Xeris Biopharma Holdings, Inc. (NASDAQ:XERS) Q2 2022 Earnings Conference Call August 10, 2022 8:30 AM ET
Allison Wey - Senior Vice President of Investor Relations and Corporate Communications
Paul Edick - Chairman and Chief Executive Officer
Steve Pieper - Chief Financial Officer
Conference Call Participants
Roanna Ruiz - SVB Securities
Oren Livnat - H.C. Wainwright
David Amsellem - Piper Sandler
Hello, and welcome to today’s Xeris Biopharma’s Second Quarter 2022 Financial Results Conference Call. My name is Aliet and I will be coordinating your call today. [Operator Instructions]
I would now like to hand over to Allison Wey, Senior Vice President of Investor Relations and Corporate Communications. The floor is yours. please go ahead.
Thank you, Aliet. Good morning and welcome to Xeris Biopharma's second quarter 2022 financial results and corporate update conference call and webcast. A press release with the company's second quarter 2022 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 Pieper, our CFO. Paul will provide opening remarks, Steve will provide details on our financial results and then, we will open up the call for questions.
Before we begin, I would like to remind you that this call will contain forward-looking statements concerning Xeris’ business practices, Xeris’ future expectations, plans, prospects, clinical approvals, commercialization, corporate strategy, performance, and the impact of COVID-19 on Xeris’ business practices, which constitute forward-looking statements for the purposes of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995.
Actual results may differ materially from those indicated by these forward-looking statements, as a result of various important factors, including the effect of uncertainties related to the COVID-19 pandemic on the U.S. and global markets, Xeris’ business, financial condition, operations, clinical trials and third-party suppliers and manufacturers and other risk factors including those discussed in our filings with the SEC.
In addition, any forward-looking statements represent our views only as of the date of this call and should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligations to update such statements.
I will now turn the call over to Paul.
Thanks, Allison. Good morning to everybody, and thank you for joining us today. This morning, I want to start with a brief look at what we're trying to build at Xeris. The most important lesson that we've learned as a team in building companies over the years is to know what you are, what you want to be and to execute with absolute clarity.
Our goal at the beginning and end of each day is to build a substantial patient centric, profitable, biopharma enterprise with multiple products in multiple therapeutic areas, a targeted development pipeline with promise and value-added partnerships on our unique technologies.
With the commercial launch of Gvoke, the acquisition of Strongbridge, the addition of the commercial team for Keveyis, the subsequent launch of Recorlev and the increasing difficult hurdles of cost and complexity in advancing numerous Phase 2 development assets simultaneously, who we are as a company has clearly had to evolve.
Where we were once a technology based 505(b)(2) development company, we are now an all-in commercial execution company. That is not to say we are walking away from our unique formulation technologies or product development at all. However, once we cross the line into being a commercial business, our focus absolutely has to be on predominantly on commercial success. Other aspects of the enterprise in turn are scrutinized more harshly in our internal prioritization process.
Where once upon a time we had a goal of becoming a fully capable pharma company with equal emphasis on development and commercial, we have evolved to a commercially-driven biopharma company, selling differentiated and innovative products across a range of therapeutic areas. We continue development of a limited number of assets with our unique formulation capabilities and we will take them forward if they prove uniquely differentiated, additionally valuable and achievable based on evolving FDA requirements. Otherwise, we will make the early and hard decision to discontinue their development.
We will also continue to partner our unique technologies as a potential value stream down the road and will be increasingly selective as to what we work on, with whom we work, and on only those projects that have a clear potential pathway to development and commercial value for Xeris. With that said, we are a commercial business first and foremost and we are executing.
Our 2022 momentum continued in the second quarter delivering record growth in patient demand and net revenues with continued pipeline development. We generated a record $25.3 million in net product revenue in the quarter, which is a 34% increase, compared to Q2 last year on a pro forma basis. We saw continued strong Gvoke prescription growth throughout the quarter and year-to-date. We had another record quarter for Keveyis in terms of net revenue, we are gaining a lot of traction in the early stage of Recorlev launch with a steady rate of referrals and an increasing pace of getting patients started on therapy.
