Xeris Biopharma Holdings Inc (XERS) 2021 Q4 法說會逐字稿

Hello, everyone, and welcome to the Xeris Biopharma Fourth Quarter 2021 Financial Results Conference Call and Webcast. My name is Seb, and I'll be the operator for your call today. (Operator Instructions)

I will now hand the floor over to Allison Wey to begin. Please go ahead.

Thank you. Good morning, and welcome to Xeris Biopharma's Fourth Quarter 2021 Financial Results and Corporate Update Conference Call and Webcast. A press release of the company's fourth quarter and full year 2021 financial results was issued earlier this morning and can be found on our website.

We are also joined this morning by Paul Edick, Chairman and CEO; and Steve Pieper, our CFO. Paul will provide opening remarks and Steve will provide details on our financial results, and then we will open the call for Q&A.

Before we begin, I would like to remind you that this call will contain forward-looking statements concerning Xeris' business practices, Xeris' future expectations, plans, prospects, clinical approvals, commercialization, corporate strategy performance and the impact of COVID-19 on Xeris' business practices, which contain forward-looking statements for the purposes of the safe harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including the effect of uncertainties related to the COVID-19 pandemic on the U.S. and global markets; Xeris' business, financial conditions, operations, clinical trials and third-party suppliers and manufacturers; and other risks, including those discussed in our filings with the SEC. In addition, any forward-looking statements represent our views only as of the date of this call and should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligations to update such statements.

So I'll now turn the call over to Paul Edick.

Good morning, everyone. Thanks for joining us today. This morning, I'll review our 2021 accomplishments and then focus my remarks on our 2022 plans and outlook.

2021 was a remarkable year for Xeris with many significant achievements. Most notable was the acquisition and integration of Strongbridge Biopharma that enabled Xeris to expand our portfolio of commercialized products and to take an important step forward in creating the critical mass necessary to become a fully capable and profitable pharmaceutical company.

Other key highlights include impressive total product sales of $79 million on a pro forma basis for Gvoke and Keveyis, which is a 56% increase over 2020. Gvoke prescriptions in the fourth quarter and full year 2021 grew by 85% and 144%, respectively, compared to last year. The number of primary paralysis patients benefiting from Keveyis continued to grow throughout 2021, and net sales increased, year-over-year, reaching the top end of our $38 million to $40 million guidance.

We also formed 2 important partnerships that could create significant value in the future with Tetris Pharma to commercialize Ogluo, which is our international trade name for Gvoke, in the U.K. and Europe; and with Merck to access our XeriJect technology for an as yet undisclosed monoclonal antibody.

We also received multiple FDA approvals in 2021. First, for the room temperature shelf life extension for our 1-milligram presentation of the Gvoke HypoPen and prefilled syringe from 24 months to 30 months of room temperature stability. And for our Gvoke Kit, which is a single-use vial and syringe presentation, giving patients another ready-to-use Gvoke option. The Kit will be available for sale next week. And very importantly, for Recorlev, an important new treatment option for patients suffering from Cushing's syndrome.

We also made advancements in our development pipeline, having submitted INDs in support of various programs, most recently for exercise-induced hypoglycemia. And we ended the year in a very strong financial position with $102 million on the balance sheet, and then added to that strength with an additional $30 million private placement at the start of 2022.

When coupled with the debt restructuring with Hayfin that we announced this morning, Xeris' financial position is as strong as it has ever been since the company's inception. More specifically, we believe that we will end 2022 with $90 million to $110 million assuming achievement of our product revenue guidance, and we will reach cash flow breakeven by year-end 2023. Steve will go into more detail on our 2021 financial performance and 2022 financial outlook.

Now I'd like to go into a little bit more detail on our 3 commercial products, starting with Gvoke.

For Gvoke, our message to physicians and other health care providers is clear and simple: everyone on insulin is at increased risk of experiencing a severe low blood sugar event and, therefore, should have a ready-to-use glucagon product available for rescue.

That message continues to resonate strongly in the medical community. In fact, the ready-to-use products have grown to 60-plus percent of the total glucagon market in just over 2 years. Every week, new prescribers come on board; every week, prescribers add additional insulin patients in their practices that should have ready-to-use Gvoke HypoPen at hand, all of which are contributing to Gvoke's impressive and accelerating performance.

