incremental investments in our commercial enterprise, resulting in a full-year SG&A and increase of approximately $50 million. We see meaningful opportunities across our portfolio and remain committed to investing where we can create sustainable long-term value. Let me summarize our full-year 2026 guidance. Total revenue is now expected to be between 385 to 390 million. Gross margin remains consistent with our prior expectation of a modest improvement compared to 2025. R&D remains consistent with prior expectations. We expect an increase of approximately 25 million compared to 2025. SG&A is now expected to increase an additional $5 million versus our prior guidance of a $45 million increase compared to last year. And lastly, we continue to expect adjusted EBITDA to increase on an absolute dollars basis compared to 2025. I want to close with this. Our business continues to strengthen, and with it, our financial condition. We remain committed to the priorities that John outlined and are confident that we can maintain a path toward a continuing expansion of adjusted EBITDA, even as we make incremental investments to support a rapid growth of our enterprise. With that, I'll hand the call over to the operator for Q&A.

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Dennis Ding with Jefferies. Your line is open. Please go ahead.

Hi, thank you for taking our questions. This is Georgia Bank on the line for Dennis Ding. I had a question about the raising the low end of your guidance. I see that you raised it again to 385, but held the 390 top. And given record of momentum, and you said the expansion benefit is still mostly ahead in the second half, I guess what's capping the ceiling? And then on the expansion, you notice that it's tracking in line.

Could you repeat?

Operator or somebody, we cannot hear this question at all.

Are you able to hear me now?

Yes. Much better. Thank you, Georgia.

Oh, sorry about that. Okay. So on the guidance raise, you raised the low end again in Q2 to 3.85, but held the top at 3.90. Given RecordLib's momentum, and you've said the expansion benefit is still mostly ahead in the second half, I guess what's capping the ceiling there? And then on that sales expansion, you noted that the execution is tracking in line and still early. Maybe can you unpack what in line looks like underneath? which leading indicators, referrals, new starts, et cetera, that you're watching to confirm that the H2 setup is materializing? Thank you.

So, thanks for the questions, Georgia. On the guidance, yeah, I mean, just another great quarter. Gave us the confidence to raise the bottom end. And, you know, we've, you know, tightened it. to a range of $5 million at this point, and we're confident that we can hit that. It still reflects some significant growth in the back half of the year. And again, that points to the contributions we're expecting from the record level of commercial expansion, as well as growth from GVOC in the back half of the year. So yeah, really confident in the guidance that we provided. and it reflects over 30% revenue growth. And then on the second question, I think the second question was just around Rekhoralev and what we're seeing. Yeah, I think we're seeing early signs of, you know, contributions from that expansion. We saw that in the second quarter. Again, this is our third time doing this expansion, and the contributions we're seeing are tracking exactly in line with our expectations. And we see it continuing into the third quarter, which gives us all the confidence in the world to meet the revenue guidance that we outlined.

Great. Thank you so much.

Your next question comes from the line of Brandon Folks with H.C. Wainwright. Your line is open. Please go ahead.

Hi, thanks for taking my questions and congratulations on the quarter. Can you just further detail the second half of the year, the core of the growth drivers? Just how much is driven by prior territories versus sort of the new sales reps? Any way to just characterize where those new reps are in terms of productivity? and then any other tailwinds you're expecting in the second half of the year, whether it be average dose, persistency, just how those sorts of metrics are tracking. Thank you.

Yeah, Brandon, thanks for the question. In terms of the back half of the year, we made this expansion to increase not only the breadth of our calls, so we expanded our targets, Thank you for joining us. and many more. So we continue to monitor those. We track them. And all of those trends are tracking as we expected and within line. And until they become more material, we really won't change our expectations around some of those things.

Great. Thanks very much. And maybe just one on 8121. Can you just elaborate on what still needs to be done before the Phase 3 initiation? And do you expect all of that to be done by the time you host the webinar? And if not, how should we think about timing for what needs to be done?

Thank you. Yeah, I've said this before. We're not going to start that Phase 3 trial until we have the go-to-market commercial presentation ready to go into that Phase 3 trial. And that's what we're doing. is going through all of the work it takes to be able to have the commercial-ready product, device, formulation, everything. And we will be in a real great position by the webinar to tell you where exactly all those timelines are. I will tell you they're all on track. They're all tracking to what we said back last June in terms of start of the trial, Data, regulatory submissions, and approval. So we're still on track for all that for a 2030 launch.

Great. Thank you very much.

Your next question comes from the line of David Amsalem with Piper Sandler. Your line is open. Please go ahead.

Hey, thanks. So just a couple for me. First on Recorlev, can you talk about prescriber breadth and depth? And sorry if I missed this, but can you give color on how many prescribers there are and repeat prescribers? So that's number one. Number two is on 8121. Can you talk to how long you think it's going to take to enroll the phase three? And do you think results could be a 28 event? And then lastly, business development, M&A, just given the commercial infrastructure in place, how aggressive are you going to be in terms of looking for assets where you can leverage that infrastructure? Thanks.

