Xeris Biopharma Q2 2024 Earnings Call Transcript

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August 8, 2024

There are 8 speakers on the call.

Operator

Hello, everyone, and welcome to today's Erus Biopharma Second Quarter 2024 Financial Results Call. My name is Drew, and I'll be your operator today. During today's call, there will be a Q and A session. I will now turn the call over to Alison Wei, Senior Vice President of Investor Relations and Corporate Communications to begin. Please go ahead.

Speaker 1

Thank you, Drew. Good morning, and welcome to Xeris' Biopharma Second Quarter and First Half twenty twenty four Financial Results Conference call and webcast. This morning, we issued our press release, which can be found on our website. We're joined this morning by John Shannon, our new CEO and Steve Piper, our CFO. After our prepared remarks, we will open the lines for questions.

Speaker 1

Before we begin, I would like to remind you that this call will contain forward looking statements concerning the company's future expectations, plans, prospects and financial performance. Forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those forward looking statements. For more information on such risks, please refer to our earnings release and risk factors included in our SEC filings. Any forward looking statements in this call represent our views only as of the date of this call and subject to applicable law, we disclaim any obligation to update such statements. I will now turn the call over to John Shannon.

Speaker 2

Thank you, Alison, and good morning, everyone. I'm honored to speak with you for the first time as the CEO of Xerus. It's an exciting time for our company as we start this new era and I'm thrilled to serve in this role. As you all saw from this morning's earnings release, we had an outstanding Q2. But before we get into the results, I want to take a moment to outline my near term priorities as the new CEO.

Speaker 2

I'm focused on 3 key priorities to guide our strategic initiatives and decision making processes in the near term. These represent important opportunities for creating value for our stakeholders. The first priority is maintaining rapid commercial growth and expanding the reach of our treatments to the patient communities they serve. We have 3 great commercial products making meaningful impact on patients' lives. We aim to pursue growth strategies that are both ambitious and sustainable.

Speaker 2

We're confident that our existing products can continue to deliver meaningful growth in the near and long term. And we intend to consistently optimize how we deploy the resources necessary to drive them. The second priority is a renewed commitment to financial discipline, ensuring investments are made wisely and remain focused on value accretion. We've built a diverse and resilient business model that can weather market fluctuations and deliver consistent performance. We can achieve our business objectives by employing prudent financial planning, appropriate risk management and by maintaining a strong cash reserve.

Speaker 2

We ended the 2nd quarter with a very healthy $77,000,000 in cash and investments. And we intend to deploy those financial resources judiciously as business needs or opportunities warrant. Given our strong cash position and rapid growth of our business, I do not plan to raise any cash by adding any incremental debt or equity that would result in shareholder dilution. Given our differentiated and enviable portfolio of assets, any M and A activity will be measured and opportunistic. In the near to intermediate term, we expect business development activity will be focused on the addition of new technology partnerships or commercial partnerships that can leverage our existing products, formulations or commercial capabilities, which add to our growth.

Speaker 2

The 3rd priority is to improve the quality of our external communications and guidance. Our external stakeholders are critical to our success and it is extremely important that we listen closely to feedback and communicate in the best manner possible, setting the right expectations around the ability of our products to deliver growth and value. To that Aetna, we understand that our initial 2024 revenue guidance suggested that we were not confident in the growth prospects of this business. As I explained with my first priority, we are committed to driving rapid and sustained growth of our commercial products. Given our first half performance and our momentum going into the second half of the year, we are confident in the performance and growth of our business.

Speaker 2

Therefore, we are raising the low end of our total revenue outlook for the full year from $175,000,000 to $190,000,000 Our updated total revenue range is now $190,000,000 to 200,000,000 By executing on these three priorities, I expect to build upon the strong foundation we've created, which will drive our overall business performance to new heights. Now, let's move on to the highlights of the 2nd quarter. I'm very pleased to report that we posted an outstanding quarter of total revenue 48,000,000 dollars a 26% increase over Q2 last year, driven by continued strong demand of all three products as well as contributions from our partnerships. Our portfolio of commercially available products Recorlev, Gevo and KEVEYIS, each of which is a transformative therapeutic in their own respective market collectively generated more than $46,000,000 in revenue, a 26% increase over the same quarter in 2023. This marks the 11th quarter in a row of greater than 20% growth.