And we dosed the final cohort of healthy volunteers in the Phase 1 study of our weekly subcu levothyroxine product candidate. Importantly, our year-to-date performance of all three products gives us confidence to reiterate our guidance of net product revenue between $105 million and $120 million. At any point in that range, we see the outlook for our 2022 commercial performance as great to outstanding.
Our cash position is strong and we expect our year-end cash balance to still be within our previously communicated range of $90 million to $110 million. We expect our cash position to adequately fund our operations to cash flow breakeven, currently expected to happen by year-end 2023.
Now I'll go into some specific highlights for each product behind this performance. I usually start with Gvoke, but today I'm going to lead with Keveyis given its record Q2 performance. Keveyis had its best quarter-to-date in terms of net revenue at $12.8 million, year-to-date Keveyis net revenue has grown 20% over the same period in 2021 on a pro forma basis, and we expect to continue to grow Keveyis for the foreseeable future.
Now moving on to our launch products starting with Gvoke. Gvoke had another strong quarterly performance with net revenue of $11.5 million for the second quarter and year-to-date Gvoke sales increased 42%, compared to the same period last year. We also continue to see impressive prescription growth in the second quarter Gvoke total prescriptions were 34,000 growing more than 60%, compared to last year. Year-to-date, Gvoke total prescriptions were over 65,000, growing more than 73%, compared to the same period in 2021. The total glucagon market continued to grow 10% in the second quarter versus prior year and glucagon -- Gvoke excuse me, continues to outpace and drive that growth quarter-after-quarter.
Now on to Recorlev. Newly launched Recorlev net sales were $1 million in Q2. Importantly, all sales in the quarter were demand based sales, not stocking or inventory. All sales for Recorlev are based on identified patients beginning therapy. And while we're thrilled with our second quarter results, we're even more excited by the weekly growth of referrals and new patients coming on to therapy. Keep in mind Q2 was our first full quarter with Recorlev with our reps having just made the first trip through their territories in February and March. As such, Recorlev continues to show great long-term growth potential.
From a commercials perspective, the continued strong performance of Gvoke and early success of Recorlev has led us to pull forward a previously planned addition of approximately 25 territories to our endocrinology focused field organization from early 2023 into the fourth quarter of this year. We expect that this will ensure and accelerate the growth of these recently launched products over the course of 2023.
A couple of words on Ogluo. Last week, we announced the Texas Pharma, our commercialization partner for Ogluo in the U.K. and EU, has been acquired by Arecor Therapeutics, a U.K.-based publicly traded globally focused biopharmaceutical company. We are very pleased with the acquisition and look forward to having Arecor as our commercial partner. Having Ogluo in the hands of a well capitalized company dedicated to the diabetes space is a very positive step forward for the millions of patients with diabetes in the U.K. and EU in our view. We're -- and we're working closely with Arecor to ensure a smooth transition and no disruption of commercial activities and we will continue to support the commercial efforts going forward.
From a development perspective, a few words about our XeriSol levothyroxine, as I mentioned previously, we dosed the last cohort in the Phase 1 pharmacokinetics study of our potential once weekly, subcutaneous levothyroxine product candidate. We will compile all the data from a range of doses to assess dose proportionality early in the fourth quarter. This latest data should provide us an increased level of confidence that we have a product candidate with the potential of once weekly dosing. This is an important starting point for developing our Phase 2, 3 program with the FDA. And we are using this information to support our FDA meeting request regarding a registration strategy, which we will anticipate having in the early part of 2023.
Exercised induced hypoglycemia based on our earlier Phase 2 data and our discussions with the FDA, we have an agreed plan for an additional Phase 2 study in order to collect additional utilization data later this year. We are in the process of planning the initiation of that study. That said, initiation of the EIH study and further development of the EIH program is being reviewed as part of our clinical prioritization and commercial opportunity assessment later this year, taking the requirements that we've gotten from the FDA and cost into consideration.