Okay. Start with Ricorla. So what we have said is we have 12,000 targets that we basically aligned our sales efforts against. And what I can tell you is that those are new and existing prescribers, and they're all good targets for cortisol normalization and hypercortisolemia and Cushing syndrome. So So we are targeting those. We are successfully covering them. And it really goes to us having a record quarter of new prescribers as well as existing prescribers. So all of those metrics are growing and growing at the pace that we expected in our guidance. And we continue to see that for the balance of the year and going forward. as we go deeper and deeper in those accounts. The next question was on 8121. And I think it was related to data by 28. Oh, data by 28. We'll be able to give you a lot more clarity around that whole clinical program and timing on September 9. You'll be able to see all that. So the clinical and regulatory timelines will be really, really clear at that point.

And business development.

and all those are all the kinds of things that we would focus on, especially ones that leverage our endocrinology footprint and or our rare product capabilities that we have within Xeris.

Thank you.

Your next question comes from the line of Chase Knickerbocker with CHLM. Your line is open. Please go ahead.

Morning, everyone. Thanks for taking the questions. This is Jake. I'm for Chase. First, just on Recorlev, I was hoping that you could characterize the growth in the market. We are seeing, as you all do have better data than us, how many patients do you think are currently on therapy for hypercortisolism and what share of new patient starts do you think you are capturing?

Wow. We haven't really dug into that in the past. And it's really hard to triangulate that because we don't have good external data sources that could tie back to that. But what I will tell you is that more than 60% of our patients are new to therapy first time on drug. So I would say that points to a couple of things. One is the majority of our patients are market growth and us capturing a significant share of those. And the fact that the dynamics in this marketplace with everybody growing in it says that there's still a lot of opportunity for market growth. And having said that, there doesn't seem to be an increase in switching. We're all getting and driving more screening, more detection, and more growth in the marketplace, and really positioning our product in a sense to win those new patients.

Thanks for that color. And then second, how do you think we should think about the new Coveas patent? Obviously, this represents a barrier to any potential future generic. Should we also be thinking about this as relevant to the current generic that's on the market right now?

Well, I think the way we think about it is with this kind of protection, We for sure are really confident in investing more, in finding more patients, and getting them on therapy. So from that perspective, we have maintained this brand for the last year and a half based on driving new patients in a space with a non-exclusive situation. So we know we can grow it in a non-exclusive situation. Great, thanks for that commentary.

Your next question comes from the line of Rowana Ruiz with Lee Rink. Your line is open. Please go ahead.

Hey, guys. You have Ryan on for Rowana. Thanks for taking our question and congrats on the quarter. Maybe just two from us. Can you frame how discontinuation rates are looking for Recorlev? And are you seeing any signs of patients reentering the funnel that may have previously dropped off therapy? And then maybe as you think about peak sales for RecorLev, what are the key levers here that could potentially accelerate the timeline to that peak sales of a billion dollars?

Thank you. So discontinuation rates have been pretty steady and stable. We don't really see any movement in that. We do see small amounts of patients that go off and come back and things like that. So None of those trends have really changed, but they've been pretty consistent. In terms of peak, I think this is an important point for everybody. This is a market where it takes a lot of effort. These are complex patients that need to be diagnosed, screened, and treated. It's more of a scalable process to get these patients on drug and get them stabilized on drug. Get them titrated and keep them on drugs. So it's one of those areas where continued investment will be required, both from a commercial standpoint, but also from a data generation and or data dissemination standpoint. Those are critical aspects to really sustaining the long-term growth of this category.

Your next question comes from the line of Leland Gershel with Opco. Your line is open. Please go ahead.

Hi, this is Tracy on for Leland. Congrats on the quarter and thanks for taking our question. Just one from us. Can you give us a sense of how to think about the FP8121 Phase 3 program's impact on OpEx going forward?

Yeah, so I think, Tracy, thanks for the question. I'll take this one. You know, we guided to an increase in R&D this year of 25 million, and that increase is almost entirely for XB8121 and starting the trial later this year. So it's everything that goes into that. As the trial unfolds next year, I think it's reasonable to expect a similar increase in R&D spend as the trial ramps up. And so we'll lay that out in terms of our guidance early next year specifically. And you'll be able to understand exactly how that kind of tracks out with everything that we're laying out in terms of the program in September at the webinars.

Sounds good. Thank you for the call.

Sure.

There are no further questions at this time. I will now turn the call back to John Shannon for closing remarks.

Thanks, everyone. As you just heard, the second quarter marked another remarkable period for Xeris, underscoring sustained commercial momentum and disciplined execution against our strategic priorities. Rekorolev is growing and driving the business. GVOC is back on track, and Covey has delivered a landmark IP win. At the same time, we continue to advance the next phase of our growth story. Our XP8121 program is progressing well, and with phase three initiation expected before year end, we believe we're approaching an important inflection point for the program. Our XP8121 program overview on September 9 will provide investors with a closer look at what we are building. In closing, we entered the second half of 2026 with strong commercial momentum, a strengthened financial foundation, and a pipeline that positions us well for continued growth. Thank you for joining us today, and thank you for your continued support and interest in Xeris Biopharma.

This concludes today's call. Thank you for attending. You may now disconnect.