Xeris Biopharma Holdings, Inc. (NASDAQ:XERS) Q4 2023 Earnings Call Transcript March 6, 2024
Xeris Biopharma Holdings, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Hello everyone and welcome to the Xeris fourth quarter and full year 2023 financial results conference call and webcast. My name is Emily and I’ll be coordinating your call today. After the presentation, there will be the opportunity for you to ask any questions, which you can do by pressing star followed by the number one on your telephone keypad. I’ll now turn the call over to Allison Wey, Senior Vice President of Investor Relations. Please go ahead.
Allison Wey: Thank you Emily. Good morning and welcome to Xeris Biopharma’s fourth quarter and full year 2023 financial results and conference call. This morning we issued two press releases, one on the company’s financial results and the other on refinancing our debt facility with Hayfin Capital. Both can be found on our website. We’re joined this morning by Paul Edick, Chairman and CEO, and Steve Pieper, our CFO. After our prepared remarks, we will open the line for questions. Before we begin, I would like to remind you that this call will contain certain forward-looking statements concerning the company’s future expectations, plans, prospects, and financial performance. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those forward-looking statements.
For more information on such risks, please refer to our earnings press release and risk factors included in our SEC filings, including our quarterly report on Form 10-Q. Any forward-looking statements on this call represent our views only as of the date of this call and, subject to applicable law, we disclaim any obligation to update such statements. I’ll now turn the call over to Paul.
Paul Edick: Thanks Allison. Good morning everyone and thank you for joining us today. Let me start by thanking everyone who contributed in some meaningful way to us delivering an outstanding year for the company, including the patients we serve, the healthcare providers we enable, and the dedicated Xeris team that executes at a very high level every day. 2023 was an exceptional year of performance and growth for Xeris, highlighted by our total revenue which grew an impressive 49% from 2022 to $164 million in 2023, and ending 2023 with over $72 million in cash. This revenue growth along with Xeris’ strong cash position continues to demonstrate the sustainability of the enterprise we’re building. In 2023, we significantly advanced our once-weekly subcutaneous XeriSol levothyroxine program.
We completed enrolment in our Phase II clinical study and have made considerable progress on manufacturing and device development. Even more exciting, we are starting to demonstrate the potential value of our Xeris technology business. In 2023, we successfully advanced this business and generated over $10 million in total revenue. I’m going to focus the majority of my remarks on our full year performance, and Steve will touch base on the full year and fourth quarter performance in his prepared remarks. Starting with our commercial business and starting with Gvoke, Gvoke had another outstanding year in 2023. We grew revenue by 28% to $67 million. We grew Gvoke prescriptions to over 215,000 in 2023, and Gvoke continues to outpace all other products in the category and drove 10% glucagon market growth in 2023.
The new ready-to-use glucagon products now represent almost 80% of both new and total prescriptions, and Gvoke continues to capture market share. At the end of February, Gvoke market share of new and total prescriptions in the retail glucagon market are approximately 34% and 32% respectively. As I’ve said before, we see tremendous opportunity for Gvoke. We estimate that approximately 15 million people with diabetes are at increased risk of severe low blood sugar. A primary risk factor for a severe low is being on insulin [indiscernible], and those who are should be carrying a ready-to-use rescue glucagon, like Gvoke HypoPen. However, less than 10% of people at risk of a severe hypoglycemic event have a ready-to-use rescue glucagon product on hand, leading far too many people with diabetes still left without protection against a potentially life threatening severe low blood sugar event.
We are just scratching the surface of this opportunity. The universe of healthcare stakeholders and advocates have declared that the addition of a ready-to-use rescue glucagon such as Gvoke should be a key element in the standard of care in diabetes. The challenge remains getting practicing healthcare professionals to adopt these standards of care as their standards of practice. As I mentioned previously, Gvoke is driving the majority of market growth in this category and we believe that Gvoke will continue to be the primary and dominant voice in the market. Onto Recorlev, we’re very pleased with our progress with Recorlev, driving patient referrals and converting them to new patient starts. We see tremendous potential for Recorlev in an increasingly dynamic Cushing’s market.
