xers-2024063000018670962024Q2FALSE12/31http://fasb.org/us-gaap/2024#SecuredOvernightFinancingRateSofrMemberP2YP3YP7YP3Y0M0Dxbrli:sharesiso4217:USDiso4217:USDxbrli:sharesxers:commerciallyAvailableProductxbrli:purexers:tranchexers:contingentValueRight00018670962024-01-012024-06-3000018670962024-07-3100018670962024-06-3000018670962023-12-310001867096us-gaap:ProductMember2024-04-012024-06-300001867096us-gaap:ProductMember2023-04-012023-06-300001867096us-gaap:ProductMember2024-01-012024-06-300001867096us-gaap:ProductMember2023-01-012023-06-300001867096xers:RoyaltyContractAndOtherRevenueMember2024-04-012024-06-300001867096xers:RoyaltyContractAndOtherRevenueMember2023-04-012023-06-300001867096xers:RoyaltyContractAndOtherRevenueMember2024-01-012024-06-300001867096xers:RoyaltyContractAndOtherRevenueMember2023-01-012023-06-3000018670962024-04-012024-06-3000018670962023-04-012023-06-3000018670962023-01-012023-06-300001867096us-gaap:CommonStockMember2022-12-310001867096us-gaap:AdditionalPaidInCapitalMember2022-12-310001867096us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-310001867096us-gaap:RetainedEarningsMember2022-12-3100018670962022-12-310001867096us-gaap:RetainedEarningsMember2023-01-012023-03-3100018670962023-01-012023-03-310001867096us-gaap:CommonStockMember2023-01-012023-03-310001867096us-gaap:AdditionalPaidInCapitalMember2023-01-012023-03-310001867096us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-03-310001867096us-gaap:CommonStockMember2023-03-310001867096us-gaap:AdditionalPaidInCapitalMember2023-03-310001867096us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-03-310001867096us-gaap:RetainedEarningsMember2023-03-3100018670962023-03-310001867096us-gaap:RetainedEarningsMember2023-04-012023-06-300001867096us-gaap:CommonStockMember2023-04-012023-06-300001867096us-gaap:AdditionalPaidInCapitalMember2023-04-012023-06-300001867096us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-04-012023-06-300001867096us-gaap:CommonStockMember2023-06-300001867096us-gaap:AdditionalPaidInCapitalMember2023-06-300001867096us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-06-300001867096us-gaap:RetainedEarningsMember2023-06-3000018670962023-06-300001867096us-gaap:CommonStockMember2023-12-310001867096us-gaap:AdditionalPaidInCapitalMember2023-12-310001867096us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-12-310001867096us-gaap:RetainedEarningsMember2023-12-310001867096us-gaap:RetainedEarningsMember2024-01-012024-03-3100018670962024-01-012024-03-310001867096us-gaap:CommonStockMember2024-01-012024-03-310001867096us-gaap:AdditionalPaidInCapitalMember2024-01-012024-03-310001867096us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-01-012024-03-310001867096us-gaap:CommonStockMember2024-03-310001867096us-gaap:AdditionalPaidInCapitalMember2024-03-310001867096us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-03-310001867096us-gaap:RetainedEarningsMember2024-03-3100018670962024-03-310001867096us-gaap:RetainedEarningsMember2024-04-012024-06-300001867096us-gaap:CommonStockMember2024-04-012024-06-300001867096us-gaap:AdditionalPaidInCapitalMember2024-04-012024-06-300001867096us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-04-012024-06-300001867096us-gaap:CommonStockMember2024-06-300001867096us-gaap:AdditionalPaidInCapitalMember2024-06-300001867096us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-06-300001867096us-gaap:RetainedEarningsMember2024-06-300001867096xers:FourCustomersMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:ProductMemberus-gaap:SalesRevenueNetMember2024-01-012024-06-300001867096xers:FourCustomersMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:ProductMemberus-gaap:SalesRevenueNetMember2024-04-012024-06-300001867096xers:FourCustomersMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:ProductMemberus-gaap:SalesRevenueNetMember2023-04-012023-06-300001867096xers:FourCustomersMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:ProductMemberus-gaap:SalesRevenueNetMember2023-01-012023-06-300001867096xers:FourCustomersMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:AccountsReceivableMember2024-01-012024-06-300001867096xers:FourCustomersMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:AccountsReceivableMember2023-01-012023-12-310001867096xers:GvokeMember2024-04-012024-06-300001867096xers:GvokeMember2023-04-012023-06-300001867096xers:GvokeMember2024-01-012024-06-300001867096xers:GvokeMember2023-01-012023-06-300001867096xers:KeveyisMember2024-04-012024-06-300001867096xers:KeveyisMember2023-04-012023-06-300001867096xers:KeveyisMember2024-01-012024-06-300001867096xers:KeveyisMember2023-01-012023-06-300001867096xers:RecorlevMember2024-04-012024-06-300001867096xers:RecorlevMember2023-04-012023-06-300001867096xers:RecorlevMember2024-01-012024-06-300001867096xers:RecorlevMember2023-01-012023-06-300001867096us-gaap:CommercialPaperMember2024-06-300001867096us-gaap:CommercialPaperMember2023-12-310001867096us-gaap:MachineryAndEquipmentMember2024-06-300001867096us-gaap:MachineryAndEquipmentMember2023-12-310001867096us-gaap:FurnitureAndFixturesMember2024-06-300001867096us-gaap:FurnitureAndFixturesMember2023-12-310001867096us-gaap:ComputerEquipmentMember2024-06-300001867096us-gaap:ComputerEquipmentMember2023-12-310001867096us-gaap:OfficeEquipmentMember2024-06-300001867096us-gaap:OfficeEquipmentMember2023-12-310001867096xers:SoftwareMember2024-06-300001867096xers:SoftwareMember2023-12-310001867096us-gaap:LeaseholdImprovementsMember2024-06-300001867096us-gaap:LeaseholdImprovementsMember2023-12-310001867096xers:DevelopedProductRightsKeveyisMember2024-06-300001867096xers:DevelopedProductRightsKeveyisMember2023-12-310001867096xers:DevelopedProductRightsRecorlevMember2024-06-300001867096xers:DevelopedProductRightsRecorlevMember2023-12-310001867096us-gaap:ConvertibleDebtMember2024-06-300001867096us-gaap:ConvertibleDebtMember2023-12-310001867096xers:Hayfin2029LoansMember2024-06-300001867096xers:HayfinLoanMember2023-12-310001867096xers:A2025ConvertibleNotesMemberus-gaap:ConvertibleDebtMember2020-07-070001867096xers:A2025ConvertibleNotesMemberus-gaap:ConvertibleDebtMember2024-01-012024-06-300001867096xers:A2025ConvertibleNotesMemberus-gaap:ConvertibleDebtMember2020-07-012020-12-310001867096xers:A2025ConvertibleNotesMemberus-gaap:ConvertibleDebtMember2023-09-292023-09-290001867096xers:A2028ConvertibleNotesMemberus-gaap:ConvertibleDebtMember2023-09-290001867096xers:A2025ConvertibleNotesMemberus-gaap:ConvertibleDebtMember2024-06-300001867096xers:A2028ConvertibleNotesMemberus-gaap:ConvertibleDebtMember2024-06-300001867096xers:AmendedLoanandSecurityAgreementMemberxers:TermLoanMember2019-09-300001867096xers:AmendedLoanandSecurityAgreementMemberxers:TermLoanMember2020-06-012020-06-300001867096xers:AmendedLoanandSecurityAgreementMemberxers:TermLoanMember2020-11-300001867096xers:HayfinLoanMemberus-gaap:SecuredDebtMember2022-03-310001867096xers:HayfinLoanMemberus-gaap:DelayedDrawTermLoanMember2022-03-310001867096xers:HayfinLoanMemberus-gaap:DelayedDrawTermLoanMember2022-12-282022-12-280001867096xers:HayfinLoanMember2022-03-310001867096xers:HayfinLoanMember2022-03-012022-03-310001867096xers:HayfinTranche1LoanMemberus-gaap:SecuredDebtMember2024-03-050001867096xers:HayfinTranche2LoanMemberus-gaap:SecuredDebtMember2024-03-050001867096xers:HayfinTranche2LoanMemberxers:SecuredDebtAndDelayedDrawTermLoanMember2024-03-050001867096xers:Hayfin2029LoansMemberus-gaap:SecuredDebtMember2024-03-050001867096xers:Hayfin2029LoansMemberus-gaap:SecuredDebtMembersrt:MinimumMember2024-03-052024-03-050001867096xers:Hayfin2029LoansMemberus-gaap:SecuredDebtMembersrt:MaximumMember2024-03-052024-03-050001867096xers:Hayfin2029LoansMemberus-gaap:SecuredDebtMember2024-03-052024-03-050001867096xers:Hayfin2029LoansMemberus-gaap:SecuredDebtMembersrt:ScenarioForecastMember2026-03-050001867096xers:Hayfin2029LoansMemberus-gaap:SecuredDebtMembersrt:ScenarioForecastMember2027-03-050001867096xers:Hayfin2029LoansMemberus-gaap:SecuredDebtMembersrt:ScenarioForecastMember2028-03-050001867096xers:A2018TermAWarrantsMember2024-06-300001867096xers:A2018TermBWarrantsMember2024-06-300001867096xers:WarrantsInConnectionWithCRGLoanAgreementMember2024-06-300001867096xers:WarrantsInConnectionWithCRGLoanAmendmentDatedJanuary2028Member2024-06-300001867096xers:WarrantsInConnectionWithAvenueCapitalLoanAgreementDueMay2025Member2024-06-300001867096xers:WarrantsInConnectionWithAvenueCapitalLoanAgreementDueDecember2025Member2024-06-300001867096xers:WarrantsInConnectionWithHorizonAndOxfordLoanAgreementMember2024-06-300001867096xers:WarrantsInConnectionWithArmisticeSecuritiesPurchaseAgreementMember2024-06-300001867096xers:WarrantsInConnectionWithHayfinLoanAgreementDueMarch2029Member2024-06-300001867096xers:TotalWarrantsAssumedMember2024-06-300001867096us-gaap:FairValueInputsLevel1Member2024-06-300001867096us-gaap:FairValueInputsLevel2Member2024-06-300001867096us-gaap:FairValueInputsLevel3Member2024-06-300001867096us-gaap:FairValueInputsLevel1Member2023-12-310001867096us-gaap:FairValueInputsLevel2Member2023-12-310001867096us-gaap:FairValueInputsLevel3Member2023-12-310001867096xers:StrongbridgeMember2021-10-050001867096xers:StrongbridgeMemberxers:AchievementInNetSalesOfKeveyisIn2023Member2021-10-050001867096xers:StrongbridgeMemberxers:AchievementInNetSalesOfKeveyisIn2023Member2021-10-052021-10-050001867096xers:StrongbridgeMemberxers:AchievementInNetSalesOfRecorlevIn2023Member2021-10-050001867096xers:StrongbridgeMemberxers:AchievementInNetSalesOfRecorlevIn2023Member2021-10-052021-10-050001867096xers:StrongbridgeMemberxers:AchievementInNetSalesOfRecorlevIn2024Member2021-10-050001867096xers:StrongbridgeMemberxers:AchievementInNetSalesOfRecorlevIn2024Member2021-10-052021-10-050001867096xers:StrongbridgeMemberus-gaap:CommonStockMember2024-01-012024-06-300001867096xers:StrongbridgeMember2024-01-012024-06-300001867096xers:CVRLiabilitiesMemberus-gaap:FairValueInputsLevel3Member2023-12-310001867096xers:CVRLiabilitiesMemberus-gaap:FairValueInputsLevel3Member2024-01-012024-06-300001867096xers:CVRLiabilitiesMemberus-gaap:FairValueInputsLevel3Member2024-06-3000018670962011-12-3100018670962018-06-300001867096xers:A2018StockOptionandIncentivePlanMember2024-06-300001867096us-gaap:EmployeeStockMember2018-06-300001867096us-gaap:EmployeeStockMember2024-01-012024-06-300001867096us-gaap:EmployeeStockMember2024-06-300001867096xers:EquityInducementPlanMember2024-06-300001867096xers:AssumedPlansMember2024-06-300001867096us-gaap:EmployeeStockOptionMemberus-gaap:ShareBasedCompensationAwardTrancheOneMembersrt:MinimumMember2024-01-012024-06-300001867096us-gaap:EmployeeStockOptionMemberus-gaap:ShareBasedCompensationAwardTrancheTwoMembersrt:MinimumMember2024-01-012024-06-300001867096us-gaap:EmployeeStockOptionMemberus-gaap:ShareBasedCompensationAwardTrancheThreeMembersrt:MinimumMember2024-01-012024-06-300001867096xers:ExchangeOfferMembersrt:MinimumMember2024-01-012024-06-300001867096xers:ExchangeOfferMembersrt:MaximumMember2024-01-012024-06-3000018670962023-01-012023-12-310001867096us-gaap:EmployeeStockOptionMember2024-06-300001867096us-gaap:EmployeeStockOptionMember2024-01-012024-06-300001867096us-gaap:RestrictedStockUnitsRSUMembersrt:MinimumMember2024-01-012024-06-300001867096us-gaap:RestrictedStockUnitsRSUMembersrt:MaximumMember2024-01-012024-06-300001867096us-gaap:RestrictedStockUnitsRSUMember2023-12-310001867096us-gaap:RestrictedStockUnitsRSUMember2024-01-012024-06-300001867096us-gaap:RestrictedStockUnitsRSUMember2024-06-300001867096us-gaap:ResearchAndDevelopmentExpenseMember2024-04-012024-06-300001867096us-gaap:ResearchAndDevelopmentExpenseMember2023-04-012023-06-300001867096us-gaap:ResearchAndDevelopmentExpenseMember2024-01-012024-06-300001867096us-gaap:ResearchAndDevelopmentExpenseMember2023-01-012023-06-300001867096us-gaap:SellingGeneralAndAdministrativeExpensesMember2024-04-012024-06-300001867096us-gaap:SellingGeneralAndAdministrativeExpensesMember2023-04-012023-06-300001867096us-gaap:SellingGeneralAndAdministrativeExpensesMember2024-01-012024-06-300001867096us-gaap:SellingGeneralAndAdministrativeExpensesMember2023-01-012023-06-300001867096us-gaap:LetterOfCreditMember2024-06-300001867096us-gaap:CollateralPledgedMemberus-gaap:LetterOfCreditMember2024-06-300001867096xers:HayfinLoanMember2024-06-300001867096us-gaap:ConvertibleDebtSecuritiesMember2024-01-012024-06-300001867096us-gaap:ConvertibleDebtSecuritiesMember2023-01-012023-06-300001867096us-gaap:StockOptionMember2024-01-012024-06-300001867096us-gaap:StockOptionMember2023-01-012023-06-300001867096us-gaap:RestrictedStockUnitsRSUMember2024-01-012024-06-300001867096us-gaap:RestrictedStockUnitsRSUMember2023-01-012023-06-300001867096us-gaap:WarrantMember2024-01-012024-06-300001867096us-gaap:WarrantMember2023-01-012023-06-30
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One) | | | | | |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2024 |
or |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _______ to _______ |
Commission file number: 001-40880 |
XERIS BIOPHARMA HOLDINGS, INC.