Speaker 2

For the first half of twenty twenty four, these products are up 25% over the same period last year. Our commercial engine is clearly working. We're enjoying continuing rapid growth in both GVOC and Recorlev and a very sturdy commitment to KEVEYIS from both patients and healthcare professionals. Let's get into a little more of the details, starting with Recorlev. As a reminder, RECORLEV is a cortisol synthesis inhibitor indicated for the treatment of endogenous hypocortisolemia in patients with Cushing's syndrome for whom surgery is not an option or hasn't worked.

Speaker 2

Importantly, RECORLEV is the only treatment approved for all etiologies of Cushing's syndrome and has been proven in long term studies to normalize cortisol levels. Cushing's syndrome is an extremely challenging disorder with a 2 to 4 times higher mortality rate than the general population and comorbidities that drastically impact a person's quality of life. While there are multiple approved medical treatments available, patients often struggle to gain control over the disease given its complexities. Clinicians increasingly recognize the burden of hypercortisolmia and are expanding their testing efforts. Not surprisingly, more patients with the disease are being discovered every day.

Speaker 2

In Q2, Recorlev generated a record number of referrals and a record number of new patient starts. With such favorable dynamics, we're confident recorlev is entering into a period of accelerating growth. Moving on to Gevoq. I'm sure you recall that Gevoq HypoPen is our liquid ready to use glucagon in an auto injector used for the treatment of severe hypoglycemia in people with diabetes. Owing to the prevalence and preventable hospitalizations and mortality associated with severe low blood sugar, the health advocacy organizations including the American Diabetes Association and the Endo Society have reached consensus opinion that any person with diabetes taking either insulin or sulfonylurea should always be carrying a ready to use glucagon product like GVOQ.

Speaker 2

We estimate that of the approximately 15,000,000 people in the U. S. That should be protected, fewer than 1,000,000 currently are. Thankfully, our ongoing efforts to increase awareness of this discrepancy and the need to protect patients at risk is gaining traction and driving market growth. Total prescriptions for GVOK in Q2 grew 13% sequentially over Q1 and 27% over the same quarter last year.

Speaker 2

Importantly, G Book's market share increased to 34%. In the quarters and years ahead, we expect to steadily add more prescribers and protect more and more of the 14,000,000 plus patients who remain unprotected. Last, but by no means least, we turn to KEVEYIS. What an amazing story KEVEYIS continues to be for the patients that need it and for our Xerus business. Just to remind you, KEVEYIS is used to treat primary periodic paralysis or PPP, which is an ultra rare genetic neuromuscular condition that interferes with the normal functioning of muscle movements.

Speaker 2

KEVEYIS lost orphan exclusivity in August of 2022, yet has proven extremely resistant to generic substitution given the uniqueness of the disorder and the PPP community's critical reliance on Xeris support for both healthcare professionals and our patients. During Q2, the number of patients being treated with KEVEYIS was nearly equivalent to Q1 and that trend has continued into Q3, a remarkable achievement. We're increasingly optimistic about the longer term strength and resilience of KEVEYIS and we'll continue to provide services that matter most for the well-being of patients suffering from PPP. Quickly shifting to our pipeline. In late May, we announced positive top line results of our Phase 2 study of XP-eight thousand one hundred and twenty one, our once weekly subcutaneous injectable formulation of Levothyroxine.

Speaker 2

The team is busy preparing for an end of Phase 2 meeting with the FDA this fall, during which time we will seek clarification about the Phase 3 requirements necessary to earn approval for this novel product. The more we evaluate the data and market potential of XP8121, the more excited we get. Owing to the size of the hypothyroidism marketplace and the desperate need for innovation to serve patients struggling for control. Innumerable reports have been published documenting the various compliance and absorption challenges that can interfere with bioavailability of oral Levothyroxine. Of note, in our Phase 2 study, 40% of the patients considered stable at the time of screening were found to have their TSH or T4 outside of normal range.

Speaker 2

Finally, in Q2, we welcomed Beta Bionics to our stable of partners seeking to leverage our formulation technology to create novel medicines. As announced in May, we're aiding Beta Bionics in the development of a novel, ready to use glucagon formulation that could work optimally in their dual hormone pump program. So once again, I couldn't be more excited for Xerus as we enter a new era. And I'm confident that we are well on our way to building an innovative, self sustaining, fast growing biopharmaceutical company committed to making a difference in patients' lives. And with that, I'm going to pass over to Steve to walk you through the details of our Q2 financial results.

