Xeris Biopharma Holdings, Inc. (XERS) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. And welcome to the Xeris Pharmaceuticals Second Quarter Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I'd now like to hand the conference over to Allison Wey, Senior Vice President of Investor Relations and Corporate Communications. Ms. Wey, please go ahead.

Thank you, James. Good morning. And welcome to Xeris' Second Quarter and First Half 2020 Financial Results and Corporate Update Conference Call. A press release with the company's second quarter and 6 months 2020 results was issued earlier this morning and can be found on our website. We are joined today by Paul Edick, Chairman and CEO; and Barry Deutsch, CFO. Paul will provide opening remarks, and Barry will review the financial results, then we will open the line for questions. Before we begin, I'd like to remind you that this call will contain forward-looking statements concerning the impact of COVID-19 on Xeris' business practices, Xeris' future expectations, plans, prospects, clinical approvals, commercializations, corporate strategy and performance which constitute forward-looking statements for the purposes of the safe harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including the effect of uncertainties related to the COVID-19 pandemic on the U.S. and global markets, Xeris' business, financial conditions, operations, clinical trials and our 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. I will now turn the call over to Paul.

Thanks, Allison. And thank you to everyone for joining us today. First, I want to emphasize that we had an outstanding second quarter that was marked by several important achievements despite the continued pandemic-related challenges and civil unrest. We recorded approximately $2 million in net sales for Gvoke. We grew Gvoke Pre-Filled Syringe prescriptions over 72% from the first quarter and continued to outpace the market. We had over 75% of commercially insured covered -- commercially insured lives covered with unrestricted access to Gvoke PFS by the end of the quarter. We have an established strong base of Gvoke prescribers and increased new writers of prescriptions by 1,000 from the first quarter. We invested in programs that support our customers and serve as a strategic launch pad for the Gvoke HypoPen. We reported positive results from 4 of our clinical programs. We signed a supply agreement with Clinigen for Gvoke ex U.S. on a named patient basis, and we raised $109 million to fund our business for the long term. Let's take a closer look at some of these accomplishments. As I just said, we were pleased with our Gvoke commercial performance in the face of the ongoing pandemic and believe it reflects strong demand for our products as well as our team's commitment to assure access to Gvoke for patients. As you know, towards the end of the first quarter, we swiftly moved to a virtual customer engagement model and invested in several programs to ensure that the diabetes community would continue to have easy and convenient ways to access Gvoke Pre-Filled Syringe, such as a $0 co-pay and the establishment of a hub to assist our health care professional customers. Importantly, achieving very high levels of payer coverage was critical to the start of good prescription growth in both the Gvoke Pre-Filled Syringe and of late, the Gvoke HypoPen. Sitting here today, approximately 80% of patients across all types of insurance have unrestricted access to Gvoke. All of these factors combined have contributed to steady growth in weekly prescriptions and has set us up for success with the Gvoke HypoPen launch. Turning to our pipeline. During the second quarter, we reported positive top line results on 4 of our clinical programs, the results of which reinforce the value and potential of our XeriSol technology. I will hit some of the highlights of each. Diazepam. We recently shared complete Phase Ib study results of our ready-to-use diazepam formulation with the FDA at an end of Phase I meeting. The study results and regulatory feedback from that meeting support a direct-to-Phase III registration study. We believe our novel diazepam formulation is a valuable asset and now with a predictable and expedited development road map, we will search for a suitable partner to continue its development as a critical therapy for the epilepsy community. PBH, or Post-Bariatric Hypoglycemia. The findings from the Phase II PBH study showed that a mini dose, for example, 300 micrograms of ready-to-use glucagon, was adequate to restore or maintain normal blood glucose levels within 15 minutes of administration after experiencing postprandial hypoglycemia and without the need of an oral glucose tablet. In addition, no rebound hypoglycemia was observed in the ready-to-use glucagon treatment arm. Exercise-Induced Hypoglycemia, or EIH. Results from the Phase II study in EIH showed that a pretreatment with a micro dose, 150 micrograms of Gvoke ready-to-use micro, significantly prevented EIH during prolonged, moderate-to-high intensity aerobic exercise in a real-world setting with or without adjustment of insulin. Recall that each