(Exact name of the registrant as specified in its charter)
| | | | | | | | | | | | | | | | | | | | |
| Delaware | | 87-1082097 | |
| (State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) | |
| 1375 West Fulton Street, Suite 1300 Chicago, Illinois | | 60607 | |
| (Address of principal executive offices) | | (Zip Code) | |
(844) 445-5704 |
(Registrant's telephone number, including area code) |
Not applicable |
(Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act: |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, $0.0001 par value per share | XERS | The Nasdaq Global Select Market |
|
| | | | | | | | | | | | | | | | | | | | | | | |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ¨ |
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ¨ |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. |
| Large accelerated filer ¨ | Accelerated filer | ☒ | |
| Non-accelerated filer ¨ | Smaller reporting company | ¨ | |
| | | | Emerging growth company | ¨ | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of July 31, 2024, 148,998,825 shares, par value $0.0001 per share, of common stock were outstanding.
XERIS BIOPHARMA HOLDINGS, INC.
Index to Quarterly Report on Form 10-Q
| | | | | | | | | | | |
| | | Page |
Part I. Financial Information | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| | |
| | |
Part II. Other Information | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
Solely for convenience, the trademarks and trade names in this Quarterly Report on Form 10-Q (this "Quarterly Report") are referred to without the ® and ™ symbols, but absence of such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. The trademarks, trade names and service marks appearing in this Quarterly Report are the property of their respective owners.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
XERIS BIOPHARMA HOLDINGS, INC.
Condensed Consolidated Balance Sheets
(in thousands, except share and par value)
| | | | | | | | | | | |
| June 30, 2024 | | December 31, 2023 |
Assets | (unaudited) | | |
Current assets: | | | |
Cash and cash equivalents | $ | 57,604 | | $ | 67,449 |
Short-term investments | 19,964 | | 5,002 |
Trade accounts receivable, net | 42,440 | | 39,197 |
Inventory | 42,977 | | 38,838 |
Prepaid expenses and other current assets | 7,355 | | 5,778 |
Total current assets | 170,340 | | 156,264 |
Property and equipment, net | 5,833 | | 5,971 |
Operating lease right-of-use assets | 22,864 | | 23,204 |
Goodwill | 22,859 | | 22,859 |
Intangible assets, net | 104,343 | | 109,764 |
Other assets | 5,494 | | 4,540 |
Total assets | $ | 331,733 | | $ | 322,602 |
Liabilities and Stockholders' Equity | | | |
Current liabilities: | | | |
Accounts payable | $ | 5,798 | | $ | 11,565 |
Current operating lease liabilities | 5,307 | | 3,495 |
Other accrued liabilities | 23,494 | | 23,510 |
Accrued trade discounts and rebates | 23,275 | | 22,149 |
Accrued returns reserve | 16,197 | | 14,198 |
Current portion of contingent value rights | 420 | | 19,109 |
Other current liabilities | 997 | | 1,167 |
Total current liabilities | 75,488 | | 95,193 |
Long-term debt, net of unamortized debt issuance costs | 230,481 | | 190,932 |
Non-current operating lease liabilities | 34,016 | | 34,764 |
Non-current contingent value rights | — | | 1,379 |
Deferred tax liabilities | 3,324 | | 2,268 |
Other liabilities | 7,710 | | 4,848 |
Total liabilities | 351,019 | | 329,384 |
Commitments and contingencies (Note 14) |
| |
|
| | | |
| | | |
| | | |
| | | |
| | | |
Stockholders' equity (deficit): | | | |
Preferred stock—par value $0.0001, 25,000,000 shares and 25,000,000 shares authorized and no shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively | — | | — |
Common stock—par value $0.0001, 350,000,000 shares and 350,000,000 shares authorized as of June 30, 2024 and December 31, 2023, respectively; 148,936,727 and 138,130,715 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively | 15 | | 14 |
Additional paid in capital | 631,740 | | 610,254 |
Accumulated deficit | (651,010) | | (617,025) |
Accumulated other comprehensive loss | (31) | | (25) |
Total stockholders' equity (deficit) | (19,286) | | (6,782) |
Total liabilities and stockholders' equity (deficit) | $ | 331,733 | | $ | 322,602 |
See accompanying notes to condensed consolidated financial statements.
XERIS BIOPHARMA HOLDINGS, INC.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share data, unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 | | |
Product revenue, net | $ | 46,512 | | | $ | 36,893 | | | $ | 86,775 | | | $ | 69,158 | | | |
Royalty, contract and other revenue | 1,553 | | | 1,115 | | | 1,928 | | | 2,046 | | | |
Total revenue | 48,065 | | | 38,008 | | | 88,703 | | | 71,204 | | | |
Costs and expenses: | | | | | | | | | |
Cost of goods sold | 7,790 | | | 7,555 | | | 13,761 | | | 12,874 | | | |
Research and development | 5,759 | | | 6,087 | | | 13,580 | | | 10,925 | | | |
Selling, general and administrative | 39,993 | | | 37,635 | | | 78,373 | | | 71,240 | | | |
Amortization of intangible assets | 2,710 | | | 2,710 | | | 5,421 | | | 5,421 | | | |
Total costs and expenses | 56,252 | | | 53,987 | | | 111,135 | | | 100,460 | | | |
Loss from operations | (8,187) | | | (15,979) | | | (22,432) | | | (29,256) | | | |
Other income (expense): | | | | | | | | | |
Interest and other income | 1,291 | | | 1,223 | | | 3,214 | | | 2,523 | | | |
| | | | | | | | | |
Debt refinancing costs | — | | | — | | | (2,690) | | | — | | | |
Interest expense | (7,964) | | | (6,528) | | | (14,996) | | | (12,744) | | | |
Change in fair value of warrants | 3 | | | (14) | | | 7 | | | (14) | | | |
Change in fair value of contingent value rights | 601 | | | 781 | | | 3,968 | | | 2,140 | | | |
Total other expense | (6,069) | | | (4,538) | | | (10,497) | | | (8,095) | | | |
Net loss before income taxes | (14,256) | | | (20,517) | | | (32,929) | | | (37,351) | | | |
Income tax (expense) benefit | (749) | | | 675 | | | (1,056) | | | 675 | | | |
Net loss | $ | (15,005) | | | $ | (19,842) | | | $ | (33,985) | | | $ | (36,676) | | | |
| | | | | | | | | |
Other comprehensive loss, net of tax: | | | | | | | | | |
Unrealized losses on investments | 5 | | | (49) | | | (5) | | | (55) | | | |
Foreign currency translation adjustments | 1 | | | — | | | — | | | — | | | |
Comprehensive loss | $ | (14,999) | | | $ | (19,891) | | | $ | (33,990) | | | $ | (36,731) | | | |
| | | | | | | | | |
Net loss per common share - basic and diluted | $ | (0.10) | | | $ | (0.14) | | | $ | (0.24) | | | $ | (0.27) | | | |
| | | | | | | | | |
Weighted average common shares outstanding - basic and diluted | 148,345,549 | | | 137,338,071 | | | 144,372,512 | | | 137,250,465 | | | |
See accompanying notes to condensed consolidated financial statements.
XERIS BIOPHARMA HOLDINGS, INC.
Condensed Consolidated Statements of Stockholders' Equity (Deficit)
(in thousands, except share data, unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Stock | | Additional Paid In Capital | | Accumulated Other Comprehensive Loss | | Accumulated Deficit | | Total Stockholders' Equity (Deficit) |
| | Shares | | Amount | |
Balance, December 31, 2022 | | 136,273,090 | | | $ | 14 | | | $ | 599,966 | | | $ | (23) | | | $ | (554,770) | | | $ | 45,187 | |
Net loss | | — | | | — | | | — | | | — | | | (16,834) | | | (16,834) | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Vesting of restricted stock units (net of 743,677 shares withheld for tax) | | 1,018,187 | | | — | | | (863) | | | — | | | — | | | (863) | |
Stock-based compensation | | — | | | — | | | 2,564 | | | — | | | — | | | 2,564 | |
| | | | | | | | | | | | |
Other comprehensive loss | | — | | | — | | | — | | | (6) | | | — | | | (6) | |
Balance, March 31, 2023 | | 137,291,277 | | | $ | 14 | | | $ | 601,667 | | | $ | (29) | | | $ | (571,604) | | | $ | 30,048 | |
Net loss | | — | | | — | | | — | | | — | | | (19,842) | | | (19,842) | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Exercise of stock options | | 14,036 | | | — | | | 32 | | | — | | | — | | | 32 | |
Vesting of restricted stock units (net of 13,525 shares withheld for tax) | | 129,033 | | | — | | | (25) | | | — | | | — | | | (25) | |
Stock-based compensation | | — | | | — | | | 2,928 | | | — | | | — | | | 2,928 | |
Issuance of common stock through employee stock purchase plan | | 577,784 | | | — | | | 549 | | | — | | | — | | | 549 | |
Other comprehensive loss | | — | | | — | | | — | | | (49) | | | — | | | (49) | |
Balance, June 30, 2023 | | 138,012,130 | | | $ | 14 | | | $ | 605,151 | | | $ | (78) | | | $ | (591,446) | | | $ | 13,641 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Stock | | Additional Paid In Capital | | Accumulated Other Comprehensive Loss | | Accumulated Deficit | | Total Stockholders' Equity (Deficit) |
| | Shares | | Amount | |
Balance, December 31, 2023 | | 138,130,715 | | | $ | 14 | | | $ | 610,254 | | | $ | (25) | | | $ | (617,025) | | | $ | (6,782) | |
Net loss | | — | | | — | | | — | | | — | | | (18,980) | | | (18,980) | |
Issuance of common stock to settle contingent value rights | | 7,525,048 | | | 1 | | | 15,802 | | | — | | | — | | | 15,803 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Exercise of stock options | | 229,417 | | | — | | | 459 | | | — | | | — | | | 459 | |
Vesting of restricted stock units (net of 1,437,592 shares withheld for tax) | | 2,339,223 | | | — | | | (3,434) | | | — | | | — | | | (3,434) | |
Stock-based compensation | | — | | | — | | | 3,767 | | | — | | | — | | | 3,767 | |
| | | | | | | | | | | | |
Other comprehensive loss | | — | | | — | | | — | | | (11) | | | — | | | (11) | |
Balance, March 31, 2024 | | 148,224,403 | | | $ | 15 | | | $ | 626,848 | | | $ | (36) | | | $ | (636,005) | | | $ | (9,178) | |
Net loss | | — | | | — | | | — | | | — | | | (15,005) | | | (15,005) | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Vesting of restricted stock units (net of 23,230 shares withheld for tax) | | 340,417 | | | — | | | (51) | | | — | | | — | | | (51) | |
Stock-based compensation | | — | | | — | | | 4,233 | | | — | | | — | | | 4,233 | |
Issuance of common stock through employee stock purchase plan | | 371,907 | | | — | | | 710 | | | — | | | — | | | 710 | |
Other comprehensive gain | | — | | | — | | | — | | | 5 | | | — | | | 5 | |
Balance, June 30, 2024 | | 148,936,727 | | | $ | 15 | | | $ | 631,740 | | | $ | (31) | | | $ | (651,010) | | | $ | (19,286) | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
See accompanying notes to condensed consolidated financial statements.