In the fourth quarter, Gvoke prescriptions grew 7% from the third quarter. This is particularly strong performance considering the glucagon market declined 8% over the same period. You will recall from our previous reviews that third quarter is the quarter in which glucagon prescriptions normally surge as a part of a back-to-school phenomenon, and so fourth quarter has historically declined in comparison. We continue to outpace the overall glucagon market due to strong demand for our product with Gvoke's retail market share currently standing at approximately 20%. That Gvoke grew so strongly into such a headwind reinforces our enthusiasm for continuing strong performance in the future.

Moving on to Keveyis. Keveyis also enjoyed a strong 2021, achieving pro forma product sales at the top end of our $38 million to $40 million guidance. As we have discussed previously, periodic peripheral paralysis patients are extremely hard to identify, so this strong performance is a testament to the collective expertise of the team and the close working relationship with the health care community. The smooth transition of the Keveyis commercial operations to Xeris also helped ensure continued strong performance.

And now for Recorlev. We received an early FDA approval for Recorlev on December 30, 2021. Because of the incredible amount of work during the integration by the teams at the end of the year, within a few weeks after approval, we were able to hold our virtual launch meeting and -- with the sales team and ship product to our specialty pharmacy partner.

As we've discussed, the key value driver of the Strongbridge acquisition was the market opportunity for Recorlev and the fit with our existing Gvoke commercial infrastructure. We remain very excited about the prospects of Recorlev. We estimate there are approximately 8,000 patients requiring pharmacologic treatment, of whom 40% are poorly controlled. The estimated total addressable market for this therapy is approximately $2 billion in the U.S.

By leveraging Xeris' commercial infrastructure targeted at endocrinology and the legacy Strongbridge organization's experience in supporting people with rare diseases, we believe that we're in a great position to help Cushing's syndrome patients who are inadequately controlled achieve a more normal lifestyle. And while it's only been a few weeks since launch, we've already placed several patients on Recorlev and have been able to support them through our Xeris CareConnection. Xeris CareConnection provides support services throughout the entire treatment journey to patients and health care professionals with direct access to pharmacists, reimbursement specialists and access managers.

Just a couple of updates on some of our pipeline programs. As we previously announced, we initiated and continued to dose participants in a single ascending Phase I study of our novel formulation of levothyroxine to evaluate the potential for a once-weekly subcutaneous injection. We expect complete results from a range of dosage and dosage proportionality from the Phase I study in the third quarter of 2022.

We recently submitted an IND for exercise-induced hypoglycemia and received FDA clearance in March. We expect to start additional Phase II work later this year.

And moving on to our outlook for 2022. On our third quarter call, we committed to providing total company product revenue guidance for 2022. Our focus is obviously on driving the entire product portfolio. Therefore, I want to reemphasize that we will be only providing outlook for the total company product revenue.

We expect product sales of all 3 branded products to total between $105 million and $120 million in 2022. Assuming company performance is consistent with our 2022 guidance and our internal 2023 outlook, we expect to end 2022 with $90 million to $110 million in cash, and we expect to achieve cash flow breakeven by year-end 2023.

We also believe that given our exceptionally strong cash position as a result of cash on hand, revenue generated from our 3 commercial products, the addition of cash from the recent private placement and with our debt refinance, we would not anticipate needing to raise additional capital in order to fund our ongoing operations. A return to the capital markets would be most likely for M&A purposes only.

Our company has arrived at a very important strategic inflection point in our history, and we look ahead to 2022 and beyond. I couldn't be more pleased with what the future holds for our stakeholders, the patient communities we serve, our employees, our shareholders and our health care professional partners. 2022 is a year of execution.

With that, I'll turn it over to Steve to review the details of our financial performance.

Thanks, Paul. Good morning, everyone. I will focus my remarks on a few of the key financial results, the details of which are in the press release issued this morning and our 10-K that will be filed later today.

Because we closed the Strongbridge acquisition in early October, the financial results I'm covering today, including fourth quarter and full year 2021, only include the fourth quarter impact from the Strongbridge acquisition. However, I will also be commenting on the full year pro forma net product revenue results.