of these 2 studies, ready-to-use glucagon programs had an in-clinic and an outpatient portion. The results from the PBH and the EIH Phase II studies demonstrated the utility of liquid stable ready-to-use glucagon in conditions beyond rescue for severe hypoglycemia, further establishing the safety profile and utility for mini dosing ready-to-use glucagon in a real-world situation that requires self-administration by the patient. Keep in mind, there are no approved therapies for either of these conditions. As we said previously -- as we have said previously, our goal with these programs is to advance the use of ready-to-use glucagon for patients that will ultimately get a non-rescue mini dose indication to the market. Now for some key findings of our XeriSol co-formulating of pramlintide-insulin from a Phase II study. And I'm going to go a little bit even slower here just to make sure people can understand what's important about this program. In type 1 diabetics using an oral glucose tolerance test, the hardest type of meal challenge possible, we have achieved significantly better glucose control than regular insulin alone, additionally, we have similar, if not better glucose control when compared to co-administration of pramlintide and insulin. We have a better glucose control and use less insulin overall. This is important because less insulin may equate to less weight gain, less insulin resistance over time, ultimately better health outcomes and lower cost. Pramlintide, within our co-formulation, exhibits novel pharmacokinetics that may reduce immediate side effects of traditional pramlintide administration, such as GI side effects, while also prolong its activity to slow gastric emptying. Prolonged slow gastric emptying may have several positive attributes, both immediately after meals, such as glucose rise as well as longer-term smaller meals appetite reduction, et cetera. Our co-formulation has an onset of activity that is similar to both regular insulin and co-administration. Additionally, when compared to both regular insulin and co-administration, PRAM9 exhibits a more predictable PK that reduces hypoglycemia risk initially after administration, yet at the same time, better blood glucose control immediately and hours after the meal. Our co-formulation offers a unique PK/PD profile with characteristics of an ideal meal time insulin product. This profile would be beneficial in both the type 1 and especially type 2 diabetes populations. We anticipate end of Phase II meetings before the end of the year for PBH, EIH and pramlintide-insulin programs, and we'll report the outcomes of each. As with our diazepam program, we plan to seek a partner for our pramlintide-insulin program to take development forward post meeting with the FDA. Turning to current events. We started the third quarter with the launch of Gvoke HypoPen on July 1. As I stated earlier, we had many of the pieces in place for a successful HypoPen launch that we didn't have when we launched the prefilled syringe at the end of last year. In addition to the $0 copay program, the hub and outstanding broad, unrestricted market access, our sales force has now established relationships and has become very efficient and effective in this new virtual environment. Patients and health care professionals have a better understanding of the benefits of Gvoke and we are launching into a pandemic version of back-to-school season, which historically has seen a bump in prescriptions. We also have optimized our sales territories, refined our messaging and fine-tuned our marketing initiatives, such as digital advertising, use of social media and virtual dinner meetings, to name a few. We like to think that the prefilled syringe launch was the on-ramp to the now HypoPen launch. It's early, only 1 month of data since the launch, but we are experiencing -- we are extremely encouraged by some leading indicators such as very significant shipments from wholesalers to retailers that are outpacing TRxs thus far. For the week ending July 31, IQVIA reported over 1,000 TRxs for Gvoke, the majority of that being HypoPen. As is typically true, especially in the launch phase, prescriptions and units are reported -- as reported by third-party sources, such as IQVIA, rarely match up. Such differences are likely due to the estimated nature of these third-party prescription numbers and the timing of purchases by customers. Gvoke is also not the kind of product that sits on a retail shelf so it may take a day or 2 to get it from the pharmacy once the prescription has been presented. However, we are confident that with the high-volume demand, patients should not have trouble getting their Gvoke HypoPen or Gvoke Pre-Filled Syringe. Let me offer a brief summary before I turn it over to Barry. We had a great second quarter. We are seeing early success with Gvoke HypoPen launch. We're advancing our pipeline programs, continuing to add new opportunities to our development pipeline. We have enough cash to get to cash flow positive. I believe that we have a very strong -- fundamentally very strong company. With that, I'll turn it over to Barry to go over the financials.

