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

Thank you. Hello everyone, thank you for joining us and welcome to Xeris Biopharma Second Quarter Earnings Conference Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. withdraw your question, press star 1 again. I will now hand the conference over to Allison Way, Senior Vice President of Investor Relations. Allison, please go ahead.

Thank you, Leah. Good morning everyone and welcome to Zare's Biopharma Second Quarter Financial Results Conference. Early this morning, we issued a press release detailing our results. This press release can be found on our website. Joining me on today's call is John Shannon, our Chairman and Chief Executive Officer, and Steve Piper, our Chief Financial Officer. Following our prepared remarks, we'll open the call for your questions. Before we begin, I'd like to remind you that today's discussion will include forward-looking statements regarding Xeris's future expectations, plans, strategies, objectives, and financial performance. These forward-looking statements are based on management's current assumptions and beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied. For discussion of these risks and uncertainties, please refer to the risk factors described in our filings with the SEC. Any forward-looking statements made on this call speak only as of today's date, and except as required by law, the company undertakes no obligation to update or revise these statements. In addition, during today's call, we will reference certain financial measures that are presented on a non-GAAP basis. A reconciliation of these non-GAAP measures to the most directly comparable gap measures is included in our earnings release. And with that, I'll turn the call over to John.

Thank you, Alison, and good morning, everyone. The second quarter was another record-breaking quarter for Xeris, one that demonstrated once again that the commercial momentum we have built is durable and accelerating. Total revenue reached 92 million with net product revenue of 91 million representing 34 percent growth year-over-year. Recorilab led the way with 81% growth. Cabeas delivered another quarter of steady, reliable performance. And GVOC improved sequentially, as we expected. But the second quarter was more than a commercial story. It was a quarter of meaningful strategic progress. made significant strides in strengthening our intellectual property portfolio across both our commercial franchise and our pipeline. And shortly after quarter end, we completed the full retirement of our convertible notes, simplifying our capital structure and eliminating nearly $3 million in annual interest expense. The progress we achieved reflects the breadth and defensibility of our science, the financial strength we have earned, and reinforces our confidence in the long-term value of what we're building. Taken together, a record commercial performance, a stronger IP portfolio, and an enhanced balance sheet, The second quarter reflects the disciplined, compounding progress we are making to build a high-value biopharmaceutical company. In other words, we're executing and we're just getting started. Based on our strong first half performance and our conviction in the growth trajectory of this business, we are raising the bottom end of our full year 2026 total revenue guidance to $385 to $390 million. This reflects our confidence in this team, the performance of our diversified commercial portfolio, and the long-term growth outlook of our business. With that, let's turn to our brands, beginning with Recorlo. RecoraLab continues to demonstrate exceptional momentum and in the second quarter it delivered yet again. Recurral of net revenue increased to nearly 57 million in the quarter, representing 81 percent growth year-over-year, an increase of over 25 million. Behind that number, Recoral have had a record number of referrals, new patient starts, patients on therapy, new prescribers, and total prescribers. Quarter after quarter, RecorLib has delivered sustained growth that speaks to the execution of our commercial team, and most importantly, the deepening confidence prescribers have in RecorLib as their treatment of choice for endogenous Cushing syndrome. We believe RecorLabs should be the standard of care, and we intend to build on that. Importantly, we are still in the early stages of realizing the benefits of the commercial expansion we completed in January. Throughout the second quarter, our focus was on training and deploying our expanded team. Execution is tracking in line with our expectations, and we are increasingly well positioned to accelerate growth as these investments gain traction in the second half. Turning to GVOC. After a slow start to the year, GVOC rebounded nicely in the second quarter, delivering net revenue of approximately 23 million and prescription growth of 10% versus the first quarter. I am proud of the team's work to put GVote back into growth mode. And the sequential improvement gives us confidence that GVote is back on the right track. Looking ahead, the back to school season should provide its typical third quarter lift as families with children managing diabetes ensure they have a ready to use GVOK on hand for the school year. The long-term opportunity for G-Vote remains unaltered and our commitment to it is unwavering. Of the 15 million people with diabetes who should have a potential life-saving product like the G-Volk Hypopen, only a million or so do. Closing that gap remains an important opportunity for us, and more importantly, a meaningful way to improve patient outcomes. Finally, Coveas. Coveas delivered nearly 12 million in net revenue. Once again, demonstrating the remarkable durability of this brand in an ultra-rare market. Maintaining patients on therapy remains the ultimate proof point. And our results continue to reflect both the clinical value of Cabeus and the patient-centric support infrastructure we have built for the PPP community. Our commitment to this brand and this community couldn't be more evident than through our steadfast multi-year effort to secure important IP protection for Cabeas. On June 11, we received a notice of allowance from the US Patent Office for new patent covering Cabeas. Once issued, it will provide renewed protection for Cabeas through at least 2039. With a clear line of sight to such extended protection and having evidenced such astounding durability during its period of non-exclusivity, we intend to invest incrementally in both Cabeas and the PPP community in order to expand efforts to identify and support even more patients. in the future. Turning to our pipeline and specifically XP-8121. The second quarter was a busy period for our program. During the quarter, we continue to build an even stronger intellectual property estate around this important product and our proprietary formulation technology. On July 28th, we received our second US patent covering XP-8121. Just one week earlier, we also received a notice of allowance for an additional patent application, which when issued will be our third US patent. Our expanding intellectual property portfolio speaks to the depth of our innovation and and the long-term defensibility of this product. Those achievements build on the significant progress we made during the second quarter. Our technical and clinical teams made great progress in advancing the program through critical milestones. Importantly, we finalized our clinical site selections and those sites are busy preparing in advance of an expected phase 3 start by year end. We also maintained a strong presence at key medical conferences throughout the quarter. The feedback we received from the endocrinology community has been exceptional, further reinforcing both our conviction in the significant unmet need in hypothyroidism and the multi-billion dollar commercial opportunity we have laid out. All of this momentum makes our plan XP-8121 program overview that much more exciting. On Wednesday, September 9th, we will host a dedicated 8121 webinar where you will hear directly from an important key opinion leader as well as members of our program team. We will walk you through the unmet medical need, the market opportunity, and our planned phase three program in detail, including trial design, primary and secondary endpoints, target patient population, as well as expected development and related regulatory timelines. We believe XP8121 represents a significant advancement in addressing the real and persistent challenges of treating hypothyroidism. And we believe it has the potential to be a blockbuster. Before I turn the call over to Steve, I want to briefly recap the strong progress we are making against the three critical priorities we outlined in March and continue to keep in our focus. First, driving rapid revenue growth. We delivered 33% growth in the first half, and we are now guiding to full year revenue growth of 33% at the midpoint. Our commercial business is growing fast. Second, advancing our pipeline. The XP-8121 program remains on track, and on September 9, we will provide the market with a comprehensive look at the program. We look forward to that conversation. And third, executing with discipline. The full retirement of our convertible notes completed in July is a direct expression of this priority in action. a proactive, planful step made possible by the ever-strengthening financial position of Xerox. With our sustained commercial momentum and disciplined execution against our strategic priorities, I couldn't be more excited about the company we're building. And with that, I'll turn the call over to Steve.