XERIS BIOPHARMA HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)
| | | | | | | | | | | | | | | | | | | |
| | | Six Months Ended June 30, |
| | | | | 2024 | | 2023 | | |
Cash flows from operating activities: | | | | | | | | | |
Net loss | | | | | $ | (33,985) | | | $ | (36,676) | | | |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | | | |
Depreciation | | | | | 607 | | | 750 | | | |
Amortization of intangible assets | | | | | 5,421 | | | 5,421 | | | |
Amortization of premium/discount on investments | | | | | (482) | | | (812) | | | |
Amortization of debt discount and debt issuance costs | | | | | 1,380 | | | 1,107 | | | |
Amortization of operating right-of-use assets | | | | | 340 | | | 373 | | | |
Deferred income tax expense (benefit) | | | | | 1,056 | | | (675) | | | |
Stock-based compensation | | | | | 8,000 | | | 5,492 | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Change in fair value of contingent value rights | | | | | (3,968) | | | (2,140) | | | |
| | | | | | | | | |
Changes in operating assets and liabilities: | | | | | | | | | |
Trade accounts receivable | | | | | (3,243) | | | 605 | | | |
Prepaid expenses and other current assets | | | | | (1,577) | | | 827 | | | |
Inventory | | | | | (4,597) | | | (11,250) | | | |
Accounts payable | | | | | (6,063) | | | 7,015 | | | |
Other accrued liabilities | | | | | 442 | | | (11,206) | | | |
Accrued trade discounts and rebates | | | | | 1,126 | | | 216 | | | |
Accrued returns reserve | | | | | 1,999 | | | 147 | | | |
Supply agreement liabilities | | | | | — | | | (6,720) | | | |
Operating lease liabilities | | | | | 1,064 | | | 5,961 | | | |
Other | | | | | 1,829 | | | 1,681 | | | |
Net cash used in operating activities | | | | | (30,651) | | | (39,884) | | | |
Cash flows from investing activities: | | | | | | | | | |
Capital expenditures | | | | | (561) | | | (1,786) | | | |
Purchases of investments | | | | | (29,486) | | | (43,741) | | | |
Sales and maturities of investments | | | | | 15,000 | | | 10,000 | | | |
| | | | | | | | | |
Net cash used in investing activities | | | | | (15,047) | | | (35,527) | | | |
Cash flows from financing activities: | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Proceeds from debt refinancing | | | | | 50,000 | | | — | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Payment of debt discount | | | | | (11,831) | | | — | | | |
Proceeds from issuance of employee stock purchase plan shares | | | | | 710 | | | 549 | | | |
Proceeds from exercise of stock awards | | | | | 459 | | | 32 | | | |
Repurchase of common stock withheld for taxes | | | | | (3,485) | | | (888) | | | |
Net cash provided by (used in) financing activities | | | | | 35,853 | | | (307) | | | |
| | | | | | | | | |
Decrease in cash, cash equivalents and restricted cash | | | | | (9,845) | | | (75,718) | | | |
Cash, cash equivalents and restricted cash, beginning of year | | | | | 71,674 | | | 126,314 | | | |
Cash, cash equivalents and restricted cash, end of year | | | | | $ | 61,829 | | | $ | 50,596 | | | |
| | | | | | | | | |
XERIS BIOPHARMA HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)
| | | | | | | | | | | | | | | | | | | |
| | | Six Months Ended June 30, |
| | | | | 2024 | | 2023 | | |
Supplemental schedule of cash flow information: | | | | | | | | | |
Cash paid for interest | | | | | $ | 8,320 | | | $ | 15,206 | | | |
Supplemental schedule of non-cash activities: | | | | | | | | | |
Issuance of common shares in settlement of CVR liability | | | | | $ | 15,803 | | | $ | — | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that agrees to the same amounts shown in the condensed consolidated statements of cash flows (in thousands):
| | | | | | | | | | | | | | | | | |
| | | As of June 30, |
| | | | | 2024 | | 2023 |
Cash flows from operating activities: | | | | | | | |
Cash and cash equivalents | | | | | $ | 57,604 | | | $ | 46,170 | |
Restricted cash included in Other assets (1) | | | | | 4,225 | | | 4,426 | |
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows | | | | | $ | 61,829 | | | $ | 50,596 | |
(1) These restricted cash items are primarily security deposit in the form of letters of credit for the Company to secure certain leases.
See accompanying notes to condensed consolidated financial statements.
XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Note 1. Organization and nature of the business
Nature of business
Xeris Biopharma Holdings, Inc. ("Xeris Biopharma" or the "Company") is a growth-oriented biopharmaceutical company committed to improving patients' lives by developing and commercializing clinically meaningful products across a range of therapies. The Company currently has three commercially available products: Gvoke, a ready-to-use, liquid-stable glucagon for the treatment of severe hypoglycemia; Recorlev, a cortisol synthesis inhibitor for the treatment of endogenous hypercortisolemia in adult patients with Cushing's syndrome approved by the Food and Drug Administration ("FDA") in December 2021; and Keveyis, the first therapy approved in the United States to treat hyperkalemic, hypokalemic, and related variants of Primary Periodic Paralysis ("PPP"). The Company also has a pipeline of development programs to bring new products forward using its proprietary formulation science, XeriSol and XeriJect.
As used herein, the "Company" or "Xeris" refers to Xeris Pharmaceuticals, Inc. ("Xeris Pharma") when referring to periods prior to the acquisition of Strongbridge Biopharma plc ("Strongbridge") on October 5, 2021 and to Xeris Biopharma when referring to periods on or subsequent to October 5, 2021.
Throughout this document, unless otherwise noted, references to Gvoke include Gvoke PFS, Gvoke HypoPen, Gvoke Kit and Ogluo (glucagon).
The Company is subject to a number of risks similar to other specialty pharmaceutical companies, including, but not limited to, successful commercialization and market acceptance of available products and any future products, if and when approved, successful development of product candidates, the development of new technological innovations by competitors, and protection of intellectual property.
Liquidity and capital resources
The Company has incurred operating losses since inception and has an accumulated deficit of $651.0 million as of June 30, 2024. The Company expects to continue to incur net losses for at least the next 12 months beyond the issuance date of these condensed consolidated financial statements. Based on the Company's current operating plans and existing working capital at June 30, 2024, the Company believes that its cash resources are sufficient to sustain operations and capital expenditure requirements for at least the next 12 months from the issuance date of these condensed consolidated financial statements.
If needed, the Company may elect to finance its operations through equity or debt financing along with revenues. There can be no assurance that such funding may be available to the Company on acceptable terms, or at all, or that the Company will be able to successfully market and sell Gvoke, Recorlev and Keveyis. Market volatility resulting from geopolitical instability resulting from the ongoing military conflicts between Russia and Ukraine and Israel and Hamas, rising interest rates, inflationary pressures, the tightening of lending standards, any further deterioration in the macroeconomic economy or financial services industry resulting from actual or potential bank failures, or other factors could also adversely impact the Company's ability to access capital as and when needed. The issuance of equity securities may result in dilution to stockholders. If the Company raises additional funds through the issuance of additional debt, which may have rights, preferences and privileges senior to those of the Company's common stockholders, the terms of the debt could impose significant restrictions on the Company's operations. The failure to raise funds as and when needed could have a negative impact on the Company's financial condition and ability to pursue its business strategies. If additional funding is not secured when required, the Company may need to delay or curtail its operations until such funding is received, which would have a material adverse impact on the business prospects and results of operations.
Note 2. Basis of presentation and summary of significant accounting policies and estimates
Basis of presentation
The condensed consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"), including those for interim financial information, and with the instructions for Quarterly Reports on Form 10-Q and Article 10 of Regulation S-X issued by the U.S. Securities and Exchange Commission (the "SEC").
In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation of the Company's financial position, results of operations and cash flows for the periods presented. The results of operations for such periods are not necessarily indicative of the results that may be expected for any future period. The accompanying financial statements should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2023 included in the Company's Annual Report on Form 10-K filed with the SEC on March 6, 2024.
Certain information and disclosures normally included in the annual financial statements prepared in accordance with GAAP, but that is not required for interim reporting purposes, have been condensed or omitted.
XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification ("ASC") and Accounting Standards Update ("ASU") issued by the Financial Accounting Standards Board ("FASB").
Some items in the prior year financial statements may have been reclassified to conform to the current presentation. Reclassification had no effect on prior year net income or stockholders’ equity.
Basis of consolidation
These condensed consolidated financial statements include the financial statements of Xeris Biopharma Holdings, Inc. and subsidiaries. All intercompany transactions have been eliminated.
Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses included in the financial statements and accompanying notes. Actual results could differ from those estimates.
Revenue recognition
The Company applies the guidance in ASC 606, Revenue Recognition, to all contracts with customers within the scope of the standard.
The Company sells product primarily to wholesalers or a specialty pharmacy that subsequently resell to retail pharmacies or patients. The Company enters into arrangements with payors, group purchasing organizations, and healthcare providers that provide for government-mandated or privately-negotiated rebates, chargebacks and discounts related to the Company's products. The Company currently sells Gvoke, Recorlev and Keveyis in the United States only.
Revenue is recognized when the Company's customer (e.g., a wholesaler or specialty pharmacy) obtains control of promised goods or services, which is when the Company's obligations under the terms of the contract with the customer are satisfied, based on the consideration the Company expects to receive in exchange for those goods or services.
Revenues are recorded at the net product sales price, which includes estimated allowances for patient copay assistance programs, prompt payment discounts, payor rebates, chargebacks, service fees, and product returns, all of which are recorded at the time of sale to the pharmaceutical wholesaler or other customer. The Company applies significant judgments and estimates in determining some of these allowances. If actual results differ from its estimates, adjustments are made to these allowances in the period in which the actual results or updates to estimates become known.
Such revenue is reported as product revenue, net in the condensed consolidated statements of operations and comprehensive loss.
Additionally, the Company earns revenue from research collaborations for the use of Xeris' proprietary formulation technology platforms and royalties from branded products. Such revenue is recognized as earned in accordance with contract terms when it can be reasonably estimated and collectability is reasonably assured. This revenue is reported as royalty, contract and other revenue in the condensed consolidated statements of operations and comprehensive loss.
Concentration of credit risk
For both the three and six months ended June 30, 2024, four customers accounted for 97% of the Company's gross product revenue. For the three and six months ended June 30, 2023, four customers accounted for 97% and 96% of the Company's gross product revenue, respectively. At June 30, 2024 and December 31, 2023, the same four customers accounted for 96% and 99% of the trade accounts receivable, net, respectively.
New accounting pronouncements
Adopted accounting standard
In July 2023, the FASB issued ASU 2023-03, Presentation of Financial Statements (Topic 205), Income Statement - Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation - Stock Compensation (Topic 718). This standard amends various SEC paragraphs in the Accounting Standards Codification to primarily reflect the issuance of SEC Staff Accounting Bulletin No. 120. Staff Accounting Bulletin No. 120 provides guidance to companies issuing share-based awards shortly before announcing material, nonpublic information to consider such material nonpublic information to adjust observable market prices if the release of material nonpublic information is expected to affect the share price. The standard does not provide any new guidance so there is no transition or effective date associated with it and therefore, the Company adopted this standard with no impact on the Company's financial statements.