Thanks, Paul. Total net sales of Gvoke Pre-Filled Syringe and Gvoke HypoPen were $2 million and $3.7 million for the 3 and 6 months ended June 30, 2020, respectively. Net sales in both periods include a small amount of Gvoke HypoPen sales in anticipation of the commercial launch of Gvoke HypoPen in July 2020. Net sales represent gross product sales less estimated allowances for patient co-pay assistance programs, such as the $0 copay program, to which Paul referred; prompt payment discounts, payer rebates, charge backs, service fees and product returns, all of which are recorded at the time of sale to pharmaceutical wholesalers. Cost of goods sold for the 3 months ended June 30, 2020, was $1.3 million, which included under-absorbed overhead costs of $0.7 million and charges related to excess and obsolete inventory of $0.3 million. Cost of goods sold for the 6 months ended June 30, 2020, was $3.1 million, which included $1.5 million related to excess and obsolete inventory and under-absorbed overhead costs of $1.2 million. Manufacturing costs for Gvoke incurred prior to approval and initial commercialization were previously expensed as research and development expenses. Total operating expenses were $22.9 million and $51.2 million for the second quarter of 2010 and the first 6 months of 2020, respectively, compared to $34.4 million and $60 million for the second quarter of 2019 and the first 6 months of 2019, respectively. Research and development expenses decreased by $14 million for the 3 months ended June 30, 2020, in comparison to the 3 months ended June 30, 2019. The decrease was driven by decreased CMC costs due to the expenses incurred in the prior year for the manufacturing of Gvoke prior to commercialization of $8.2 million and a reduction of manufacturing batches and supplies needed for preclinical and clinical trials of $1.8 million. Decreased expenses associated with our clinical trials of $3.9 million and personnel and facility costs that, beginning in 2020, were allocated to cost of goods sold of $0.8 million. All of this partially offset by increased personnel expenses due to additional headcount and other employee-related costs of $0.6 million. Research and development expenses decreased by $20.6 million for the 6 months ended June 30, 2020, in comparison to the 6 months ended June 30, 2019. The decrease was primarily driven by decreased CMC costs due to the expenses incurred in the prior year for the manufacturing of Gvoke prior to commercialization of $10.6 million and reduction of manufacturing batches and supplies needed for preclinical and clinical trials of $3.8 million, decreased expenses associated with our clinical trials of $5.8 million and personnel and facility costs that beginning in 2020 were allocated cost of goods sold of $1.4 million, partially offset by increased personnel expenses due to additional headcount and other employee-related costs of $0.9 million. Selling, general and administrative expenses increased by $2.6 million for the 3 months ended June 30, 2020, in comparison to the 3 months ended June 30, 2019. The increase was primarily driven by an increase in compensation and related personnel costs of $3.1 million due to additional headcount to support commercialization efforts of Gvoke, partially offset by decreases in marketing and selling expenses of $0.7 million primarily due to timing of marketing spend. Selling, general and administrative expenses increased by $11.7 million for the 6 months ended June 30, 2020, in comparison to the 6 months ended June 30, 2019. The increase was primarily driven by an increase in compensation and related personnel costs of $7 million due to additional headcount to support commercialization efforts of Gvoke and increases in marketing and selling expenses of $4.4 million. Net loss for the 3 months ended June 30, 2020, was $24.1 million or $0.63 per share compared to $34.4 million or $1.28 per share for the same period in 2019. Net loss for the 6 months ended June 30, 2020, was $53.3 million or $1.51 per share compared to $59.7 million or $2.36 per share for the same period in 2019. As of June 30, 2020, we held approximately $146 million in cash, cash equivalents and investments. In June 2020, we completed concurrent public convertible debt and equity offerings. Specifically, we sold $86.3 million aggregate principal amount of 5% convertible senior notes due 2025. This amount includes the $11.3 million we raised pursuant to the full exercise of the greenshoe in early July. With regard to the equity offering, we sold 8,510,000 shares of common stock, which includes 1,110,000 shares pursuant to the full exercise of the greenshoe in early July. Net proceeds from the concurrent offerings were $102.8 million after deducting underwriting discounts and commissions as well as other offering expenses. The total shares outstanding as of July 31, 2020, were 46,277,008 shares. On June 30, 2020, we entered into an amendment to our loan agreement with Oxford and SVB to provide for the lenders' consent to our convertible debt offering and permit the company to prepay our PPP loan in full. The amendment also provided for the extension of the interest-only payment period through December 31, 2021, after which, the term loans will be payable in 30 equal monthly installments. If the company achieves a certain revenue milestone prior to January 1, 2022, then the period for interest-only payments is extended through September 30, 2022, after which the term loans will be payable in 21 equal monthly installments. The amendment provides for an extension of the maturity date from June 1, 2023 to June 1, 2024. Pursuant to the amendment, the company prepaid $20 million of the $60 million outstanding under the term loans along with associated accrued and unpaid interest, fees and expenses. I now will turn the call back to Paul.