Speaker 3

Thanks, John. Good morning, everyone. We ended the quarter with net product revenue of $46,500,000 and total revenue of $48,100,000 both increasing by approximately 26% compared to prior year. Year to date net product revenue was $86,800,000 and total revenue was $88,700,000 both increasing by approximately 25% compared to prior year. This growth in revenue was driven by strong performance from both RECORLEV and Gevo.

Speaker 3

RECORLEV net revenue was $13,300,000 for the quarter, increasing 86% compared to prior year. On a sequential basis, RECORLEV net revenue increased by an impressive $2,700,000 representing growth of 26%. These increases were driven by the average number of patients on recorlev increasing 124% from last year and 25% compared to Q1. We expect this rapid growth to continue based on our robust pipeline of referrals growing 31% compared to Q1. Our ability to convert these referrals into patients on RECORLEV as well as our field expansion, which we completed in early July.

Speaker 3

Gevoque net revenue was $20,000,000 for the quarter, representing a 28% increase compared to the same period last year. This growth was driven by 27 percent increase in GVOK prescriptions. As we mentioned during our prior quarter remarks, the Change Healthcare Cybersecurity breach temporarily impacted Gevo's net revenue in the Q1. Although we do not believe we recovered the lost revenue from the Q1, growth in patient demand, which consistently exceeded 5,000 weekly prescriptions since May, as well as increased orders from our wholesalers have signaled to us the impact has been resolved. KEVEYIS net revenue for the quarter year to date was $13,100,000 26.2 $1,000,000 Despite generic competition, revenue only decreased slightly by 2% on a year to date basis.

Speaker 3

As we have repeatedly stated, KEVEYIS is resilient and we will continue to invest and defend the brand. Our commitment to this strategy is proven to be successful as we continue to generate a healthy pipeline of patient referrals. Given the strong performance of all three of our products in the first half of the year and the momentum we are currently generating, we are confident in tightening our total revenue guidance by substantially raising the low end of the range with revised guidance of $190,000,000 to $200,000,000 from the previous guidance of $175,000,000 to 200,000,000 dollars Moving down the P and L. Cost of goods sold as a percentage of total product revenue decreased by 4% for the quarter compared to the prior year. This decrease was primarily the result of an increase in RECORLEV revenue resulting in a product mix with lower costs.

Speaker 3

Research and development expenses were $5,800,000 for the Q2. These expenses were relatively flat compared to the Q2 of 2023 and were primarily comprised of costs for our pipeline, notably XP8121 and further development of our technology platform, XERISOL and XERAGEX. On a year to date basis, research and development expenses were $13,600,000 a $2,400,000 increase compared to prior year, which was primarily a result of investments in our pipeline and increased employee costs to support XERASOL and XERAGEX. Consistent with my previous remarks, we are focused on advancing our pipeline and supporting our XeroJect and XeroJect technology platform, which will result in an increase in R and D costs this year compared to 2023. We expect a modest increase in R and D spend relative to the first half.

Speaker 3

Selling, general and administrative expenses were $40,000,000 for the quarter and $78,400,000 for the year, an increase of 6% 10% compared to prior year. These increases were driven by higher personnel costs, primarily due to our field expansion in the Q4 of last year. Looking ahead for the full year, we expect a modest increase in second half expenses relative to the first half as we have made investments that are focused on supporting our revenue growth. Moving to cash. We ended the quarter in a healthy cash position of $77,600,000 Looking ahead to our year end, we are tightening our cash guidance to $60,000,000 to $75,000,000 from the original $55,000,000 to 75,000,000 dollars which considers our revised revenue guidance as well as the additional investments we have made in the Recorlev business.

Speaker 3

We are able to make these investments as a result of continued strong revenue growth. We are seeing great momentum across our business, which is translating to consistent and meaningful revenue growth and driving the financial health of our enterprise. With that, operator, please open the line for questions.

Operator

Thank you. We will now start today's Q and A session. Our first question today comes from Roana Ruiz from Leerink Partners. Your line is now open. Please go ahead.

Speaker 4

Great. Good morning, everyone. So I have a question for Recorlev first. It seems like the new patient starts are growing well in the quarter. How do you think that will trend into the second half this year?