The key difference from most other products used in the category is that Recorlev actually treats the underlying condition in Cushing’s by normalizing cortisol levels in the body, which is a differentiation that resonates with physicians. We grew Recorlev net revenues to $29.5 million, nearly a 300% increase compared to the prior year, and referrals and new patient starts outpaced our expectations each quarter in 2023. Recorlev generated $9.8 million in net revenue for the fourth quarter, an increase of 158% over the same period in 2022 and an increase of 21% over third quarter 2023. We’re very pleased with the steady increase in Recorlev revenue quarter-over-quarter. Patient referrals continue to be robust and the underlying patient demand grew 28% over the third quarter.
The number of unique prescribers with new referrals also continues to grow. The average number of patients on Recorlev increased over 145% from the same period in 2022. Our healthy pipeline of patient referrals and healthcare professionals using Recorlev as a first line therapy are key indications that Recorlev is seen as an important option for Cushing’s patients, especially given Recorlev’s multi-pronged approach to suppressing cortisol production as post-surgery treatment for Cushing’s syndrome. Moving to Keveyis, we grew Keveyis revenue 15% compared to 2022 despite the launch of a generic competitor in early 2023. This performance exceeded our expectations for the brand in 2023 by delivering $56.8 million, well in excess of the $40 million revenue milestone which triggered a CVR for Strongbridge shareholders.
Steve will provide more detail on the CVR. In the fourth quarter, revenue for Keveyis was $14.1 million, which is an 11% decrease from the third quarter of this year, however was a 2% increase compared to the same period in 2022. In the second half of the year, we started to see modest patient loss to generic competition. The fourth quarter was the first quarter we saw pressure from the generic impacting our net revenue. That said, even with a whole year of generic competition, we exited 2023 retaining over 90% of our patients on Keveyis. This is a testament to our team’s ability to find new patients and the value of our Xeris Care Connections team, which provides support for primary periodic paralysis patients and providers. As a result, patients and the medical community are willing to fight for the Keveyis brand.
That said, we expect payor pressure will persist and we may see sequential quarterly declines in Keveyis revenue in 2024, which we’ve accounted for in our 2024 guidance that we’ll talk about later; however, we continue to find new patients and build the top of the referral funnel, which is key to maintaining Keveyis’ contribution to our commercial portfolio. Before I move onto our levothyroxine program, a quick comment on the Change Healthcare cybersecurity issue two weeks ago. We believe this has the potential to temporarily slow adjudication of pharmaceutical prescriptions in general. The degree to which that potential for delayed adjudication may impact our specialty pharmacy and retail business is yet unclear and really too early to tell.
Now onto our XeriSol levothyroxine program, a potential once-weekly subcutaneous injection. The last patient last visit was just last week, which keeps us on track for data from the Phase II study midyear. This oral liquid dose conversion data will help to inform our proposal to the FDA for a pivotal Phase III program. We anticipate requesting an end of Phase II meeting later this year. If we gain alignment with FDA on a Phase III study program, we could start that study as early as mid-2025. Now onto our formulation technology business. We’re very excited about the potential value this business can provide for patients, caregivers, healthcare professionals, and our Xeris partners. We made a lot of progress elevating new Xeris technology in 2023 from signing the Regeneron platform deal a year ago to successfully formulating the pre-prescribed target product profile for XeriJect, Tepezza, and as such receiving the associated $6 million success payment from Amgen.
As recently as January, Amgen executed the exclusive worldwide license agreement to develop, manufacture and commercialize a subcutaneous formulation of teprotumumab using our XeriJect technology in thyroid eye disease. Under terms of the agreement, Xeris has the potential to receive up to $75 million in development, regulatory and sales-based milestones, as well as an escalating single-digit royalty based on future sales of Tepezza using the XeriJect technology. The next step in this program, the newly integrated Amgen team has been formed around the XeriJect program. Development work continues and planning is underway in preparation for initial clinical stage activities. As for the Regeneron collaboration, we have completed formulation and development for both initial molecules.