Thanks, Barry. I want to once again summarize some of what we believe you can see with our company. We believe the fundamentals of our company are truly stronger than ever. If you think about our performance thus far and specifically in second quarter, we had a great quarter. We're seeing early success in the Gvoke HypoPen launch in the month of July. We are advancing our pipeline programs, reporting out positive data on 4 programs in just the second quarter and we continue to add new opportunities to our development pipeline coming out of our labs. We also have enough cash to get us to cash flow positive. So once again, we believe the fundamentals of the company are strong. And with that, I will turn it over to the operator for questions.

[Operator Instructions] And our first question comes from the line of Ami Fadia with SVB Leerink.

This is Eason on for Ami. Three quick questions, if I may, on the auto-injector launch. First, we've seen -- we can see in IQVIA the weekly Gvoke scripts are now basically doubling what they were pre-auto-injector launch. Maybe can you speak to where this growth is coming from. Like are these from practices that have prescribed the needles -- have prescribed the prefilled syringe and are adding the auto-injector now? Or are these -- is this growth from practices that were sort of waiting out for the auto-injector to be available? Second, just with the back-to-school season, but with sort of COVID-19 and a bit of the mix reopening across the country, how do you think this might affect sort of the typical glucagon prescribing volume uptick that we typically see at this time of year? And then maybe third, just in terms of the sort of getting used to this virtual -- sort of this virtual sort of physician interaction, how do you think that -- how -- do you think we sort of reached a sort of a new normal in terms of physician receptivity to this type of marketing and as a result, maybe even if we see sort of a COVID impact prolonging into the future that we would still sort of see sort of the market sort of expand with the availability of these new glucagon options?