Before I turn the call to Steve for detail on our second quarter financial performance, I'd like to reiterate Xeris has a record quarter on several fronts as I just reviewed. We are prioritizing our spend to accelerate the growth of our enterprise; we remain confident in our ability to achieve our guidance for the year for both revenue and ending cash position. And delivering on these two commitments affirms our expectation that we will achieve cash flow breakeven by year-end 2023 without the need to raise additional equity. We believe our performance is a clear demonstration that we are building an increasingly valuable enterprise, energetically and aggressively, but with discipline.
Now I'll turn this call over to Steve.
Thanks, Paul. Good morning, everyone. I will focus my remarks on a few of the key financial results, the details of which are in the press release issued this morning.
Total net product revenue was $25.3 million for the second quarter, representing a 34% increase over the same quarter last year on a pro forma basis. This growth was driven by strong underlying patient demand for both Gvoke and Keveyis and patient starts on therapy for Recorlev.
Breaking it down by product, Gvoke net revenue for the quarter was $11.5 million or a 30% increase, compared to the same period last year. This increase was driven by continued growth in prescriptions topping 34,000 for the first time, more than a 60% increase, compared to prior year Q2, partially offset by a decrease in net pricing, which I will explain in detail later.
Year-to-date net revenue for Gvoke was $23.9 million or a 42% increase, compared to the same period last year. This increase was again driven by growth in prescriptions more than a 73% increase, compared to the same period prior year, which was partially offset by a decrease in net pricing.
Let me provide more context on the decrease in net pricing for Gvoke this year. As discussed last quarter, we made adjustments to our returns reserved based on actual results. This is driving a portion of the net price decrease relative to last year. Additionally, in order to continue to maintain unrestricted access for patients that want Gvoke, we have made decisions regarding our payer strategy that are resulting in higher, commercial and government rebates. These rebates started to impact our net pricing in the latter half of Q2. Looking forward, we expect Gvoke demand to continue to grow and we expect the net pricing to begin to stabilize in Q3 once all of the new payer agreements take effect, assuming of course a consistent payer mix.
Moving to Keveyis. Keveyis net revenue for the quarter was $12.8 million or a 28% increase, compared to the same period last year on a pro forma basis. On a year to date basis, Keveyis net revenue was $22.1 million or a 20% increase, compared to the same period last year on a pro forma basis. We continue to see increases in the number of patients on Keveyis. These patient increases coupled with a net pricing increase contributed to this revenue growth. Looking forward, we are confident in our ability to continue to maintain and grow our Keveyis business.
Moving to Recorlev. Recently launched Recorlev net revenue for the quarter was $1 million or $1.1 million year-to-date. We are pleased with our initial financial performance through June. We are also encouraged by the outlook of Recorlev given the weekly growth of referrals and new patients coming into therapy. As Paul mentioned, we are reaffirming our guidance of net product revenue of $105 million to $120 million.
Moving down the P&L, cost of goods sold was $11.1 million for the six months ended June 30, 2022, an increase of approximately $5.9 million, compared to the same period in 2021. This increase was primarily driven by increased sales of our products, as well as product mix and increased costs.
Research and development expenses increased $0.6 million or roughly 6% for the six months ended June 30, 2022, compared to prior year. The increase was primarily driven by higher personnel related costs offset by lower product development costs.
Selling, general and administrative expenses increased by $23.9 million or roughly 53% for the six months ended June 30, 2022, compared to the same period in 2021. We incurred $19.6 million of increase in personnel related costs due to the Gvoke field expansion in the third quarter of 2021 and the inclusion of our Keveyis and Recorlev commercial infrastructure. The company also incurred increased marketing spend driven by the Recorlev launch.
As of June 30, 2022, Xeris had total cash, cash equivalents and short-term investments of $111.6 million, compared to $132.1 million at March 31, 2022. We are in a strong cash position. Looking forward and consistent with prior guidance, we plan to draw the additional $50 million available under our Hayfin debt facility by the end of this year and finished the year within our previously communicated cash guidance of $90 million to $110 million. We expect our cash position to adequately fund our operations as currently constructed to cash flow breakeven by year-end 2023.