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This standard eliminates certain accounting models to simplify the accounting for convertible instruments, expands the disclosure requirements related to the terms and features of convertible instruments, and amends the guidance for the
XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
derivatives scope exception for contracts settled in an entity's own equity. Consequently, more convertible debt instruments will be reported as a single liability instrument and more convertible preferred stock as a single equity instrument with no separate accounting for embedded conversion features. This standard enhances the consistency of earnings-per-share ("EPS") calculations by requiring that an entity use the if-converted method and that the effect of potential share settlement be included in diluted EPS calculations and disclosures. The Company adopted ASU 2020-06 on January 1, 2024. Adoption of ASU 2020-06 did not impact the Company's financial position, results of operations or cash flows since the Company did not separately present in equity an embedded conversion feature in such debt but accounted for the convertible debt instrument wholly as debt.
Pending accounting standards
In March 2024, the FASB issued ASU 2024-02, Codification Improvements - Amendments to Remove References to the Concept Statements. This standard amends the Codification to remove references to various concepts statements and impacts a variety of topics in the Codification. The amendments apply to all reporting entities within the scope of the affected accounting guidance, but in most instances the references removed are extraneous and not required to understand or apply the guidance. Generally, the amendments in this standard are not intended to result in significant accounting changes for most entities. The standard is effective January 1, 2025 and is not expected to have a material impact on the Company's financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This standard expands the requirements for income tax disclosures in order to provide greater transparency. The amendments are effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied prospectively. The Company is evaluating the timing and effects of the adoption of this standard on the Company's disclosures.
In December 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Segment Reporting Disclosures. This standard requires an entity to provide more detailed information about its reportable segment expenses that are included within management's measurement of profit and loss and will require certain annual disclosures to be provided on an interim basis. The amendments in this ASU are effective for the Company in 2025 for annual reporting and in 2026 for interim reporting, with early adoption permitted beginning in 2024, and is required to be applied using the full retrospective method of transition. The Company is evaluating the timing and effects of the adoption of this standard on the Company's segment disclosures.
In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements - Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. This Standard modifies the disclosure or presentation requirements of a variety of Topics in the Codification to align with the SEC's regulations. The ASU also makes those requirements applicable to entities that were not previously subject to the SEC's requirements. The ASU is effective for the Company two years after the effective date to remove the related disclosure from Regulation S-X or S-K. As of the date these financial statements have been made available for issuance, the SEC has not yet removed any related disclosure. The Company does not expect the adoption of this standard to have a material impact on the Company's financial statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This standard provides optional expedients for the application of GAAP, if certain criteria are met, to contracts and other transactions that reference London Inter-bank Offered Rate ("LIBOR") or other reference rates that are expected to be discontinued because of reference rate reform. This standard is effective for all entities as of March 12, 2020 through December 31, 2022. On December 21, 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, which extends the period of time entities can utilize the reference rate reform relief guidance under ASU 2020-04 from December 31, 2022 to December 31, 2024. The Company does not expect the adoption of this standard to have a material impact on the Company's financial statements.
Note 3. Disaggregated revenue
Disaggregated revenue by product (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2024 | | 2023 | | 2024 | | 2023 | | |
Product revenue: | | | | | | | | | | |
Gvoke | | $ | 20,046 | | | $ | 15,638 | | | $ | 36,625 | | | $ | 30,671 | | | |
Keveyis | | 13,128 | | | 14,088 | | | 26,213 | | | 26,843 | | | |
Recorlev | | 13,338 | | | 7,167 | | | 23,937 | | | 11,644 | | | |
Product revenue, net | | 46,512 | | | 36,893 | | | 86,775 | | | 69,158 | | | |
Royalty, contract and other revenue | | 1,553 | | | 1,115 | | | 1,928 | | | 2,046 | | | |
Total revenue | | $ | 48,065 | | | $ | 38,008 | | | $ | 88,703 | | | $ | 71,204 | | | |
XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Note 4. Short-term investments
The Company classifies investments in debt securities as available-for-sale. Debt securities are comprised of liquid investments that are highly rated securities and, as of June 30, 2024, consist of U.S. government securities, all with remaining maturities of less than one year. Debt securities as of June 30, 2024 had an average remaining maturity of 0.2 years. The debt securities are reported at fair value with unrealized gains or losses recorded in accumulated other comprehensive income (loss) in the condensed consolidated balance sheets. The cost of short-term investments is adjusted for amortization of premiums or accretion of discounts to maturity, and such amortization or accretion, as well as interest income, are included in interest and other income in the condensed consolidated statements of operations and comprehensive loss. Refer to "Note 11 - Fair value measurements," for information related to the fair value measurements and valuation methods utilized.
The following table represents the Company's short-term investments by major security type (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2024 |
| | Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Total Fair Value |
Investments: | | | | | | | | |
U.S. government securities | | $ | 19,971 | | | $ | — | | | $ | (7) | | | $ | 19,964 | |
| | | | | | | | |
| | | | | | | | |
Total available-for-sale investments | | $ | 19,971 | | | $ | — | | | $ | (7) | | | $ | 19,964 | |
| | | | | | | | |
| | December 31, 2023 |
| | Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Total Fair Value |
Investments: | | | | | | | | |
U.S. government securities | | $ | 5,004 | | | $ | — | | | $ | (2) | | | $ | 5,002 | |
| | | | | | | | |
| | | | | | | | |
Total available-for-sale investments | | $ | 5,004 | | | $ | — | | | $ | (2) | | | $ | 5,002 | |
Allowance for Credit Losses
For available-for-sale securities in an unrealized loss position, the Company first assesses whether they are intended to be sold, or if it is more likely than not that the Company will be required to sell, the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security's amortized cost basis is written down to fair value through earnings. For available-for-sale securities that do not meet the above criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the severity of the impairment, any changes in interest rates, market conditions, changes to the underlying credit ratings and forecasted recovery, among other factors. The credit-related portion of unrealized losses, and any subsequent improvements, are recorded in interest income through an allowance account. Any impairment that has not been recorded through an allowance for credit losses is included in other comprehensive loss on the statements of operations and comprehensive loss. No credit loss allowance was recorded in the three and six months ended June 30, 2024 and 2023.
Note 5. Inventory
The components of inventory consist of the following (in thousands): | | | | | | | | | | | |
| June 30, 2024 | | December 31, 2023 |
| | | |
Raw materials | $ | 23,910 | | | $ | 17,404 | |
Work in process | 11,302 | | | 10,959 | |
Finished goods | 7,765 | | | 10,475 | |
Inventory | $ | 42,977 | | | $ | 38,838 | |
| | | |
Inventory reserves were $3.9 million and $2.4 million at June 30, 2024 and December 31, 2023, respectively.
XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Note 6. Property and equipment
Property and equipment consist of the following (in thousands): | | | | | | | | | | | |
| June 30, 2024 | | December 31, 2023 |
| | | |
Lab equipment | $ | 4,600 | | | $ | 4,153 | |
Furniture and fixtures | 539 | | | 539 | |
Computer equipment | 826 | | | 860 | |
Office equipment | 97 | | | 97 | |
Software | 374 | | | 374 | |
Leasehold improvements | 6,040 | | | 5,984 | |
Total property and equipment | 12,476 | | | 12,007 | |
Less: accumulated depreciation and amortization | (6,643) | | | (6,036) | |
Property and equipment, net | $ | 5,833 | | | $ | 5,971 | |
Depreciation and amortization expense relating to property and equipment was $0.3 million and $0.4 million for the three months ended June 30, 2024 and 2023, respectively. Depreciation and amortization expense relating to property and equipment was $0.6 million and $0.8 million for the six months ended June 30, 2024 and 2023, respectively.
Note 7. Intangible assets
Identified intangible assets consist of the following (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2024 | | December 31, 2023 |
| Life (Years) | Gross assets | Accumulated amortization | Net | | Gross assets | Accumulated amortization | Net |
Definite-lived intangible asset - Keveyis | 5 | $ | 11,000 | | $ | (6,050) | | $ | 4,950 | | | $ | 11,000 | | $ | (4,950) | | $ | 6,050 | |
Definite-lived intangible asset - Recorlev | 14 | 121,000 | | (21,607) | | 99,393 | | | 121,000 | | (17,286) | | 103,714 | |
Total intangible assets | | $ | 132,000 | | $ | (27,657) | | $ | 104,343 | | | $ | 132,000 | | $ | (22,236) | | $ | 109,764 | |
As of June 30, 2024, expected amortization expense for intangible assets subject to amortization for the next five years and thereafter is as follows (in thousands):
| | | | | |
2024 remaining | $ | 5,422 | |
2025 | 10,843 | |
2026 | 10,293 | |
2027 | 8,643 | |
2028 | 8,643 | |
| |
Thereafter | 60,499 | |
Total | $ | 104,343 | |
XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Note 8. Other accrued liabilities
Other accrued liabilities consist of the following (in thousands): | | | | | | | | | | | |
| June 30, 2024 | | December 31, 2023 |
Accrued employee costs | $ | 12,825 | | | $ | 16,956 | |
Accrued interest expense | 6,670 | | | 1,374 | |
Accrued supply chain costs | 441 | | | 523 | |
Accrued marketing costs | 803 | | | 598 | |
| | | |
Accrued research and development costs | 621 | | | 960 | |
Accrued other costs | 2,134 | | | 3,099 | |
Other accrued liabilities | $ | 23,494 | | | $ | 23,510 | |
Note 9. Long-term debt
The components of debt are as follows (in thousands):
| | | | | | | | | | | |
| June 30, 2024 | | December 31, 2023 |
| | | |
Convertible senior notes | $ | 49,256 | | | $ | 49,306 | |
Less: unamortized debt issuance costs | (1,186) | | | (1,400) | |
Loan agreement | 184,722 | | | 145,569 | |
Less: unamortized debt issuance costs | (2,311) | | | (2,543) | |
Long-term debt, net of unamortized debt issuance costs | $ | 230,481 | | | $ | 190,932 | |
Convertible senior notes
In June 2020, Xeris Pharma completed a public offering of $86.3 million aggregate principal amount of Xeris Pharma's 5.00% Convertible Senior Notes due 2025 (the "2025 Convertible Notes"), including $11.3 million pursuant to the underwriters' option to purchase additional notes, which was exercised in full in July 2020. Since January 15, 2021, the 2025 Convertible Notes bear cash interest at the rate of 5.00% per annum, payable semi-annually in arrears on January 15 and July 15 of each year.
Xeris Pharma incurred debt issuance costs of $5.1 million in connection with the issuance of the 2025 Convertible Notes. At any time before the close of business on the second scheduled trading day immediately before the maturity date, holders of 2025 Convertible Notes may convert their 2025 Convertible Notes at their option into shares of the Company's common stock, together, if applicable, with cash in lieu of any fractional share, at a conversion rate of 326.7974 shares of the Company's common stock per $1,000 principal amount of 2025 Convertible Notes. In the second half of 2020, $39.1 million in principal amount of 2025 Convertible Notes were converted into 13,171,791 shares of Xeris Pharma's common stock.
On September 29, 2023, the Company completed the exchange of $32.0 million in aggregate principal amount of the 2025 Convertible Notes for $33.6 million in aggregate principal amount of new 8.00% Convertible Notes due 2028 (the "2028 Convertible Notes" and together with the 2025 Convertible Notes, the "Convertible Notes"). As of June 30, 2024, the outstanding balance of the 2025 Convertible Notes was $15.2 million and the outstanding balance of the 2028 Convertible Notes was $33.6 million.
The 2025 Convertible Notes are governed by the terms of a base indenture for senior debt securities dated June 30, 2020 (the "2025 Base Indenture"), as supplemented by the first supplemental indenture dated June 30, 2020 (the "First Supplemental Indenture"), and the second supplemental indenture dated October 5, 2021 (the "Second Supplemental Indenture" and together with the 2025 Base Indenture and First Supplemental Indenture, the "2025 Indenture"), among the Company, as guarantor, Xeris Pharma, as issuer, and U.S. Bank Trust Company, National Association (f/k/a U.S. Bank National Association), as trustee (the "Trustee"). The 2028 Convertible Notes are governed by the terms of an indenture for senior debt securities dated September 29, 2023 (the "2028 Indenture" and together with the 2025 Indenture, the "Indentures") among the Company, as issuer, Xeris Pharma, as guarantor, and the Trustee. The 2025 Convertible Notes and the 2028 Convertible Notes will mature on July 15, 2025 and July 15, 2028, respectively, unless earlier converted or redeemed or repurchased.