So thanks. Let me try to take those in order. Where are the prescriptions coming from? It's across the board. We're getting prescriptions from people who have prescribed the prefilled syringe historically. We're getting prescriptions from people who hadn't prescribed prefilled syringe. We're also adding -- if you remember, we added 1,000 new prescribers just in the second quarter. In the third quarter, so far, with the auto-injector in July, we continue to add new prescribers by the hundreds. So also keep in mind, the prefilled syringe or Gvoke, in general, was launched at the very end of last year, pretty much almost the beginning of this year. We really only had about 2.5 months of open and free time in the field in detailing until we went into a virtual world in the middle of March. So what the prefilled syringe is in terms of prescribing versus what it could be, nobody knows. But we continue to drive increases in the second quarter, set ourselves up very nicely for the third quarter and for the HypoPen. So all in all, pretty good, and we're getting prescriptions across the board. In terms of back-to-school, there's going to be some version, we think, of back-to-school. Obviously, it's not going to be the normal back-to-school. But when you really think about it, parents have to be prepared. Whatever the schooling is going to be, parents need to prepare for their children to either be in school, at home, partially in school, I think we're going to see a variety of things across the country, and parents are going to need to be prepared for all of them. Will it be the same level of peak that we've seen historically? We just don't know. We're anticipating it could very well be or it could very well be even higher given the kind of things that I mean, parents are worried right now. So I think they're taking extra precautions, but we'll see how that plays out. In terms of the virtual world, it will be part of our new normal without question. There will be more -- we will have an ongoing virtual interaction with customers over time, we believe. One of the elements of that is, early on, when we went to virtual, not a lot of the physicians did, but physicians have a business to run as well. And if the only way they can communicate with their patients is virtually or by phone or by video or by FaceTime, they are getting used to it as well. The offices are getting used to it. And as they get used to running their business and doing good work with their patients on a virtual basis, they also get more comfortable interacting with us virtually. So I think there's going to be a piece of that. Around the country, we're going to have some reps that are in the field, some that are in the field some of the time and virtually some of the time. And in some parts of the country, we're going to have reps that are still virtual. So I think it's going to be all of the above. Long-winded answers, but great questions. Thanks.

Our next question comes from the line of David Amsellem with Piper Sandler.

This is Zack on for David. Just 1 follow-up on the HypoPen launch. Could you maybe speak to the extent that you've been providing free samples early in the launch for physicians to sort of gain experience with the pen presentation and the extent you plan on providing samples throughout the rest of 2020? And then quickly on the diazepam program. I was just hoping to get a quick update on the progress you've made looking for a co-development partner. And if you could provide an update on maybe the timing for the start of the Phase III program, that would be great.

So a couple of things. Thanks, Zack. The extent of samples, we are not sampling the auto-injector. We have demonstrators all -- any physician, educators, nurses in the office can get from our sales representatives, a mock auto-injector, a mock HypoPen that it can be used repeatedly so that they can demonstrate to patients how it is to be used. Keep in mind, it's fairly simple. You pull the red cap off, you press the yellow cap down. So it's pretty easy to do, but they will have demonstrators that they can teach patients with. The prefilled syringe, we chose during that launch to do samples simply because we wanted to get the product into doctors' hands in an environment where there was less managed care coverage, less reimbursement so that they could provide the samples to patients whose coverage was not there yet. We're not in that place with the auto-injector. We've got great managed care coverage. So we didn't need to. As far as diazepam is concerned, we have just started looking for a partner. And when the Phase III study will start will depend on if and when we can get a partner.

Our next question comes from the line of Difei Yang with Dheres Pharmaceutical (sic) [Mizuho].

Just a couple. Paul, I'm wondering if you are able to make comments with regards to the net price realized on both PFS and HypoPen? And then secondarily, with regards to the PFS samples, what amount do you believe are still unconsumed with the physicians? Then finally, with regards to the Clinigen, I'm not sure if I'm pronouncing the company's name correctly. But for the European licensing deal with -- on the PFS portion, would you be able to comment high level deal terms?

Difei, thank you for the question. We have not and we don't plan to talk about our net pricing. I mean if you do the math in the second quarter, our costs were a little bit higher because of some of the programs we initiated, and were very aggressive with in terms of helping patients and helping prescribers, hospital hubs, et cetera, et cetera. The prefilled syringe, we think -- from what we can see -- prefilled syringe samples, from what we can see, those have all moved through -- we put about 5,500 out there. They've all moved through into patients' hands. We don't know that there's many sitting around the doctors' offices. A lot of physicians kept 1 or 2 for emergency use in their offices. So we know that's the case. We know some of them have actually been used for patient emergencies in office. So it's great that they have them. And Clinigen is -- that's a named patient program only. It's not really a commercial partner and it's a distributor relationship, the details of which we have not made public.

Then just a quick follow-up. There's the $0 copay program for both the pen and PFS. And do you plan to keep that for a longer term? Or is that temporary program?

We have not decided if that's going to be longer term. We know it's going to be in place for the next couple of months. We'll see how that goes.