As you heard Paul say, strong demand continued for Gvoke and Keveyis in 2021. On a pro forma basis, total net product revenue was $79 million for the full year, representing a 56% increase over pro forma 2020 revenues, finishing at the high end of the guidance we provided back in November. On a GAAP reported basis, fourth quarter total net product revenue was $21.4 million and for the full year was $49.3 million, reflecting only one quarter of Keveyis contribution.

While we are not reporting net revenue by product, I will say that Keveyis did achieve the high end of our previous guidance range of $38 million to $40 million for the full year 2021.

Gvoke continued its strong momentum in the fourth quarter, driving quarter-over-quarter prescription growth of 7% and topping 29,000 prescriptions, growing more than 85% from Q4 of 2020. For the full year 2021, Gvoke generated over 94,000 prescriptions, representing a 144% increase over full year 2020.

As we move down the P&L, cost of goods sold was $4.9 million for the 3 months ended December 31, 2021, an increase of approximately $1.5 million compared to the same period in 2020. Cost of goods sold was $13.3 million for the full year ended December 31, 2021, an increase of $4 million compared to the full year 2020, which included primarily product costs for increased product sales, partially offset by lower excess and obsolete expenses.

Turning our attention to expenses. Research and development expenses increased by approximately $5 million in the fourth quarter 2021 to $10.1 million compared to the same period in 2020. On a full year basis, research and development expenses increased by approximately $4.2 million in 2021 to $25.2 million compared to the full year 2020. These increases were primarily driven by higher pharmaceutical process development and clinical costs across multiple programs.

Selling, general and administrative expenses increased by approximately $36 million in the fourth quarter 2021 to approximately $54 million compared to the same period in 2020. On a full year basis, SG&A expenses increased by approximately $52 million in 2021 to approximately $126 million compared to the full year 2020.

Let me provide some important context to these increases relative to 2020. As I mentioned on our third quarter earnings call, given that the Strongbridge acquisition closed in early October, I had communicated that we would incur a majority of the onetime costs associated with the transaction in the fourth quarter. I also mentioned that with the acquisition of Strongbridge, we would absorb the Keveyis commercial infrastructure, which prior to the fourth quarter of 2021 did not exist in Xeris' financial results. This is important context in terms of the increases to SG&A relative to both the fourth quarter and full year 2020 results.

With this context in mind, looking at the fourth quarter and full year 2021 increases, approximately $18 million and $24 million of the respective increases are related to the acquisition of Strongbridge, including transaction costs, restructuring, related employee costs and insurance costs. These Strongbridge acquisition-related expenses in SG&A will not materially recur in 2022. Furthermore, these results do not include any impact from material cost savings synergies, the bulk of which we expect to realize by year-end 2022.

Additional drivers of the SG&A increase in the fourth quarter and full year 2021 include the previously communicated expansion of our Gvoke sales force in 2021; the inclusion of the Keveyis commercial team and related expenses in Q4 of '21; and other commercial related expenses, including preparation for a Recorlev launch in Q1 2022. These expenses accounted for approximately $16 million and $17 million of the fourth quarter and full year 2021 increase.

To be clear, we believe that we are on track to realize $50 million in deal-related synergies, approximately equally split between cost reductions and cost avoidance by the end of 2022. Additionally, our operating expenses going forward will include in the future costs for the launch of Recorlev, supporting the continued growth of both Gvoke and Keveyis and R&D and operating and other administrative costs associated with running a public company.

Turning our attention to cash. As of December 31, 2021, Xeris had total cash, cash equivalents and short-term investments of $102.4 million compared to $133.8 million at December 31, 2020. We will continue to pay Strongbridge acquisition-related costs in 2022, including severance and other accrued liabilities at year-end 2021.

Turning our attention to debt. As we announced earlier this morning, we entered into a senior secured term loan agreement with funds managed by Hayfin to provide us with up to a total of $150 million of capital. Under the terms of the debt facility, we drew $100 million on the closing date and we repaid our previous debt facility of $43.5 million with Oxford Finance and Silicon Valley Bank. The net proceeds will provide additional working capital to fund our business plan. An additional $50 million is available to Xeris at our election during the next 12 months. Based upon our current operating plan, we expect we will draw the remaining $50 million by the end of this year.

We are very pleased to be partnering with Hayfin. This debt facility increases our financial strength and provides us with substantial resources by securing access to nondilutive capital on attractive terms without over-encumbering our balance sheet.