The Convertible Notes are senior, unsecured obligations and are equal in right of payment with the issuer's existing and future senior, unsecured indebtedness, senior in right of payment to its future indebtedness, if any, that is expressly subordinated to the Convertible Notes, and effectively subordinated to its existing and future secured indebtedness to the extent of the value of the collateral securing that indebtedness. The Convertible Notes are structurally subordinated to all existing and future indebtedness and other liabilities,
XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
including trade payables, and (to the extent the Company or Xeris Pharma is not a holder thereof) preferred equity, if any, of the Company's direct and indirect subsidiaries other than Xeris Pharma.
As a result of the transactions associated with the acquisition of Strongbridge, and pursuant to the Second Supplemental Indenture, the 2025 Convertible Notes are no longer convertible into shares of common stock of Xeris Pharma. Instead, subject to the terms and conditions of the 2025 Indenture, the 2025 Convertible Notes will be exchangeable into cash and shares of common stock of the Company in proportion to the transaction consideration payable pursuant to the transaction agreement for the acquisition of Strongbridge, and the "Reference Property" provisions in the 2025 Indenture.
The fair value of the Convertible Notes is determined using current interest rates based on credit ratings and the remaining term of maturity. As of June 30, 2024, the fair value of the Convertible Notes was approximately $53.5 million. The fair value of the convertible debt was estimated using inputs for volatility, the Company's stock price, time to maturity, the risk-free rate and the Company's credit spread, some of which are considered Level 3 inputs in the fair value hierarchy disclosed in "Note 11 - Fair value measurement."
Loan agreement
In September 2019, Xeris Pharma entered into an Amended and Restated Loan and Security Agreement (the "Oxford Loan Agreement") with Oxford Finance LLC ("Oxford"), as the collateral agent and a lender, and Silicon Valley Bank, as a lender ("SVB," and together with Oxford, the "Prior Lenders"). The Oxford Loan Agreement provided for the Prior Lenders to extend up to $85.0 million in term loans to Xeris Pharma in three tranches, of which $60.0 million was drawn down in September 2019.
In June 2020, Xeris Pharma paid a portion of the term loan equal to the sum of $20.0 million, plus all accrued and unpaid interest. In November 2020, an additional $3.5 million was drawn from the term loan.
In March 2022, the Company, Xeris Pharma and certain subsidiary guarantors of the Company entered into a Credit Agreement and Guaranty (as amended, modified or amended and restated from time to time, the "Hayfin Loan Agreement") with the lenders from time to time parties thereto (the "Lenders") and Hayfin Services LLP, as administrative agent for the Lenders (in such capacity, together with its successors and assigns, the "Agent"), pursuant to which the Company and its subsidiaries party thereto granted a first priority security interest on substantially all of their assets, including intellectual property, subject to certain exceptions. The Hayfin Loan Agreement provided for the Lenders to extend $100.0 million in term loans to the Company on the closing date and up to an additional $50.0 million in delayed draw term loans during the one year period immediately following the closing date (collectively, the "Loans"). On December 28, 2022, the Company borrowed the full amount of such $50.0 million delayed draw term loan under the Hayfin Loan Agreement. In conjunction with the execution of the Hayfin Loan Agreement, the Oxford Loan Agreement remaining balance of $43.5 million and fees of $2.1 million in connection with the loan repayment were paid. In addition to utilizing the proceeds to repay the obligations under the Oxford Loan Agreement in full, the proceeds were otherwise used for general corporate purposes.
On March 5, 2024, the Company, Xeris Pharma and certain subsidiary guarantors of the Company entered into an Amended and Restated Credit Agreement and Guaranty (the "Amended and Restated Credit Agreement") with the lenders from time to time parties thereto (the "New Lenders") and Hayfin Services LLP, as administrative agent for the New Lenders, pursuant to which the Company and its subsidiaries party thereto granted a first priority security interest on substantially all of their assets, including intellectual property, subject to certain exceptions. The Amended and Restated Credit Agreement amends and restates in its entirety the Hayfin Loan Agreement. The Amended and Restated Credit Agreement provided for the New Lenders to extend $200.0 million in term loans (the "Tranche 1 Loans") to Xeris Pharma on the closing date and $15.2 million in additional term loans (the "Tranche 2 Loans" and, together with the Tranche 1 Loans, the "2029 Loans") on any date after the closing date and through July 15, 2025. The Tranche 2 Loans may only be used to redeem the 2025 Convertible Notes. In conjunction with the execution of the Amended and Restated Credit Agreement, the aggregate principal balance of $150.0 million plus all accrued and unpaid interest outstanding under the Hayfin Loan Agreement was continued under the Amended and Restated Credit Agreement as Tranche 1 Loans. In addition to utilizing the proceeds to repay the obligations under the Hayfin Loan Agreement in full, the proceeds of the Tranche 1 Loans will otherwise be used for general corporate purposes. After repayment, the 2029 Loans may not be re-borrowed.
The 2029 Loans will mature on March 5, 2029; provided, however, that the 2029 Loans will mature on (A) January 15, 2025 if the 2025 Convertible Notes are outstanding as of such date or (B) January 15, 2028 if the 2028 Convertible Notes are outstanding as of such date and, in both cases, either (i) the maturity date of the applicable notes has not been extended to a date not earlier than September 5, 2029 and (ii) the Company has not received net cash proceeds from one or more permitted equity raises or permitted raises of convertible debt which, together with no more than $15.6 million of cash on hand, is sufficient to redeem and discharge the 2025 Convertible Notes or the 2028 Convertible Notes, as applicable, in full.
The 2029 Loans incur interest at a floating per annum rate in an amount equal to the sum of (i) 6.95% (or 5.95% if the replacement rate is in effect) plus (ii) the greater of (x) the forward-looking term rate based on SOFR for a three month tenor (or the replacement rate, if applicable), and (y) 2.00% per annum. The remaining balance of unamortized debt issuance costs have been reflected as a direct reduction to the loan balance. The effective interest rate of the 2029 Loans, including the amortization of debt discount and debt
XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
issuance costs, amounts to approximately 11.4%. The debt outstanding under the 2029 Loans approximates fair value due to the variable interest rate on the debt.
The Amended and Restated Credit Agreement allows Xeris Pharma to voluntarily prepay the outstanding amounts thereunder. Xeris Pharma is subject to an early prepayment fee equal to (i) for any prepayment that occurs on or prior to the second anniversary of the closing date, the applicable make-whole amount, (ii) for any prepayment that occurs after the second anniversary of the closing date but on or prior to the fourth anniversary of the closing date, the product of (x) the amount of any principal so prepaid, multiplied by (y) for any prepayment that occurs (A) after the second anniversary of the closing date and on or prior to the third anniversary of the closing date, five percent (5.00%), (B) after the third anniversary of the closing date and on or prior to the fourth anniversary of the closing date, three percent (3.00%), and (C) after the fourth anniversary of the closing date, zero percent (0.00%).
The Amended and Restated Credit Agreement contains customary representations and warranties, events of default and affirmative and negative covenants, including, among others, covenants that limit or restrict the Company's (and its subsidiaries) ability to incur additional indebtedness, grant liens, merge or consolidate, make acquisitions, pay dividends or other distributions or repurchase equity, make investments, dispose of assets and enter into certain transactions with affiliates, in each case subject to certain exceptions.
The Amended and Restated Credit Agreement was accounted for as a modification of debt in accordance with ASC 470-50, Debt - Modifications and Extinguishments, thus there was no gain or loss recognized on the transaction.
The following table sets forth the Company's future minimum principal payments on the Convertible Notes and the loan facility (in thousands):
| | | | | |
2024 remaining | $ | — | |
2025 | 15,200 | |
2026 | — | |
2027 | — | |
2028 | 33,574 | |
| |
Thereafter | 200,000 | |
| $ | 248,774 | |
For the three and six months ended June 30, 2024, the Company recognized interest expense of $8.0 million and $15.0 million, respectively, of which $0.8 million and $1.4 million, respectively, related to the amortization of debt discount and issuance costs, respectively. For the three and six months ended June 30, 2023, the Company recognized interest expense of $6.5 million and $12.7 million, respectively, of which $0.6 million and $1.1 million, respectively, related to the amortization of debt discount and issuance costs, respectively. Debt refinancing costs related to advisory and legal fees of $2.7 million were recorded in the condensed consolidated statements of operations and comprehensive loss for the six months ended June 30, 2024.
XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Note 10. Warrants
As of June 30, 2024, the following warrants were outstanding:
| | | | | | | | | | | |
Warrants classified as liabilities: | Outstanding Warrants | Exercise Price per Warrant | Expiration Date |
2018 Term A Warrants | 53,720 | $11.169 | February 2025 |
2018 Term B Warrants | 40,292 | $11.169 | September 2025 |
| 94,012 | | |
Warrants classified as equities: | | | |
Warrants in connection with CRG loan agreement | 309,122 | $9.410 | July 2024 |
Warrants in connection with CRG loan amendment in January 2018 | 978,628 | $12.760 | January 2025 |
Warrants in connection with Avenue Capital loan agreement | 209,633 | $2.390 | May 2025 |
Warrants in connection with Avenue Capital loan agreement | 209,633 | $2.390 | December 2025 |
Warrants in connection with Horizon and Oxford loan agreement | 125,999 | $3.130 | December 2026 |
Warrants in connection with Armistice securities purchase agreement | 5,119,454 | $3.223 | February 2027 |
Warrants in connection with Hayfin Loan Agreement | 1,315,789 | $2.280 | March 2029 |
| 8,268,258 | | |
Note 11. Fair value measurements
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are classified and disclosed in one of the following categories:
Level 1: Measured using unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2: Measured using quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs, other than quoted prices in active markets, that are observable either directly or indirectly.
Level 3: Measured based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable from objective sources (i.e., supported by little or no market activity).
Fair value measurements are classified based on the lowest level of input that is significant to the measurement. The Company's assessment of the significance of a particular input to the fair value measurement requires judgment, which may affect the valuation of the assets and liabilities and their placement within the fair value hierarchy levels. The determination of the fair values stated below considers the market for the financial assets and liabilities, the associated credit risk and other factors as required. The Company considers active markets as those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The following tables present the Company's fair value hierarchy for those assets and liabilities measured at fair value as of June 30, 2024 and December 31, 2023 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Total as of June 30, 2024 | | Level 1 | | Level 2 | | Level 3 |
| | | | | | | | |
Assets | | | | | | | | |
Cash and cash equivalents: | | | | | | | | |
Cash and money market funds | | $ | 57,604 | | | $ | 57,604 | | | $ | — | | | $ | — | |
Investments: | | | | | | | | |
U.S. government securities | | $ | 19,964 | | | $ | 19,964 | | | $ | — | | | $ | — | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Other assets: | | | | | | | | |
Restricted cash | | $ | 4,225 | | | $ | 4,225 | | | $ | — | | | $ | — | |
Liabilities | | | | | | | | |
| | | | | | | | |
Contingent value rights - current | | $ | 420 | | | $ | — | | | $ | — | | | $ | 420 | |
Warrant liabilities | | $ | 1 | | | $ | — | | | $ | — | | | $ | 1 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Total as of December 31, 2023 | | Level 1 | | Level 2 | | Level 3 |
Assets | | | | | | | | |
Cash and cash equivalents: | | | | | | | | |
Cash and money market funds | | $ | 67,449 | | | $ | 67,449 | | | $ | — | | | $ | — | |
Investments: | | | | | | | | |
U.S. government securities | | $ | 5,002 | | | $ | 5,002 | | | $ | — | | | $ | — | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Other assets: | | | | | | | | |
Restricted cash | | $ | 4,225 | | | $ | 4,225 | | | $ | — | | | $ | — | |
Liabilities | | | | | | | | |
Current portion of contingent value rights | | $ | 19,109 | | | $ | — | | | $ | — | | | $ | 19,109 | |
Non-current contingent value rights | | $ | 1,379 | | | $ | — | | | $ | — | | | $ | 1,379 | |
Warrant liabilities | | $ | 8 | | | $ | — | | | $ | — | | | $ | 8 | |
Contingent Value Rights
As part of the 2021 acquisition of Strongbridge, the Company issued contingent value rights ("CVRs") representing additional contingent consideration of up to $1.00 for each CVR upon the achievement of the following:
•Keveyis Milestone: $0.25 per CVR, upon the earlier of the first listing of any patent in the FDA's Orange Book for Keveyis by the end of 2023 or the first achievement of at least $40 million in net revenue of Keveyis in 2023;
•2023 Recorlev Milestone: $0.25 per CVR, upon the first achievement of at least $40 million in net revenue of Recorlev in 2023; and
•2024 Recorlev Milestone: $0.50 per CVR, upon the first achievement of at least $80 million in net revenue of Recorlev in 2024.
XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
As of June 30, 2024, there were approximately 74.4 million CVRs outstanding. Up to 8.1 million CVRs may be issued to holders of Strongbridge rollover options and assumed warrants upon the exercise thereof. CVRs are settleable in cash, common stock, or a combination of cash and common stock, at the Company's sole election.
Contingent consideration obligations are recorded at their estimated fair values and these obligations are revalued at each reporting period until the related contingencies are resolved. The CVRs are adjusted to fair value using the methods described above at the end of each reporting period. Significant changes which increase or decrease the probabilities of achieving the related milestones or shorten or lengthen the time required to achieve such events would result in corresponding increases or decreases in the fair values of these obligations.
The 2023 Keveyis milestone was achieved, triggering a milestone payment to CVR holders. In settlement of the milestone payment obligation, the Company issued 7,525,048 shares of common stock. The 2023 Recorlev Milestone was not achieved. A gain of $3.0 million from the remeasurement of the CVR liability was recorded in the first quarter of 2024 in the condensed consolidated statements of operations and comprehensive loss as a result of changes in the Company's stock price prior to the issuance of the common stock in settlement of the CVR.
The Company has determined that the CVR liabilities' fair values are Level 3 items within the fair value hierarchy. The following table presents the change in the CVR liabilities (in thousands):
| | | | | |
| |
| |
| |
| |
Balance at December 31, 2023 | $ | 20,488 | |
CVR settlement | (16,100) | |
Change in fair value of CVRs | (3,968) | |
Balance at June 30, 2024 | $ | 420 | |
| |
| |
| |
| |
Note 12. Stock compensation plan
In 2011, the Company adopted the 2011 Stock Option Issuance Plan (the "2011 Plan") and subsequently amended it to authorize the Board of Directors to issue up to 4,714,982 incentive stock option and non-qualified stock option awards.
The 2018 Stock Option and Incentive Plan (the "2018 Plan") was adopted by the Board of Directors in April 2018 and approved by the Company's stockholders in June 2018 to award up to 1,822,000 shares of common stock. The 2018 Plan replaced the 2011 Plan as the Board of Directors decided not to make additional awards under the 2011 Plan following the closing of the IPO, which occurred in June 2018. The 2018 Plan allows the compensation committee to make equity-based and cash-based incentive awards to the Company's officers, employees, directors and other key persons (including consultants). No grants of stock options or other awards may be made under the 2018 Plan after the tenth anniversary of the effective date.
As of June 30, 2024, there were 1.8 million shares of common stock available for future issuance under the 2018 Plan.
The 2018 Employee Stock Purchase Plan (the "ESPP") was adopted by the Board of Directors in April 2018 and approved by the Company's stockholders in June 2018 to issue up to 193,000 shares of common stock to participating employees. Through the ESPP, eligible employees may authorize payroll deductions of up to 15% of their compensation to purchase up to the number of shares of common stock determined by dividing $25,000 by the closing market price of Xeris common stock on the offering date. The purchase price per share at each purchase date is equal to 85% of the lower of (i) the closing market price per share of Xeris common stock on the employee's offering date or (ii) the closing market price per share of Xeris common stock on the purchase date. Each offering period has a six-month duration and purchase interval. As of June 30, 2024, there were 14.2 thousand shares available for issuance under the ESPP.
The Equity Inducement Plan (the "Inducement Plan") was adopted by the Board of Directors in February 2019. The Inducement Plan allows the Company to make stock option or restricted stock unit awards to prospective employees of the Company as an inducement to such individuals to commence employment with the Company. The Company uses this Inducement Plan to help it attract and retain prospective employees who are necessary to support the commercialization of products and the expansion of the Company generally. As of June 30, 2024, there were 1.6 million shares of common stock available for future issuance under the Inducement Plan.
Assumed Plans
On the acquisition date of Strongbridge, the Company assumed all then-outstanding stock options and shares available and reserved for issuance under some legacy equity incentive plans of Strongbridge, including the Strongbridge 2015 equity compensation plan and Strongbridge 2017 inducement plan (collectively, the "Assumed Plans"). Shares reserved under the Assumed Plans will be available for future grants. The Company also assumed all then-outstanding stock options from the rest of the legacy equity incentive plans of Strongbridge without assuming the shares available and reserved for issuance under these plans. The number of shares subject to stock options outstanding under all Strongbridge legacy equity incentive plans are included in the tables below. As of June 30, 2024, there were 102.1 thousand shares reserved for future grants under the Assumed Plans.
XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Stock options
Stock options are granted with an exercise price equal to the market price of the Company's stock at the date of grant. Stock option awards typically vest over either two, three or four years after the grant date and expire seven to ten years from the grant date.
The fair value of each option is estimated on the date of grant using a Black-Scholes option valuation model that uses the assumptions noted in the following table. The expected term of options represents the period of time that options granted are expected to be outstanding. The risk-free interest rate for periods during the contractual life of the option is based on the United States Treasury yield curve in effect at the time of grant. The expected stock price volatility assumption is based on the historical volatilities of a peer group of publicly traded companies as well as the historical volatility of the Company's common stock, since the Company began trading subsequent to the IPO in June 2018, over the period corresponding to the expected life as of the grant date. The expected dividend yield is based on the expected annual dividend as a percentage of the market value of the Company's ordinary shares as of the grant date.
Stock option activity under the 2011 Plan, 2018 Plan, Inducement Plan and Assumed Plans for the six months ended June 30, 2024 was as follows:
| | | | | | | | | | | | | | | | | |
| Number of Options | | Weighted Average Exercise Price Per Share | | Weighted Average Contractual Life (Years) |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Outstanding - December 31, 2023 | 9,199,744 | | $5.22 | | 3.84 |
| | | | | |
| | | | | |
Exercised | (229,417) | | | 2.00 | | |
Forfeited | (190) | | 4.98 | | |
Expired | (26,962) | | 5.44 | | |
Outstanding - June 30, 2024 | 8,943,175 | | $5.29 | | 3.31 |
Vested and expected to vest at June 30, 2024 | 8,943,175 | | $5.29 | | 3.31 |
Exercisable - June 30, 2024 | 8,840,519 | | $5.30 | | 3.27 |
| | | | | |
At June 30, 2024, there was a total of $0.3 million of unrecognized stock-based compensation expense related to stock options that is expected to be recognized over a weighted average period of 0.5 years.
Restricted Stock Units
The Company grants Restricted Stock Units ("RSUs") to employees. RSUs that are granted vest over either three or four years in equal annual installments beginning on the one-year anniversary of the date of grant, provided that the employee is employed by the Company on such vesting date. If and when the RSUs vest, the Company will issue one share of common stock for each whole RSU that has vested, subject to satisfaction of the employee's tax withholding obligations. Upon vesting and settlement of RSUs or exercise of stock options, at the election of the grantee, the Company does not collect withholding taxes in cash from employees. Instead, the Company withholds upon settlement as RSUs vest, or as stock options are exercised, the portion of those shares with a fair market value equal to the amount of the minimum statutory withholding taxes due. The withheld shares are accounted for as repurchases of common stock. Stock-based compensation expense related to RSUs is recognized on a straight-line basis over the employee's requisite service period.
A summary of outstanding RSU awards and the activity for the six months ended June 30, 2024 was as follows:
| | | | | | | | | | | |
| Number of Units | | Weighted Average Grant Date Fair Value Per Share |
| | | |
| | | |
| | | |
| | | |
Unvested balance - December 31, 2023 | 11,579,548 | | $ | 1.83 | |
Granted | 9,614,250 | | 2.45 | |
Vested | (4,140,462) | | 2.15 | |
Forfeited | (287,447) | | 2.02 | |
Unvested balance - June 30, 2024 | 16,765,889 | | $ | 2.10 | |
As of June 30, 2024, there was $28.0 million of unrecognized stock-based compensation expense related to RSUs, which is expected to be recognized over the weighted-average remaining vesting period of 2.0 years.
XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The following table summarizes the reporting of total stock-based compensation expense resulting from stock options, RSUs and the ESPP (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 | | |
| | | | | | | | | |
Research and development | $ | 382 | | | $ | 632 | | | 719 | | | 954 | | | |
Selling, general and administrative | 3,851 | | | 2,296 | | | 7,281 | | | 4,538 | | | |
Total stock-based compensation expense | $ | 4,233 | | | $ | 2,928 | | | $ | 8,000 | | | $ | 5,492 | | | |
Note 13. Leases
The Company has non-cancellable operating leases for office and laboratory space, which expire at various times in 2031 and 2036. The non-cancellable lease agreements provide for monthly lease payments, which increase during the term of each lease agreement.
All of the Company's leases are classified as operating leases, which are included as operating lease right-of-use assets and current and non-current operating lease liabilities in the condensed consolidated balance sheets. The Company's operating lease costs are included in operating expenses in the accompanying condensed consolidated statements of operations and comprehensive loss. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.
A majority of the Company's lease agreements include fixed rental payments. Certain lease agreements include fixed rental payments that are adjusted periodically by a fixed rate. The fixed payments, including the effects of changes in the fixed rate or amount, and renewal options reasonably certain to be exercised, are included in the measurement of the related lease liability. The exercise of lease renewal options is at the Company's sole discretion. The depreciable life of assets and leasehold improvements are limited by the expected lease term, which includes renewal options reasonably certain to be exercised. The majority of the Company's real estate leases require that the Company pay maintenance, real estate taxes and insurance in addition to rent. These payments are generally variable and based on actual costs incurred by the lessor. Therefore, these amounts are not included in the consideration of the contract when determining the right-of-use asset and lease liability but are reflected as variable lease expenses.
As the interest rate implicit in the lease is not readily determinable, the Company uses the incremental borrowing rate as the discount rate. The Company considers observable inputs as of the effective date of the ASC 842 adoption including the credit rating, existing borrowings and other relevant borrowing rates, such as risk-free rates like the United States Treasury rate, and then adjusting as necessary for the appropriate lease term. The incremental borrowing rate is reassessed if there is a change to the lease term or if a modification occurs and it is not accounted for as a separate contract. As of June 30, 2024, the Company's operating leases had a weighted-average remaining lease term of 11.2 years and a weighted-average discount rate of 11.9%.
Supplemental cash flow information related to the Company's operating leases was as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2024 | | 2023 | | 2024 | | 2023 | | |
Cash paid for amounts included in the measurement of lease liabilities: | | | | | | | | | | |
Operating cash flows for operating leases | | $ | 839 | | | $ | 440 | | | $ | 1,204 | | | $ | 918 | | | |
Right of use assets obtained in exchange for new lease obligations: | | | | | | | | | | |
Operating leases | | $ | — | | | $ | 20,043 | | | $ | — | | | $ | 20,043 | | | |
The Company reports the amortization of operating lease right-of-use assets and the change in operating lease liabilities on a net basis in other in the operating activities of the accompanying condensed consolidated statements of cash flows.
XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The components of lease expense were as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
Lease cost | | 2024 | | 2023 | | 2024 | | 2023 |
Operating lease expense | | $ | 1,340 | | | $ | 1,350 | | | $ | 2,680 | | | $ | 1,763 | |
Variable lease cost | | 325 | | | 302 | | | 566 | | | 652 | |
Sublease income | | (52) | | | (54) | | | (105) | | | (108) | |
Total lease cost | | $ | 1,613 | | | $ | 1,598 | | | $ | 3,141 | | | $ | 2,307 | |
As of June 30, 2024, maturities of lease liabilities are summarized as follows (in thousands):
| | | | | |
2024 remaining | $ | 2,290 | |
2025 | 6,080 | |
2026 | 6,232 | |
2027 | 6,389 | |
2028 | 6,549 | |
| |
Thereafter | 45,441 | |
Total lease payments | 72,981 | |
Less: Effect of discounting to net present value | (33,658) | |
Present value of lease liabilities | $ | 39,323 | |
| |
Operating lease liabilities, current | $ | 5,307 | |
Operating lease liabilities, non-current | 34,016 | |
Total operating lease liabilities | $ | 39,323 | |
Note 14. Commitments and contingencies
Commitments
Commitments to Taro
The Company has a supply agreement with Taro Pharmaceuticals North America, Inc. ("Taro") to produce Keveyis. In 2023, the Company amended the agreement to extend the initial term until March 2027. As part of the agreement, as amended, the Company has agreed to certain annual minimum marketing spend requirements and minimum purchase order quantities for each year, which in the case of the minimum purchase order quantities, is based on the previous year's purchases.