Regeneron’s stability and non-clinical evaluations will take place over the next six months. Assuming continued success, that could lead to their potentially executing a license option for further clinical development and commercialization of any of the molecules in the platform, which would trigger an additional one-time payment. Regeneron also has the option to nominate additional molecules for formulation development at any time, for which we would receive an additional upfront per molecule. We’re excited about the potential for our XeriJect business and believe this could be a significant contributor to the growth of Xeris over time. We continue to discuss additional XeriJect collaborations with numerous companies. Before I go to our 2024 financial guidance, I want to touch on our debt refinance with Hayfin Capital that we announced this morning.
Since we began our relationship with Hayfin two years ago, we have proven to them that we can execute on our strategy, growing and de-risking our enterprise. This has given them the confidence in Xeris to further support us by committing an additional $50 million at close of the transaction, with another $15 million of committed capital at our discretion to settle the 2025 convertible notes, and by providing $100 million of uncommitted capital for potential M&A purposes. While lowering our total cost of capital overall, Hayfin has been a great partner to Xeris, willing to support the growth of our enterprise with non-dilutive capital. Steve will go into more details on the transaction. Looking at 2024, as our momentum continues, we expect to grow total revenue in the range of $170 million to $200 million.
Our total revenue range implies a 4% growth at the low end, 22% growth at the high end and 13% at the midpoint; however, net of non-recurring partner revenue, our range for 2024 represents approximately 10% growth at the low end, 30% at the high end and 20% at the midpoint, so very positive potential for continued growth of the enterprise either way you look at it. Recall in 2023, we initially gave a wide revenue range as we are not sure of the rate of expected decline in Keveyis due to generic competition, and revenue contribution from technology partners, which is episodic in nature altogether. The same unknowns and uncontrollables exist for 2024. That said, this double-digit revenue growth coupled with our recent debt financing and continued disciplined cash management allows us to further invest in the growth of our commercial products, fund Phase III readiness activities for our pipeline levothyroxine program, and lastly make incremental investments in our emerging technology business, and we still expect to end 2024 with a very healthy cash position of between $55 million and $75 million, further demonstrating the sustainability of the enterprise that we’re building.
I’m now going to turn the call over to Steve for additional details on our financial performance.
Steve Pieper: Thanks Paul, and good morning everyone. As Paul mentioned, 2023 was another year of exceptional performance and growth for Xeris. All three of our commercial products grew revenue for the full year and fourth quarter compared to last year. We ended the year with net product revenue of $153.4 million, a 40% increase compared to last year. Our various partnerships contributed meaningful revenue with a record $10.5 million of other revenue for the full year 2023. Total revenue in 2023 was $163.9 million, a 49% increase compared to last year. Revenue growth coupled with our disciplined cash management resulted in Xeris ending 2023 with cash of $72.5 million and generating $6.5 million of cash in the fourth quarter.
This is a significant milestone for Xeris and it continues to demonstrate our ability to be a self-sustaining enterprise. Moving onto our fourth quarter and full year results, for the fourth quarter, total revenue was $44.4 million, representing a 34% increase over the same quarter last year. Gvoke net revenue for the quarter was $18.6 million, representing a 25% increase compared to the same period last year. Full year net revenue was $67 million, representing a 28% increase compared to last year. In the fourth quarter, Gvoke prescriptions topped 59,000, a 43% increase compared to the same period last year. Consistent with the historical trend following the typical back-to-school spike for the glucagon market in Q3, the total glucagon prescription market declined 7% in the fourth quarter.
Despite the 7% market decline, Gvoke total prescriptions grew 1% in the same period, ending the quarter with total retail market share of approximately 31%. Gvoke continues to gain market share in 2024, ending February at approximately 32%. Moving to Recorlev, Recorlev net revenue was $9.8 million for the fourth quarter and $29.5 million for the full year 2023. Compared to Q3 2023, net revenue increased by 21% driven by a steady increase in underlying patient demand. We are encouraged by the growth in Recorlev’s patient demand, which has been fueled by a consistently healthy pipeline of referrals. Moving to Keveyis, Keveyis net revenue for the quarter was $14.1 million, representing a 2% increase compared to the same period last year. Full year 2023 net revenue was $56.8 million, representing a 15% increase compared to last year.