Speaker 4

And I'm also curious with the newly expanded field force, could that continue to be a tailwind later this year and possibly into 2025?

Speaker 2

Hey, Rohan, it's John. Yes, I mean, we as I said, we're it's accelerating. We're growing the new starts and new referrals. We see that are continuing to accelerate in Q3 and we see that through the end of the year. And we just put the new sales force on out in the additional sales reps out into the field in the last couple of weeks and they'll start contributing early later this year and early next year.

Speaker 4

Got it. Helpful. And for GVOC, I also was curious, would you consider focusing the field force a bit more on driving back to school prescribing for GVOC to sort of maximize that going into later this year? And could you just remind us what are the Gevoque reps doing today in terms of tackling some of these prescribers versus other prescribers for adults, etcetera?

Speaker 2

Yes. So as you pointed out, the Q3 back to school starts kicking in like this week and next week. And as always, we will focus in that area for that time period, which is primarily pediatric, endo. And as we've shown and you guys understand is, is BaXymi has a pretty strong hold on that space, only because they launched right into it several years ago. So from our perspective, we hold on and continue to grow during this timeframe.

Speaker 2

It's our biggest growth quarter every year and it'll be that way this year. But we also then focus on how do we bring every day, how do we bring more of the 14,000,000 people that are not protected today, on Gevo.

Speaker 4

Got it. Thanks.

Operator

Our next question comes from David Amsellem from Piper Sandler. Your line is now open. Please go ahead.

Speaker 5

Hi, thank you. This is Skyler on for David. First on RECORLEV, can you talk about your long term expectations in the context of the recent catalyst data from Corcept, which showed that 24% of patients with difficult to treat type 2 diabetes in the study actually had Cushing's syndrome, which might indicate that the true prevalence is higher than previously understood? And then separately, how are you thinking about Gevo growth over the remainder of the second half of the year? And touching on last question, just the degree of seasonality we should expect with the back to school season, just so we can better think about the phasing of revenue?

Speaker 5

Thank you.

Speaker 2

Okay. Let me start with Recorlev. And I think you're pointing out part of what I had in my prepared remarks is that more and more patients are being tested and screened for high cortisol levels, which is ideal for the marketplace and ideal for our product because Recorlev normalizes cortisol. So it fits right in for why some of the accelerate we're seeing some of the acceleration in our growth and how our product fits into what's going on in that space. For GVoke, we expect to continue to grow and drive kind of more and more people who aren't protected, to prescribe and or get Gevoque just in case, okay?

Speaker 2

That will continue strongly through the Q3, which is always our strongest quarter and then into the Q4 as well. So we look to see this steady continuous growth that we've been pounding out the last several quarters, to continue on Gevoque.

Speaker 3

Yes. Maybe just this is Steve, Skyler. Just to get a little more specific on Gevoque. I think historically we've seen in the back half of the year 20% growth, and we've enjoyed that through the first half of the year. So I would expect that trend to continue with probably a little bit more dramatic growth in the Q3.

Speaker 3

But I think that's kind of where I would peg things for the second half of the year.

Speaker 5

Helpful. Thank you, guys.

Operator

Our next question comes from Chase Knickerbocker from Craig Hallum. Your line is now open. Please go ahead.

Speaker 6

Good morning. Thanks for taking the questions. And first of all, John, congrats on the new role. Looking forward to watching you execute here. First, just on housekeeping on GVOK.

Speaker 6

Revenue net sales grew a little bit more than prescriptions in the year, year over year. Is that some stocking dynamics? Or is there a little bit of pricing benefit year over year? Just click there.

Speaker 3

Yes. Chase, this is Steve. I would say it's probably just a little bit of stocking, maybe a little bit of price, but nothing material.

Speaker 6

Got it. Thanks. And maybe so far through the first half of the year, at least in our data, we've seen some pretty nice share gains relative to competitors. Can you just speak to kind of what you've seen in your data kind of in the first half of the year on New Rx trends here with your ready to use competitors with G Book?

Speaker 2

Yes, I think we see the same thing you do is, yes, we're gaining share, but we're gaining that share primarily by market growth and capturing an inordinate amount of the market growth directly to Gevo. So we're not out there directly getting it from existing BXimy patients. We're getting it from the market growth that's out there and the market growth that we're driving. So, and we think that trend will continue.