I will now turn the call back to Paul.
Thanks, Steve. As you just heard from both myself and Steve, the first half of 2022 has been one of steady growth and commercial and operational execution and we're on track to achieve our guidance.
Operator, we will now take questions.
Thank you for our Q&A. [Operator Instructions] Our first question comes from Roanna Ruiz from SVB Securities. Your line is open. Please go ahead.
Great. Good morning, everyone. So two quick questions for me: first on Gvoke, I was curious about the sales in the quarter and the impact on net price. Could you talk a little bit about the relative magnitude of net price change that you're seeing? And do you expect to see that trend a little bit into 3Q or create normalized?
Yes. So, Roanna, the impact -- there's a couple of things, if we look at it just from quarter-over-quarter perspective, a couple of things were going on there. So in the first quarter, we actually had revenue to -- that was related to our sales to our European partner, Tetris at the time. That was a stocking order that didn't repeat in the second quarter. So that was a little north of $1 million, so that impacted the quarter-over-quarter growth. That's included in our Gvoke line.
And then in terms of our net pricing, just to remind everybody, we had last year in the first half of last year, we had a reversal to our returns reserve that ultimately increased our revenue As we discussed last quarter, we had an adjustment in the first half of this year that based on actual returns. We expect that, that's actually normalized. What happened in the second quarter was we made decisions around our payer agreements and that was a bit of a drag on our net pricing. But we expect that once those, kind of, flush through on a full quarter basis in the third quarter that our net pricing will stabilize. I wouldn't expect as a material movement from the second quarter to the third quarter in terms of that price. It may balance around a couple percentage points, but nothing material.
Okay, it’s great. Helpful. And then wanted to ask a question about Recorlev. Could you discuss a little bit the titration process that you're observing for early patients that are receiving Recorlev? And how long do you estimate that it might take individual patients to get to their specific ideal maintenance dose?
Hey, Roanna, it's Paul. And I may ask John Shannon to help me with this question, because he is little closer to it. The -- our original assumptions on titration were based on the clinical studies. And in the clinical studies, people got to an average dose of about 600 milligrams. As you would expect in the clinical study, it's very prescribed and controlled and patients return to the office is on a routine scheduled basis. So you have a pretty easy way of seeing the titration and managing the titration in that context. It's a controlled environment. In actuality in the wild as we say in normal practice, patients don't go back to the offices frequently and it takes a little longer.
So far, we're seeing people begin to titrate up. But on average, I think they're pretty much at the starting dose still given that we're basically one quarter in, we'll have a better sense of how that titration is going, as we get closer to the end of the year. Right now, I think John would agree, it's a little slower than we had anticipated, but it's one quarter.
Great, helpful. Thanks.
Our next question comes from Oren Livnat from H.C. Wainwright. Your line is open.
Thanks. I have a couple of questions. Just to follow-up quickly on Recorlev. Are you able to give us any more color on the -- I guess sort of volume or acceleration of patients in the funnel, you know, with regards to referrals into your hub services? And what kind of success or proportion of patients are successfully getting coverage and getting drug? And I guess to dig into that and further, what sort of renewal requirements are you seeing or expecting to see on those prescriptions, you know, for some drugs? Insurance companies require every month to be authorized. Are you seeing that? Or are they getting chronic, sort of, indefinite authorization and coverage? And I have a Gvoke follow-up.
Yes. I'll start from the end, Oren the renewal process once a patient is on therapy, it's not really a prescription-based process, they're on therapy and it's approved by the payer. And then it's a continuous process from there. You don't have to renew the prescription, at least not so far, we haven't seen it in the category. Coverage so far, we haven't had a lot of losses and most everybody that we've put through the process we’re being pretty successful at getting patients through the insurance process. There are hurdles as we anticipated, but we're getting through them reasonably efficiently.
In terms of volume, we're not going to disclose patient numbers. We think that's competitive thing that we don't want our competitors to know where we are, we'll continue to give you dollars. We're seeing rapid increase in referrals and we're seeing referrals convert to patients on drug at an increasing rate.