Our next question comes from the line of David Steinberg with Jefferies.

It's actually Ed Chung on for Dave. A couple of questions here. Can you comment in terms of the -- for the scripts, are you now pretty much at 2 syringes per script? Or are you somewhere still in between 1.5, 2 syringes? And then I've got a follow-up after that.

So for the -- I think we're right about 2 on a unit per prescription. It tends to go up and down. At one point, we were as high as 2.9 with the prefilled syringe. Over time, we think it's going to be somewhat higher than 2, but time will tell. With the auto-injector, keep in mind, the only thing we're marketing currently is a 2-pack. So every prescription right now should be for a 2-pack because that's the only configuration we have for the auto-injector, the HypoPen.

Got it. And last question here. You've had a fair amount of success here with your glucagon clinical programs. And I mean, seemingly, you could have multiple programs going into Phase III next year. So what -- how would you prioritize the different programs given your current resources, if the end of Phase II meetings come back positive?

Yes. So hopefully, I was really clear in my opening remarks. We will take diazepam forward and pramlintide-insulin co-formulation forward into the next phase, call it, Phase III, hopefully, for both, only if we have a partner, a funding partner. We are -- we do not plan to take those forward into Phase III on our own nickel. We will prioritize our funds to continue to advance our glucagon franchise in the short term and to bring new assets through our laboratory into first in man. And prioritization of those will depend on what we get in terms of feedback from the FDA between exercise-induced or PBH or both.

Our last question comes from the line of Daniel Busby with RBC Capital Markets.

It's Dan Busby on for Randall Stanicky. Two questions for me. First, can you provide some high-level thoughts on how you're thinking about the market opportunity for Gvoke in Europe relative to the U.S.? And second, from a competitive standpoint, we could see a dasiglucagon auto-injector launch as early as the first half of next year. How are you thinking about the potential competitive impact on Gvoke? Are you doing anything now to prepare for that?

Good questions. So the market opportunity in Europe, demographically, there's as many diabetics in Europe -- as many people on insulin as there are in the United States. So overall, the opportunity is large. What you will see in Europe, however, is pricing for glucagon is extremely low to the point where we -- if you want reimbursement in Europe for a product, for glucagon, in particular, you are going to have to be extremely low priced. Our approach to Europe will limit the market opportunity for us because we do not plan to sell at reduced prices like has been traditional in the pharmaceutical industry. We think it's wrong. We don't think it's good business. And our plan is to seek a partner in Europe who will -- that we can partner with as a distributor at costs in Europe similar to the U.S. That will cause a fairly significant tightening of the opportunity for us that we will be looking at people who are willing to pay out of pocket, have private insurance, et cetera. Our plan is to not seek government reimbursement at extremely low prices. In terms of dasiglucagon, I would say if they launch that product and position it for the diabetes community, they will continue to add to the positive momentum of the growth in the category and the true goal of getting as many of the 6 million people on insulin as possible to have glucagon handy. The real goal that we should all have, there are 6.2 million people on insulin, and all 6.2 million should have glucagon handy for potential emergency low blood sugar. And I think all 3 companies, Lilly, them and us can support that and work toward that goal. At the end of the day, whether they want Lilly's nasal or the other auto-injector or the other pen, I don't know if it will be an auto-injector or our Gvoke HypoPen, will be a patient choice. And if you look at what's happened with just the nasal and the prefilled syringe and our auto-injector, thus far, the market has grown. A lot of people have come into the market, and it continues to grow. We will get our fair share of that. At the end of the day, do we think when you look at all of those products, do we have the best one? And will we have the best one once they launch their version of a pen? Yes, I believe we will. So we believe we'll do very well over time.

And with that, I'd like to turn the call back over to Mr. Edick for some closing remarks.

Okay. Thank you very much. Thanks for joining us this morning. Thanks for your questions. Once again, I can only repeat that we believe our company is in very strong position. The fundamentals are sound. We continue to make great progress, and we're very optimistic about the second half of 2020. Thank you very much.

This concludes today's conference call. You may now disconnect.