Good morning everyone. As John highlighted, our momentum from the first quarter carried into the second, reflecting solid execution and growing confidence in the performance of our business. Net product revenue of 91 million, up 34 percent or over 23 million year over year, is the headline for this quarter. This performance drove total revenue to 92.1 million, representing 29 percent year over year growth and reflects sustained commercial momentum John just described. Recorlev generated net revenue of $56.8 million, representing growth of 81% year-over-year, an increase of $25.3 million, reflecting continued expansion of our patient base. Patient starts continued at a strong pace and the underlying commercial metrics all support momentum accelerating in the back half of the year where we expect to see incremental contributions from our commercial expansion completed at the start of the year. GVOC net revenue of $22.5 million in the second quarter, up 8% sequentially, and was in line with our expectations. We expect GVOC's performance to normalize and track more consistently with historical seasonal patterns in the second half of the year. Cabeas delivered another solid quarter, generating net revenue of 11.7 million for reflecting modest improvements in both net pricing and the number of patients on therapy compared to prior year. Gross margin for the second quarter was approximately 86%, an improvement of nearly 400 basis points compared to last year, driven by favorable product mix. Turning to operating expenses, R&D expenses totaled $10.7 million in the quarter, an increase of $2.6 million compared to prior year. This increase reflects continued investment advancing XP81-21 toward Phase III initiation planned for later this year. SG&A expenses were $61 million for the second quarter, driven primarily by the full deployment of our expanded RecorLav commercial team and patient support infrastructure. Adjusted EBITDA for the second quarter was $19.3 million, an improvement of $6.7 million versus the prior year, representing over 50% growth year-over-year, even as we made incremental commercial and R&D investments this quarter. I also want to take a moment to discuss our balance sheet and specifically the full retirement of our 2028 convertible notes because it will be visible in our gap results this quarter. In July, we completed the full retirement of our convertible notes, settled through a combination of cash and equity. As of July 15th, not a single convertible note remains outstanding. The exchange agreement we signed on June 10th with certain holders of the convertible notes triggered a re-measurement of the convertible notes under GAAP, resulting in a one-time non-cash charge of approximately $31 million recognized in the second quarter. This charge does not impact adjusted EBITDA and there will be no additional income state charge related to these notes in Q3. The bottom line. eliminated $34 million of debt, creating approximately $3 million in annual interest savings and a meaningfully cleaner balance sheet. This was a proactive step made possible by the consistent financial performance of our business. Moving to our 2026 outlook. We are raising the bottom end of our full year total revenue guidance and tightening the range to 385 to 390 million. This outlook reflects the strong performance we delivered in the first half of the year, as well as our confidence that this momentum will continue as our expanded Recoralev commercial team moves from build to yield, and we continue to see GVOTE rebound from its slow start this year. On SG&A, at the start of the year, we outlined an expected full year increase of approximately $45 million versus 2025. Based on our strong first half results and current outlook, we are making further incremental investments in our commercial enterprise, resulting in a full year SG&A an increase of approximately 50 million. We see meaningful opportunities across our portfolio and remain committed to investing where we can create sustainable long term value. Let me summarize our full year 2026 guidance. Total revenue is now expected to be between 385 to 390 million. Gross margin remains consistent with our prior expectation of a modest improvement compared to 2025. R&D remains consistent with prior expectations. expect an increase of approximately 25 million compared to 2025. SG&A is now expected to increase an additional $5 million versus our prior guidance of a $45 million increase compared to last year. And lastly, we continue to expect adjusted EBITDA to increase on an absolute dollars basis compared to 2025. I want to close with this. Our business continues to strengthen and with it our financial condition. We remain committed to the priorities that John outlined and are confident that we can maintain a path toward a continuing expansion of adjusted EBITDA even as we make incremental investments to support a rapid growth of our enterprise. With that, I'll hand the call over to the operator for Q&A. We will now begin the question and answer session.

Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Dennis Ding with Jefferies. Your line is open. Please go ahead.

Hi, thank you for taking our questions. This is Dorcha Bank on the line for Dennis Ding. I had a question about the raising the low end of your guidance. I see that you raised it again to 385 but held the 390 top. And given record-lived momentum and you said the expansion benefit is still mostly ahead in the second half, I guess, what's capping the ceiling. And then on the expansion, you notice.

that you know it's tracking in line could you repeat could you operator or somebody we cannot hear this question at all.

Are you able to hear me now? Yes. Much better. Thank you, Georgia.

Oh, sorry about that. Okay. So, on the guidance raise, you raised the low end again in Q2 to 3.85, but held the top at 3.90. Given RecorLib's momentum, and you've said the expansion benefit is still mostly ahead in the second half, I guess what's capping the ceiling there? And then on that, you know, sales expansion, you noted that the execution is tracking in line and still early. Maybe can you unpack, you know, what in line looks like underneath? Which leading indicators, referrals, new starts, etc., that you're watching to confirm that the H2 setup is materializing? Thank you.

So thanks for the questions, Georgia. On the guidance, yes, I mean just another great quarter gave us the confidence to raise the bottom end. And we've tightened it. We've to a range of five million at this point. And we're confident that we can hit that. It still reflects some significant growth in the back half of the year. And again, that points to the contributions we're expecting from the recorral of commercial expansion as well as growth from from GVOC in the back half of the year. So yes really confident in the guidance that we provided and it reflects over 30 percent revenue growth. And then on the second question, I think the second question was just around record 11 and what we're seeing. Yes, I think we're, we're seeing early signs of, of, you know, you know contributions from that expansion we saw that in the second quarter again this is our third time doing this uh expansion and you know uh the contributions we're seeing are tracking exactly in line with our expectations um and we see it you know continuing into the third quarter which gives us all the confidence in the world to meet the revenue guidance that we outline.

Great. Thank you so much. Your next question comes from the line of Brandon Fowkes with HC Wainwright. Your line is open. Please go ahead.

Hi, thanks for your questions and congratulations on the quarter. the detail the second half of the year the core of the growth drivers just how much is driven by prior territories versus sort of the new sales reps any way to just characterize where those new reps are in terms of productivity and then any other tailwinds you're expecting in the second half of the year whether it be average dose, persistency, just how those sorts of metrics are tracking. Thank you.

Yes, Brandon, thanks for the question. You know, in terms of, you know, the back half of the year, you know, we made this expansion to increase not only the breadth of our calls, so we expanded our targets, but the depth within our calls. So it's going to come across existing prescribers and new prescribers, and it's going to come across all territories. new and existing. So we see it coming across everywhere. And that's kind of how we set up the expansion. In terms of, you know, changes to all of, you know, anything like dosing or anything else like that, with the amount of expansion we're going through and the and the number of new starts. We are watching all those metrics, but we don't expect them to materially change in this time and period of growth at these rates. So we continue to monitor those, we track them, and all of those trends are tracking as we expected And we really won't change our expectations around some of those things.

Great. Thanks very much. And maybe just one on 8121. Can you just elaborate on what still needs to be done before the phase three initiation? And, you know, do you expect all of that to be done by the time you host the webinar? And if not, sort of how should we think about timing for what needs to be done? Thank you.

Yes, I think, yes, I've said this before is, we're not going to start that phase three trial till we have the go to market presentation commercial presentation ready to go into that phase three trial. And that's what we're doing, is we're going through all of the work it takes to be able to take, to have the commercial ready. product, device, formulation, everything. And we will be in a real great position by the webinar to tell you where exactly all those timelines are. I will tell you they're all on track. They're all tracking to what we said back last June terms of start of the trial, data, regulatory submissions, and approval. So we're still on track for all that for our 2030 launch. Great, thank you very much.

Your next question comes from the line of David Amsalem with Piper Sandler. Your line is open. Please go ahead.