Together with the recent equity financing, which closed in January, Xeris has now added approximately $80 million of cash to the greater than $102 million of cash, cash equivalents and short-term investments already on our balance sheet at year-end 2021. This capital base and the additional $50 million from the debt facility provides the company with significant operating flexibility to drive our rapidly growing commercial business, as currently constructed, to cash flow breakeven by year-end 2023 and thereafter produce increasing operating cash flow.

As we look ahead, we project the rate of cash burn to improve over the course of 2022 as our revenue base continues to grow and we see a decline in obligations associated with the Strongbridge acquisition-related costs. With the revenue growth from our 3 marketed products, combined with our current cash position, the cash received from the recent equity financing and the debt restructuring with Hayfin, we believe that we will finish 2022 with approximately $90 million to $110 million and further can achieve cash flow breakeven by year-end 2023.

To summarize, Gvoke and Keveyis had a great quarter and year in terms of net product sales. We have integrated Strongbridge quickly into Xeris and will achieve $50 million in synergies by the end of 2022. And we are in a solid position from a cash perspective to drive growth of Gvoke, Keveyis and Recorlev and fund our R&D pipeline.

Let me turn the call back to Paul.

Thanks, Steve. As you just heard, we're off to a great start in 2022 as a result of the great work done by the entire team in 2021. We believe that with the continued growth of our 3 commercial products, Gvoke, Keveyis and now Recorlev, we can see full year 2022 net sales in the range of $105 million to $120 million. In 2022, we also expect Tetris to launch Ogluo in several additional European countries, the availability of the Gvoke Kit next week, data from our Phase I study of levothyroxine in the third quarter and initiation of an exercise-induced hypoglycemia Phase II program later in the year.

And because of cash on hand, cash generating products and the capital from Hayfin, we expect to end 2022 with a very healthy cash position, as Steve mentioned, and, as we've said several times, cash flow breakeven by year-end 2023.

Operator, I'll turn it over to you to open the lines for questions.

(Operator Instructions) The first question today comes from Roanna Ruiz from SVB Leerink.

So 2 questions from me. First is, I wanted to ask about your financial guidance for 2022. Curious what's driving your cost -- $120 million net product revenue range. And I also wanted to ask about Recorlev. So could you talk a little bit about the first patients that have been prescribed Recorlev, how they cycled through products previously? Are they more switched patients from other Cushing's drugs? Or just help us think about like what they look like and -- as the early adopters of Recorlev.

Thank you. I'll take the second one first. We don't yet -- we've got a few patients so far. We don't yet have a handle on where they're coming from. We don't have that level of specific information on a per patient basis. As we get more patients, the specialty pharmacy will begin to aggregate in general where the patients are coming from on a percentage basis. So for example, if we had 10 patients, what percentage of those 10 are coming from other products they have cycled through. We'll know more as we get more.

And then your first question in terms of what's driving our confidence, we -- I think in our prepared remarks, we had a great fourth quarter when you compare it to what the market did and normally does. So that's incredibly encouraging. And if you look at script data so far at the beginning of the year, we're off to a really good start. Keveyis is holding strong. And we're a few weeks into Recorlev, but we're feeling very positive.

Our next question comes from Vamil Divan from Mizuho Securities.

So maybe one also on Recorlev and then a couple more on like the guidance commentary you made. So thanks for all the info you provided.

So one, just on Recorlev. Can you just talk a little bit about the payer environment there in terms of the first few patients and what you're expecting going forward? Or any requirements that people are having who had gone through other therapies? Or what would -- just kind of how payers are adopting this product.

And then on the guidance, I had a couple of questions just to make sure I understand some of what you said. So the cash of $90 million to $110 million at year-end, that already includes the $50 million that you're expecting to draw down from Hayfin, it sounds like. Just I want to make sure I'm clear on that.

And then I'm trying to triangulate from that to your comments of being cash flow breakeven by the end of next year. Aside from the strong Recorlev costs you talked about that you believe you're going to have some of that at the beginning of this year, would you expect overall expenses to stay somewhat similar between '22 and '23? I'm just trying to get a sense of sort of what your burn rate would be on a more steady basis and how to get to a point where you're cash flow breakeven.