While our strategy to invest in Keveyis and defend brand prescribing has been successful to date, in Q4 we saw a slight decrease in patient demand due to increased generic pressure. We will continue to deploy strategies to protect Keveyis and will continue to invest in Xeris Care Connections as they offer the best-in-class therapy and support for primary periodic paralysis patients. Before I move onto our other revenue and as I covered in my prepared remarks in November, I want to again address the Keveyis CVR milestone that was achieved I 2023. 2023 Keveyis net revenue was over $56 million, exceeding the Keveyis CVR milestone of $40 million. Consistent with my previous remarks, we will settle this obligation in Xeris common shares later this month and anticipate issuing approximately 7.5 million common shares, which is a modest increase of approximately 5% of outstanding shares.
Moving onto our other revenue, in 2023 we generated $10.5 million in other revenue. This was mainly comprised of our technology partnership business, which we significantly advanced in 2023. We will be making incremental investments in our technology business in 2024 to further advance our existing partnerships and attract new partners in 2024 and beyond. These investments include accelerating GMP manufacturing readiness and clinical scale-up to enable our partner programs to move into clinical development. We believe these investments are necessary to further demonstrate the full value of our technology platform. Looking ahead to 2024, we expect to grow total revenue and are issuing full year total revenue guidance of $170 million to $200 million.
2024 revenue will be driven by the continued growth of Gvoke and Recorlev and impacted by an expected decline in Keveyis and the potential episodic contributions from our technology partnership business. Moving down the P&L, cost of goods sold in the fourth quarter was $7.6 million, a 20% increase compared to the same quarter last year. For the year, cost of goods sold was $28.6 million, an increase of 27% compared to last year. These increases are mainly driven by higher product sales. Research and development expenses were $6.4 million for the quarter and $22.3 million for the full year, a modest increase of 7% compared to prior year driven by our levo Phase II clinical study and an increase in personnel costs. Selling, general and administrative expenses were $37.6 million for the quarter, an increase of $3.2 million relative to the same period last year.
This increase was driven by rent expenses related to the facility lease that commenced in April 2023 and personnel costs, primarily driven by a modest field expansion. Compared to last quarter, SG&A was relatively flat. On a full year basis, SG&A was $146.1 million, an increase of approximately $8 million or 6% versus last year. Moving onto cash, we ended the year with a very healthy cash position and generated positive cash for the first time in Xeris’ history in the fourth quarter. As of December 31, 2023, we had total cash of $72.5 million compared to $66 million as of September 30, 2023, generating $6.5 million in cash in the quarter. Cash utilization for the full year ’23 was $49.5 million, a significant improvement over 2022 cash utilization of over $100 million.
Earlier today, we announced that we refinanced our senior secured term loan with Hayfin Capital. As a result, we are reducing the interest rate we pay on our loan by over 200 basis points as we move from a SOFR plus 9% rate to a SOFR plus 6.95% rate in the new agreement. Additionally, we drew down an incremental $50 million at close, resulting in a total facility of $200 million with the ability to draw down an additional $15.2 million to redeem our outstanding 2025 convertible notes. The new loan is interest-only with a term of five years. We must maintain minimum cash and achieve minimum revenue targets. These covenants are in line with our previous Hayfin agreement. This new agreement is a testament to the confidence Hayfin has in Xeris’ ability to successfully execute our strategy.
From a cash guidance perspective, we expect to end 2024 with a very healthy cash position of $55 million to $75 million, which includes the incremental $50 million from Hayfin less one-time costs, including a call premium, commitment fees, and other advisor and legal fees, adding a net $35 million to cash in the first quarter. We expect SG&A to be relatively flat to 2023. Furthermore, we expect R&D to increase by approximately $5 million relative to 2023 as we make strategic investments in our own pipeline and our emerging technology partnership business. The incremental capital from our refinanced Hayfin facility coupled with the continued growth of our revenue allows us to further invest in the growth of our commercial products, fund Phase III readiness activities for our own pipeline levo program, and lastly make incremental investments in our emerging technology partnership business.
To summarize, Xeris had a year of exceptional performance and growth in 2023 and we look forward to continuing to build on that momentum in 2024. With that, Operator, please open the line for questions.
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