Leases
As of June 30, 2024, the Company had unused letters of credit of $4.2 million, which were issued primarily to secure leases. These letters of credit are collateralized by $4.2 million of restricted cash, which is recorded in other assets in the condensed consolidated balance sheets.
Contingencies
Litigation
From time to time, the Company may become involved in various legal actions arising in the ordinary course of business. As of June 30, 2024, management was not aware of any existing, pending or threatened legal actions that would have a material impact on the financial position or results of operations of the Company.
Long Term Debt
In the event (i) the 2025 Convertible Notes are still outstanding as of January 15, 2025 or (ii) the 2028 Convertible Notes are still outstanding as of January 15, 2028 and, in each case, the maturity date has not been extended to a date not earlier than September 5, 2029, then unless the Company has received net cash proceeds from one or more permitted equity raises or permitted raises of convertible debt which, together with no more than $15.6 million of cash on hand, is sufficient to redeem and discharge the 2025 Convertible Notes or 2028 Convertible Notes, as applicable, in full, the loans outstanding under the Amended and Restated Credit
XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Agreement will mature on January 15, 2025 in the case of outstanding 2025 Convertible Notes and January 15, 2028 in the case of outstanding 2028 Convertible Notes. As disclosed in "Note 9 - Long-term debt", the Amended and Restated Credit Agreement provided for the New Lenders to extend $15.2 million Tranche 2 Loans on any date after March 5, 2024 and through July 15, 2025 solely for the purpose of redeeming the 2025 Convertible Notes.
Note 15. Net loss per common share
Basic and diluted net loss per common share are determined by dividing net loss applicable to common stockholders by the weighted average common shares outstanding during the period. For all periods presented, the shares issuable upon conversion, exercise or vesting of Convertible Notes, warrants, stock option awards and RSUs have been excluded from the calculation because their effects would be anti-dilutive. Therefore, the weighted average common shares outstanding used to calculate both basic and diluted net loss per common share are the same.
The following potentially dilutive securities were excluded from the computation of diluted weighted average common shares outstanding due to their anti-dilutive effect:
| | | | | | | | | | | |
| As of June 30, |
| 2024 | | 2023 |
Shares to be issued upon conversion of Convertible Notes | 15,939,216 | | | 15,416,667 | |
Vested and unvested stock options | 8,943,175 | | | 9,307,846 | |
Restricted stock units | 16,765,889 | | | 10,602,771 | |
Warrants | 8,362,270 | | | 8,362,270 | |
Total anti-dilutive securities excluded from EPS computation (1) | 50,010,550 | | | 43,689,554 | |
(1) Total anti-dilutive securities exclude CVRs which are settleable in cash, additional Xeris Biopharma shares, or a combination, at the election of the Company.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cautionary statements for forward-looking information
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and notes to those financial statements appearing elsewhere in this Quarterly Report on Form 10-Q and with the audited financial statements and the notes to those financial statements included in the Annual Report on Form 10-K filed on March 6, 2024 with the U.S. Securities and Exchange Commission. In addition to financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. All statements in this document other than statements of historical fact are, or could be, "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "will," "would," "may," "should," "expects," "focus," "goal," "intends," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue," and terms of similar meaning are also generally intended to identify forward-looking statements. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including without limitation, the regulatory approval of our product candidates, our ability to market and sell our products and product candidates if approved, and factors discussed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2023 and elsewhere in this Quarterly Report on Form 10-Q. Any forward-looking statements contained herein speak only as of the date hereof, and Xeris expressly disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
Overview
Unless otherwise indicated, references to "Xeris," the "Company," "we," "our" and "us" in this Quarterly Report on Form 10-Q refer to Xeris Biopharma Holdings, Inc. Throughout this document, unless otherwise noted, references to Gvoke include Gvoke PFS, Gvoke HypoPen, Gvoke Kit and Ogluo (glucagon).
We are focused on building an innovative, self-sustaining, growth-oriented biopharmaceutical company committed to improving patients' lives by developing and commercializing clinically meaningful products across a range of therapies. We are uniquely positioned to achieve this through our three commercial products and our proprietary formulation science (XeriSol and XeriJect), which generates partnerships and enhances our product candidates.
Outlook and strategies
Our goal is to build an innovative, self-sustaining, growth-oriented biopharmaceutical company committed to improving patients' lives by developing and commercializing clinically meaningful products across a range of therapies. To achieve our goal, we are pursuing the following strategies:
| | | | | | | | | | | |
| < | | Drive growth through effective commercial execution of our innovative products. We have three innovative commercial products (Gvoke, Keveyis, and Recorlev) all of which fill unique, unmet needs. Additionally, Gvoke and Recorlev are in the very early stages of their product lifecycles and both leverage our experienced and growing leadership presence in the endocrinology community. We are focused on executing against the opportunities made possible by Gvoke, Recorlev, and Keveyis in order to maintain our momentum of growth and enable the financial self-sufficiency of our Company. |
| < | | Continue to leverage our proprietary formulation science and expertise to develop our internal new product candidates. We have established a proven capability to bring new and innovative products through the development and regulatory process to successful commercialization. XeriSol and XeriJect have broad application and have the potential to be utilized across a range of potential product candidates in multiple therapeutic areas. Our immediate focus is on developing XP-8121, a once weekly subcutaneous injection of levothyroxine, and eventually generating significant benefits for patients and value for our company. |
| < | | Collaborate with pharmaceutical and biotechnology companies to apply our formulation science to enhance the formulations of their proprietary products and candidates. We are pursuing formulation and development partnerships to apply our XeriSol and XeriJect formulation platforms to enhance the drug delivery and clinical profile of other companies' proprietary drugs and biologics. We currently are collaborating with several major pharmaceutical companies on the development of formulations of their proprietary therapeutics with XeriSol or XeriJect. Our strategic goal is to ultimately enter into commercial licensing agreements with these partners upon successful completion of formulation development. |
We believe these three distinct pillars of our strategy can bring new products to market and transform the lives of patients with life-impacting diseases and ultimately drive value for Xeris' shareholders. Pursuing these strategies provides Xeris with a range of value driving opportunities that are incremental to the value already realized by the Xeris enterprise. Commercial Products
Our top priority is maximizing the potential of our three commercial products:
•Gvoke is a ready-to-use, liquid-stable glucagon for the treatment of severe hypoglycemia. The product is indicated for use in pediatric and adult patients with diabetes age 2 years and above and can be administered in 2 simple steps. The estimated total addressable market for this drug is approximately $5.0 billion in the United States.
•Recorlev is a cortisol synthesis inhibitor approved for the treatment of endogenous hypercortisolemia in adult patients with Cushing's syndrome for whom surgery is not an option or has not been curative. Endogenous Cushing's syndrome is a rare but serious and potentially fatal endocrine disease caused by chronic elevated cortisol exposure. The estimated total addressable market for this therapy is approximately $3.0 billion in the United States.
•Keveyis is the first therapy approved in the United States to treat hyperkalemic, hypokalemic, and related variants of Primary Periodic Paralysis ("PPP"). PPP is a rare genetic, neuromuscular disorder that can cause extreme muscle weakness and/or paralysis; some forms are also commonly associated with myotonia or muscle stiffness. The estimated total addressable market for this therapy is greater than $0.5 billion in the United States.
Our proprietary formulation capabilities
Our company name, Xeris, is derived from the ancient Greek word xērós meaning 'dry' or 'without water/non-aqueous'. Our proprietary, non-aqueous formulation capabilities are designed to enable the convenient injection of medicines previously uninjectable or poorly injectable when utilizing aqueous approaches. Both XeriSol and XeriJect offer the opportunity to create ready-to-use, room-temperature stable, highly concentrated, injectable formulations of both small and large molecules. These proprietary formulation capabilities can enable subcutaneous (SC) or intramuscular (IM) administration in lieu of intravenous (IV) infusion, allow for convenient, cost-effective storage, and provide an improved patient, caregiver, and healthcare provider experience. XeriSol and XeriJect have broad applications and enable us to develop our own internal product development candidates in endocrinology, neurology and other therapeutic areas. They also enable us to pursue formulation and development partnerships pursuant to which our proprietary formulation science is applied with the goal of enhancing the product formulation, delivery and clinical profile of other companies' proprietary drugs and biologics.
Development of product candidates
Once Weekly Subcutaneous Injection of Levothyroxine (XP-8121)
XP-8121 is a novel formulation for subcutaneous administration that could potentially mitigate many of the challenges associated with oral formulations, such as identification of an ideal dose due to absorption variation and medication adherence for patients who have difficulty maintaining a stable, therapeutic serum level. Preclinical studies of XP-8121 showed a sustained plasma exposure profile and similar highest concentration of a drug in the blood, or Cmax, when compared with equivalent doses of the oral formulation. We conducted a Phase 1 study of XP-8121 to evaluate the pharmacokinetics, safety and tolerability, and potential for weekly dosing in the treatment of hypothyroidism.
Levothyroxine and Hypothyroidism
The thyroid gland is responsible for the synthesis, storage, and release of metabolic hormones including thyroxine (T4) and triiodothyronine (T3). These hormones are crucial in the regulation of critical metabolic processes and are vital for normal growth and development during fetal life, infancy, and childhood.
Therapeutically, levothyroxine is administered as a replacement for deficient thyroid hormones. The goal of the therapy is restoration of the euthyroid state which can reverse the clinical manifestations of hypothyroidism and significantly improve quality of life. The treatment of choice for correction of hypothyroidism is currently continuous daily oral administration of levothyroxine. It is one of the most widely prescribed drug products in the United States, but the complexity of maintaining biochemical and clinical euthyroidism in patients undergoing treatment with oral levothyroxine is challenging. It has been reported that nearly 40% of patients undergoing treatment with oral levothyroxine are either over- or under-treated due to factors that include, but are not limited to, drug formulation, use of the drug with food, adherence to the drug, use of concomitant medications, and pre-existing medical conditions. Many patients failing to reach target thyroid stimulating hormone ("TSH") levels are managed by simply increasing their levothyroxine daily dose. However, levothyroxine is a drug with a narrow therapeutic index, meaning that relatively small deviations from the proper dose can cause a clinically meaningful shift in pharmacological effects when administered to a patient; thus, the titration of levothyroxine oral drug may be a tailored and incremental process.
The Phase 1 clinical study was a single ascending dose crossover design in 30 healthy participants to compare matching doses of oral levothyroxine (Synthroid) and subcutaneous XP-8121. The primary endpoints of the study were to characterize the absorption and elimination kinetics of XP-8121 and compare bioavailability of XP-8121 to oral levothyroxine. Secondary endpoints were safety and tolerability of XP-8121.
In October 2022, we reported positive topline Phase 1 data of XP-8121. The data showed that subjects receiving XP-8121 subcutaneous had slower absorption, lower peak plasma, and higher extended exposure compared to Synthroid PO at the comparable dose of 600 μg. In addition, exposure was proportional over the range of ascending XP-8121 doses studied. Simulations based on a population pharmacokinetic model indicated that exposure from weekly XP-8121 1200 μg SC doses overlapped daily Synthroid PO 300 μg suggesting a dose conversion factor of 4x. Importantly, single SC doses of XP-8121 at all doses were generally well-tolerated and the XP-8121 doses studied were generally comparable to Synthroid 600 μg PO with respect to the safety findings. In June 2023, we initiated a non-randomized, open-label, single arm, self-controlled Phase 2 study to determine a target dose conversion factor from stably dosed oral levothyroxine to XP-8121 in patients with hypothyroidism and also assess the safety and tolerability after once-weekly subcutaneous injections. The data established an average once-weekly SC dose of XP-8121 and confirmed previous Phase 1 study of a 4x target dose conversion factor when switching from once-daily oral administration of levothyroxine. Participants who completed the study rated higher treatment satisfaction with XP-8121 compared to oral and a majority (72%) indicated a strong
preference for the subcutaneous route of administration. An FDA End-of-Phase 2 interaction to facilitate a Phase 3 pivotal study program is expected by year-end.