Okay. Vamil, thank you very much. Appreciate the question. On Recorlev, we only have a few patients so far. So -- and the -- all of these patients or most all of them require prior authorization. We're going through that process. The branded products in this category are getting reimbursed, and they're getting reimbursed at the price levels that we've established.

So we're not worried about it. It is a process. And with every patient, we go through the process. They're referred to therapy. They're referred to the specialty pharmacy. The specialty pharmacy works with them to get all the history and everything. They're referred to our CareConnection so that we can support the patient, help them go through the reimbursement process, get them preapproved. And we're going through that process. Each patient is individual and it takes a little bit of time.

It's not like a prescription shows up at Walgreens and they adjudicate it in 30 seconds over their computer. But we don't foresee any roadblocks there. We think we're going to be fine. Other products are out there and getting reimbursed, so that should not be an issue. We won't have 100%. You never do, but we think there is a pathway.

In terms of the $90 million to $100 million year-end cash guidance, yes, it does include drawdown of that other $50 million late in the year.

And then in terms of cash flow breakeven, expenses '22 to '23, we expect to have a pretty good steady state once we get past the first quarter in some of the one-timers that are in the first quarter. The rest of '22 and '23 should be pretty consistent.

Our next question comes from David Amsellem from Piper Sandler.

So just a few. First, Paul, you made a comment about potentially accessing equity capital to the extent that you do additional M&A. So I wanted to get some more clarity from you as to the kind of assets you'd be interested in and, just in general, how much of a priority M&A is going forward. So that's the first question.

The second question is on Gvoke. In terms of moving on from the pandemic or hopefully moving on from the pandemic, what's your sense regarding the extent to which a ready-to-use product will get more on the radar of endocrinologists, the extent to which you could see overall expansion of adoption? How are you thinking about that? And as a related question, what portion of your sales calls are in person these days?

And then the last question is on Recorlev, just as a follow-up on the payer question. Is it your expectation over time that Recorlev patients will have to have had exposure to ketoconazole in order to access the product? Or do you think you might even see wider access?

Okay, David. Thank you very much for joining us this morning. And let me take them in the same order that you gave them to me. In terms of access to capital markets, the most important point in my statement is that we believe we can get to cash flow breakeven with our organic business growth and the cash that we have on hand and the cash that we're going to generate. If we do access the capital markets, it would more than likely be for continued M&A activity.

We are focused on growing our organic business without question. We're focused on getting to profitability, and that requires we get to a level of critical mass. And M&A and continued product and potential company acquisition plays a role in that.

And the kind of assets we would look for, I mean, you look at the Strongbridge acquisition. It's exquisite in its overlap with our current business or our previous business, and it allows us to advance our move to critical mass and profitability significantly. So if there's another Strongbridge out there, then that's something we would consider. But there's -- that's just a part of our plan.

In terms of Gvoke, the ready-to-use market expansion, we're already starting to see late in the fourth quarter and beginning of the third quarter getting back to double-digit growth. So we're very confident it's going to go -- I mean, at the end of the day, physicians don't disagree that if patients are on insulin, they should have a ready-to-use glucagon product handy, available. It's just generating more of that behavior because you've got decades of lack of behavior.

So every day, more and more physicians get on board and begin to give more of their insulin patients one of these ready-to-use products. And the degree to which they're giving Gvoke is growing every single day.

Face-to-face interactions with physicians are nearing 100%. But, I mean, we're out there. All the reps are in the field. We still have an inside group which will remain totally virtual. But we're getting access. It's looking pretty good. And fingers crossed, hopefully we're actually coming out of the whole pandemic thing.

And then as far as keto step-through, we do not expect that to be the case. We expect to get patients from all different products because there's quite a churn in this market. And our focus is on those patients, 8,000, on pharmacological treatment, 3,200 of which are uncontrolled, not achieving normalization of cortisol. And yes, control equals normalization of cortisol, and that's what we're focused on with plenty of patients out there.

So we have no further questions waiting on the call. I will hand it back to Paul for closing remarks.

Thank you. Thank you, guys, for your questions. Thanks, everybody, for listening. Congratulations to the team on a great year and a great fourth quarter, and we're looking forward to another successful year in 2022. Thank you very much.

This concludes today's conference call. Thank you all very much for joining. You may now disconnect your lines.