Okay. That's encouraging. And I meant Keveyis follow-up actually. Impressive quarter up nicely quarter-over-quarter and you said a couple of times in the script you emphasized that you're looking to maintain and grow this franchise. And I think the general consensus expectation for this product is erosion starting next year. And I'm wondering if you have any updated thoughts on the potential timing and/or impact of any competition? Are you in fact investing more behind this product for a longer runway in your view?
The answer to your question at the end is yes. We are investing more behind the product in anticipation of a healthy runway. We haven't seen any evidence that there is any competitive product coming. We haven't seen evidence of a generic. And as we've said repeatedly, we believe that we can maintain and grow this business in the face of a generic competitor, no matter what. And we have a lot of reason to believe that's the case. It's an ultra rare disease, it’s one specialty pharmacy. Patients are hard to find. We're the only ones finding them up to end including our own authorized generic if at some point we feel that's necessary. So we bought the company and knowing full well that Keveyis was going to lose exclusivity and we believe we could grow the product.
Thank you. Appreciate the color.
Our next question comes from David Amsellem from Piper Sandler. Your line is open.
Thanks. So just had a couple, so can you just talk anecdotally about what you're hearing in the field from practitioners about Recorlev. And, you know, specifically, you know, where patients are coming from or they switches from the racemic, ketoconazole, and are they de novo patients? And just overall receptivity, that's number one.
Number two is as we think about Gvoke in a longer term, what's your view on just overall penetration of these ready-to-use modalities. You know, it seems like the pandemic, sort of, kind of, threw a wrench into uptake. So do you expect now that we're sort of emerging from it, you know, more growth in just penetration of these ready-to-use modalities overall? And just how are you thinking about it longer term? Thank you.
Thanks, David. I'll start right at the beginning with Recorlev. The receptivity to Recorlev has been great. It's been very high, doctors are very interested in the product. We're getting great reception. In terms of where are we getting the patients, we're getting them from everywhere, we're getting de novo patients, we're getting switch patients. So doctors see this as a valuable and alternative that they're eager to use. So we're very pleased with very early days. We're basically one quarter of actual selling.
Moving on to Gvoke. You're right, the pandemic did have an impact on the move to the ready-to-use and the growth of the category. The category has grown throughout the -- that said, the category has grown throughout the pandemic, maybe a dip to single-digits for a period, but it's continued to grow. I think one of the things that you may have seen recently that really speaks volumes about what's going to happen with this category Lilly just announced that they're going to withdraw their kit, the old kit that's been around forever. They're going to withdraw from the market, they're going to discontinue distribution of that kit. That signals a commitment by Lilly to the ready-to-use category in a major fashion. And as we've all discussed, those kits are almost impossible to use. It'll be interesting to see if other companies withdraw their products and discontinue distribution of kits altogether. But that says a great deal about the [indiscernible] category. I mean, we're happy to see it.
Okay. And that's helpful. For me just seek in a follow-up. Just regarding that discontinuation, I mean, do you think that's more of a function of the fact that Amphastar has a generic and Lilly's kit is the reference was the drug? Or do you think it's really about the migration to the ready-to-use modalities?
I think at the end of the day, it's probably some of both. But the fact of the matter is they are taking it off the market and they are emphasizing they're ready-to-use. At the end of the day, Lilly is the reference product for the generic, so I don't see how the Amphastar product can continue to grow. I think it's going to decline. Our perspective is Novo and Amphastar should withdraw theirs and discontinue distribution of theirs as well. They're not good for patients.
Okay. Thanks, Paul.
Thanks, David. Drive carefully.
This concludes our Q&A. I'll now hand back to Paul Edick, CEO for final remarks.
Okay. Thank you. Thanks to everyone for joining the call this morning and for your continued support as we execute on our growth strategy to create a profitable pharmaceutical company with products in multiple therapeutic categories that meet the needs of patients and their caregivers. Thank you very much.
This call is now concluded. We'd like to thank for your participation.