Speaker 6

Yes. And so kind of thinking about that through the remainder of the year and into next with kind of you guys taking a majority of new patient starts from here, maybe that is a little bit different in Q3, but you would expect that to kind of remain the case outside of maybe that back to school seasonality?

Speaker 2

Yes. If you went back and just map this out over the last couple of years, you see that we have share gains pretty consistent every quarter. And then we get to the 3rd quarter and it kind of flattens out in terms of increases. And then it picks up again in Q4. That trend will probably continue this quarter.

Speaker 6

Got it. And then just on RECORLEV, I mean, just kind of taking a step back and looking at the market as a whole. Can you help me kind of parse through what is maybe just some increased diagnosis cushions here versus you guys making competitive gains from some that have failed other therapies, maybe just doing better there? And then I might have missed this, sorry, I'm jumping around, but just speak to the pipeline as far as kind of sequential growth there, and how that kind of informs your guys' confidence in the back half of the year? Thanks.

Speaker 2

Let me try to answer your Recorlev question, because there's a couple of dynamics there. There's more and more people being tested and more and more people being diagnosed. And with high elevated cortisol. And again, we normalize cortisol. There's also a level of complexity in terms of treating this and there's no perfect product for anybody.

Speaker 2

So there's some bouncing around between therapies and we benefit from that. So we're picking up patients from new starts to people that have switched to people that have tried other things and now are moving over. So there's all kind of people are coming from all places in terms of new starts. And I don't know that I understood your last question about the pipeline. Are you referring to the pipeline?

Speaker 6

You saw the pipeline of patients for Recorlev. Yes, for Recorlev pipeline. Yes.

Speaker 2

Yes, it's stronger than ever. And it continues to build for us. And like I said, it's coming from all places.

Speaker 6

Then just lastly on KEVEYIS, would you expect kind of a consistent kind of treatment from payers kind of through the remainder of the year? And that kind of informs some of the confidence here. And then when was we typically think kind of Q1 for potential payer changes, that would kind of be the next time where there would be something that we should think about from an investor perspective?

Speaker 2

Yes. I would think about Q1. As you pointed out, that's when kind of new there's all kinds of resets going on there. What we saw in Q2 and what we're seeing in Q3 is we're adding new patients at a very, very strong pace. And as I said in my prepared remarks, we were basically even Q2 to Q1 in terms of patients.

Speaker 2

And we see that trend continuing for the rest of the year.

Speaker 6

Thanks for the questions guys. Congrats on a really nice quarter.

Speaker 2

Thanks, Chase.

Operator

We will now take our final question from Rowan Mather from Oppenheimer. Your line is now open. Please go ahead.

Speaker 7

Hi. This is Ron on for Lee Ingersoll. Congratulations on another strong quarter. Just a couple for me. On RECORLEV, can you give some detail on how the payer reception and coverage has been in the last quarter and how it's changed over time?

Speaker 7

And this is on KEVEYIS. Any granularity you could provide on the sturdiness of the business and how you're thinking about how resilient the franchise might be in the coming years? Thank you.

Speaker 2

Okay. So, let me talk about payer coverage with Recorlev. And I it's really not changed. What happens is you get spend more and more time in these spaces with these rare brands is you get better and better at moving patients from a referral through the payer process and you do it faster and you do it more efficiently. So and I think that's where that's what's also leading to when you have a really strong referral pipeline that you can turn that into new starts.

Speaker 2

And we saw both of those accelerate in the 2nd quarter and continue to see that going into the 3rd quarter. And for KEVEYIS, we said I think we've done an amazing job of kind of managing this space for the benefit of the patients with PPP. And that is being we see that in the resilience that patients and physicians are willing to fight for brand. So we see that continuing. Now could it get maybe another player coming in or something would maybe potentially disrupt that.

Speaker 2

But until that happens, we're really confident that it's going to hold its resiliency.

Speaker 7

Great. Thank you.

Operator

We have no further questions in the queue at this time. So I'll hand back over to the team for closing remarks.

Speaker 2

Well, thank you everyone for listening today. As you've just heard, Xerus is stronger than ever. I'm confident that by executing on the three priorities I talked about earlier, we will deliver a robust business result that will ultimately translate into meaningful shareholder value. Thank you again for your time this morning.

Operator

That concludes today's call.

Speaker 5

Thank you

Operator

for joining. You may now disconnect your line.

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