Patents
We currently own 178 patents issued globally, including composition of matter patents covering our ready-to-use glucagon formulation that expire in 2036. Included in the total patents, we have 64 granted patents globally related to our platform technologies and 8 patents granted in the United States and listed in the United States FDA Orange Book covering proprietary formulations of levoketoconazole (the active pharmaceutical ingredient in Recorlev) and the uses of such formulations in treating certain endocrine-related diseases and syndromes. The latter includes United States Patent Nos. 11,020,393, 11,278,547 and 11,903,940, which were granted on June 1, 2021, March 22, 2022, and February 20, 2024, respectively, and which provide patent protection through 2040 for the use of Recorlev in the treatment of certain patients with persistent or recurrent Cushing's syndrome.
Financing
We have funded our operations to date primarily with proceeds from the sale of our preferred and common stock and debt financing.
For the six months ended June 30, 2024 and June 30, 2023, we reported net losses of $34.0 million and $36.7 million, respectively. We have not been profitable since inception, and, as of June 30, 2024, our accumulated deficit was $651.0 million. In the near term, we expect to continue to incur significant expenses, operating losses and net losses as we:
| | | | | | | | | | | |
| < | | continue our marketing and selling efforts related to commercialization of Gvoke, Recorlev and Keveyis; |
| < | | continue our research and development efforts; |
| < | | continue to operate as a public company; and |
| < | | continue to fund our operations with an increased cost of borrowing due to a higher interest rate environment and tighter lending requirements. |
We may continue to seek public equity and debt financing to meet our capital requirements. There can be no assurance that such funding may be available to us on acceptable terms, or at all, or that we will be able to commercialize our product candidates, if approved. In addition, we may not be profitable even if we commercialize any of our product candidates.
Components of our Results of Operations
The following discussion sets forth certain components of the statement of operations of Xeris for the three and six months ended June 30, 2024 and 2023 as well as factors that impact those items.
Product revenue, net
Product revenue, net, represents gross product sales less estimated allowances for patient copay assistance programs, prompt payment discounts, payor rebates, chargebacks, service fees, and product returns, all of which are recorded at the time of sale to the pharmaceutical wholesaler or other customer. We apply significant judgment and estimates in determining some of these allowances. If actual results differ from our estimates, we make adjustments to these allowances in the period in which the actual results or updates to estimates become known.
Royalty, contract and other revenue
Royalty and contract revenue is recognized as earned in accordance with contract terms when it can be reasonably estimated and collectability is reasonably assured. Revenue generated from various collaboration and technology partnerships are included in this line.
Cost of goods sold
Cost of goods sold primarily includes product costs, which include all costs directly related to the purchase of raw materials, charges from our contract manufacturing organizations, and manufacturing overhead costs, as well as shipping and distribution charges. Cost of goods sold also includes losses from excess, slow-moving or obsolete inventory and inventory purchase commitments, if any. Manufacturing costs for Gvoke and Recorlev incurred prior to approval and initial commercialization were expensed as research and development expenses.
Research and development expenses
Research and development expenses consist of expenses incurred in connection with the discovery and development of our products and product candidates. We recognize research and development expenses as incurred. Expenses that are paid in advance of performance are capitalized until services are provided or goods are delivered. We track external research and development costs by project, however, personnel related expenses related to research and development are not allocated by project. Research and development expenses include:
| | | | | | | | | | | |
| < | | the cost of acquiring and manufacturing preclinical study and clinical trial materials and manufacturing costs related to commercial production and scale-up until a product is approved and initially available for commercial sale; |
| < | | expenses incurred under agreements with contract research organizations ("CROs") as well as investigative sites and consultants that conduct our preclinical studies and clinical trials; |
| < | | personnel-related expenses, which include salaries, benefits and stock-based compensation; |
| < | | laboratory materials and supplies used to support our research activities; |
| < | | outsourced product development services; |
| < | | expenses relating to regulatory activities, including filing fees paid to regulatory agencies; and |
| < | | allocated expenses for facility-related costs. |
Research and development activities are central to our business model. We expect to continue to incur significant research and development expenses as we advance our pipeline candidates and in particular plan and conduct clinical trials, prepare regulatory filings for our product candidates, and utilize internal resources to support these efforts. Our research and development costs have declined as compared to previous levels as a result of directing significant funding to our commercial activities.
Our research and development expenses may vary significantly over time due to uncertainties relating to the timing and results of our clinical trials, feedback received from interactions with the FDA and the timing of regulatory approvals.
Selling, general and administrative expenses
Selling, general and administrative expenses consist primarily of compensation and related personnel costs, marketing and selling expenses, professional fees and facility costs not otherwise included in research and development expenses.
Amortization of intangible assets
Amortization of intangible assets relates to the amortization of our products: Keveyis and Recorlev. These two intangible assets are being amortized over a five-year and fourteen-year period, respectively, using the straight-line method.
Other income (expense)
Other income (expense) consists primarily of interest expense related to our convertible debt, senior secured credit facility, interest income earned on deposits and investments, debt refinancing costs and gains and losses on the change in fair value of the CVRs.
Results of Operations
The following table summarizes our results of operations for the three and six months ended June 30, 2024 and 2023 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Change | | Six Months Ended June 30, | | Change | | |
| 2024 | 2023 | | $ | % | | 2024 | 2023 | | | $ | % | | | |
Product revenue: | | | | | | | | | | | | | | | |
Gvoke | $ | 20,046 | | $ | 15,638 | | | $ | 4,408 | | 28.2 | | | $ | 36,625 | | $ | 30,671 | | | | $ | 5,954 | | 19.4 | | | | |
Keveyis | 13,128 | | 14,088 | | | (960) | | (6.8) | | | 26,213 | | 26,843 | | | | (630) | | (2.3) | | | | |
Recorlev | 13,338 | | 7,167 | | | 6,171 | | 86.1 | | | 23,937 | | 11,644 | | | | 12,293 | | 105.6 | | | | |
Product revenue, net | 46,512 | | 36,893 | | | 9,619 | | 26.1 | | | 86,775 | | 69,158 | | | | 17,617 | | 25.5 | | | | |
Royalty, contract and other revenue | 1,553 | | 1,115 | | | 438 | | 39.3 | | | 1,928 | | 2,046 | | | | (118) | | (5.8) | | | | |
Total revenue | 48,065 | | 38,008 | | | 10,057 | | 26.5 | | | 88,703 | | 71,204 | | | | 17,499 | | 24.6 | | | | |
| | | | | | | | | | | | | | | |
Cost and expenses: | | | | | | | | | | | | | | | |
Cost of goods sold, excluding amortization of intangible assets | 7,790 | | 7,555 | | | 235 | | 3.1 | | | 13,761 | | 12,874 | | | | 887 | | 6.9 | | | | |
Research and development | 5,759 | | 6,087 | | | (328) | | (5.4) | | | 13,580 | | 10,925 | | | | 2,655 | | 24.3 | | | | |
Selling, general and administrative | 39,993 | | 37,635 | | | 2,358 | | 6.3 | | | 78,373 | | 71,240 | | | | 7,133 | | 10.0 | | | | |
Amortization of intangible assets | 2,710 | | 2,710 | | | — | | — | | | 5,421 | | 5,421 | | | | — | | — | | | | |
Total cost and expenses | 56,252 | | 53,987 | | | 2,265 | | 4.2 | | | 111,135 | | 100,460 | | | | 10,675 | | 10.6 | | | | |
Loss from operations | (8,187) | | (15,979) | | | 7,792 | | (48.8) | | | (22,432) | | (29,256) | | | | 6,824 | | (23.3) | | | | |
Other income (expense): | | | | | | | | | | | | | | | |
Interest and other income | 1,291 | | 1,223 | | | 68 | | 5.6 | | | 3,214 | | 2,523 | | | | 691 | | 27.4 | | | | |
| | | | | | | | | | | | | | | |
Debt refinancing costs | — | | — | | | — | | nm | | (2,690) | | — | | | | (2,690) | | nm | | | |
Interest expense | (7,964) | | (6,528) | | | (1,436) | | 22.0 | | | (14,996) | | (12,744) | | | | (2,252) | | 17.7 | | | | |
Change in fair value of warrants | 3 | | (14) | | | 17 | | (121.4) | | | 7 | | (14) | | | | 21 | | (150.0) | | | | |
Change in fair value of contingent value rights | 601 | | 781 | | | (180) | | (23.0) | | | 3,968 | | 2,140 | | | | 1,828 | | 85.4 | | | | |
Total other expense | (6,069) | | (4,538) | | | (1,531) | | 33.7 | | | (10,497) | | (8,095) | | | | (2,402) | | 29.7 | | | | |
Net loss before benefit from income taxes | (14,256) | | (20,517) | | | 6,261 | | (30.5) | | | (32,929) | | (37,351) | | | | 4,422 | | (11.8) | | | | |
Income tax (expense) benefit | (749) | | 675 | | | (1,424) | | (211.0) | | | (1,056) | | 675 | | | | (1,731) | | (256.4) | | | | |
Net loss | $ | (15,005) | | $ | (19,842) | | | $ | 4,837 | | (24.4) | | | $ | (33,985) | | $ | (36,676) | | | | $ | 2,691 | | (7.3) | | | | |
nm: not meaningful
Product revenue, net
Gvoke
Net revenue increased by $4.4 million or 28.2% for the three months ended June 30, 2024 compared to the same period ended June 30, 2023. This change was due to an increase in volume ($3.7 million or 23.8%), primarily driven by prescription growth, and net pricing ($0.7 million or 4.4%).
Net revenue increased by $6.0 million or 19.4% for the six months ended June 30, 2024 compared to the same period ended June 30, 2023. This change was due to an increase in volume ($5.1 million or 16.6%), primarily driven by prescription growth, and net pricing ($0.9 million or 2.8%).
Keveyis
Net revenue decreased by $1.0 million or 6.8% for the three months ended June 30, 2024 compared to the same periods ended June 30, 2023. The decrease was due to lower volume ($1.3 million or 9.4%) partially offset by an increase in net pricing ($0.3 million or 2.6%).
Net revenue decreased by $0.6 million or 2.3% for the six months ended June 30, 2024 compared to the same periods ended June 30, 2023. The decrease was due to lower volume ($2.2 million or 8.3%) partially offset by an increase in net pricing ($1.6 million or 6.0%).
Recorlev
Net revenue increased by $6.2 million or 86.1% for the three months ended June 30, 2024 compared to the same period ended June 30, 2023. The increase was due to higher volume ($4.9 million or 67.9%) and an increase in net pricing ($1.3 million or 18.2%).
Net revenue increased by $12.3 million or 105.6% for the six months ended June 30, 2024 compared to the same period ended June 30, 2023. The increase was due to higher volume ($9.8 million or 84.3%) and an increase in net pricing ($2.5 million or 21.3%).
Cost of goods sold
Cost of goods sold increased by $0.2 million or 3.1% and $0.9 million or 6.9% for the three and six months ended June 30, 2024 compared to the same periods ended June 30, 2023, respectively.
Cost of goods sold as a percent of total product revenue decreased by 3.7%, to 16.7% for the three months ended June 30, 2024 compared to 20.5% for the same period ended June 30, 2023, primarily due to higher sales of products with a lower cost of goods sold ($0.7 million or 2.0%).
Cost of goods sold as a percent of total product revenue decreased by 2.8%, to 15.9% for the six months ended June 30, 2024 compared to 18.6% for the same period ended June 30, 2023, primarily due to higher sales of products with lower cost of goods sold ($1.3 million or 1.8%).
Research and development expenses
Research and development expenses decreased by $0.3 million or 5.4% for the three months ended June 30, 2024 compared to the same period ended June 30, 2023, primarily driven by lower spending for our pipeline ($0.5 million), primarily XP-8121 ($0.9 million) offset by other projects ($0.4 million), and our technology development ($0.6 million) offset by an increase in personnel related expenses ($0.4 million).
Research and development expenses increased by $2.7 million or 24.3% for the six months ended June 30, 2024 compared to the same period ended June 30, 2023, primarily driven by higher spending for our pipeline ($1.3 million) and personnel related expenses ($1.1 million).
The following table summarizes our research and development expenses by type for the three and six months ended June 30, 2024 and 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Change | | Six Months Ended June 30, | | Change |
| 2024 | 2023 | | $ | % | | 2024 | 2023 | | | $ | % |
Project specific expenses: | | | | | | | | | | | | |
Pipeline | $ | 941 | | $ | 1,447 | | | $ | (506) |