Q4 2022 Xeris Biopharma Holdings Inc Earnings Call
Based on the Fda's feedback, we will now initiate a phase II study in subjects currently taking oral thyroid replacement therapy to continue the dose conversion to once weekly as to confirm excuse me to confirm the dose conversion to once weekly <unk> $1 21.
We expect to begin that study by mid 2023.
Data from this phase II study will then inform our proposal to the FDA for a pivotal phase III program.
All sites all levels Thyroxine has been the standard of care for treatment of hypothyroidism for many years and it continues.
It is one of the most prescribed medicine in the United States generating more than 100 million prescriptions per year. However.
However.
<unk>, 49% of patients have some gi issue or co morbid Gi condition impacting oral absorptions.
21% taken commented medications that could interfere with absorption.
And 17% of patients admit to compliance issues with the daily oral regimen.
And many of whom may or may not be the same patient experiencing multiple issues.
If we assume conservatively.
That 62 million weekly doses per year is the addressable opportunity in that population.
Having difficulties with the oral dosage.
At today's branded Synthroid cost, which is approximately 35% to $50 per weekly dose.
That would equal a potential to $2 billion to $3 billion market segment that would be our target opportunity.
A very substantial opportunity for once weekly drops.
Yes.
In November we announced the collaboration.
And option agreement with Horizon therapeutics to use our proprietary formulation technologies Zurich jacked to develop an ultra concentrated ready to use subcutaneous injectable version of <unk>.
Upon successful completion of the formulation development horizon will have an option to license the <unk> delivery technology for further clinical development and commercialization.
<unk>.
You May know that <unk> is the first and only medicine approved in the U S approved by the U S food and drug administration or FDA for the treatment of thyroid eye disease, which is a serious progressive and potentially vision threatening rare autoimmune disease.
It's IV form generated net sales of almost $2 billion worldwide in 2022.
Two.
Gauge in the project to develop a subcutaneous form we received an upfront payment from horizon of $2 $75 million in the fourth quarter and will be entitled to receive a payment of $6 million on successful achievement of the target formulations.
If the commercial option has been exercised by horizon, various would also be entitled to future development regulatory and sales based milestones and royalties based on future sales.
Moving onto our outlook for 2023.
Yes.
As I said at the start of this call I believe this is a pivotal year for <unk> as we build on our 2022 momentum.
Achieve cash flow breakeven in the fourth quarter and do that without the need for additional capital to raise or to fund operations.
We are positioned for continued growth and are providing the following 2023 guidance.
We believe we can deliver total revenues.
<unk> between $135 million and $165 million in 2023.
This includes net product revenue from current commercial products and other revenue from existing and potentially new technology collaborations.
<unk>.
The midpoint of this range implies approximately 36% growth from 2022.
We expect the rate of cash utilization in 2023 to be significantly less in 2022.
In 2023, we expect that to be in the range of 57 million to $77 million.
With the first quarter being the highest and improving considerably by the second half of the year drill.
Driven by our projected revenue growth and by aggressive cash management.
We expect year end cash cash equivalents and short term investments of between $45 million and $65 million.
This guidance should give you confidence that our business is self sustainable beyond 2023.
I'll turn the call to Steve for additional details of our 2022 performance and our 2023 guidance Steve. Thanks.
Thanks, Paul Good morning, everyone I will focus my remarks on a few of the key financial quarterly and full year 'twenty two results.
And provide 2023 financial guidance the details of which are in the press release issued this morning.
Focusing on fourth quarter results total net product revenue was a record $32 5 million, representing a 52% increase over the same quarter last year strong underlying patient demand for both <unk> and <unk> and new patient starts on therapy for Korolev drove total.
Product revenue growth in the quarter.
On a full year basis, our total net product revenue was over 109 million, finishing the year at the top end of our most recent guidance of total net product revenue of $105 million to $110 million.
On a pro forma basis total net product revenue grew 38% in 2022 versus 2021.
This increase was driven by continuous growth in <unk> and the launch of <unk> in the first quarter of 2022.
We are pleased by the performance across all of our products driving this growth.
It down by product <unk> net revenue for the quarter was a record $14 9 million, representing a 36% increase compared to the same period last year.
This increase in revenue was driven by continued growth in <unk> prescriptions topping 41000 for the first time more than a 42% increase compared to the same period in 2021. This growth in demand was partially offset by a decrease in net pricing.
Consistent with prior years, the total glucagon prescription market declined in Q4 versus Q3, notably <unk> total prescriptions grew 8% in the same period significantly outpacing the market.
Full year 2022, <unk> net revenue was $52 5 million, representing a 35% increase compared to 2021. This increase was driven by a 54% growth in total prescriptions when compared to 2021, which was partially offset by a decrease in net pricing.
As we mentioned last quarter, our net pricing has stabilized in the second half of 2022.
Moving to capacity <unk> net revenue for the quarter was $13 8 million, representing a 33% increase when compared to the same period last year on.
On a full year basis <unk> net revenue was $49 3 million, representing a 23% increase compared to the 2021 on a pro forma basis.
Revenue growth was driven by continued increases in the number of patients on <unk>, coupled with the net pricing increase.
Our commercial strategy on <unk> since day, one has been preparing ourselves for the possibility of losing orphan drug exclusivity status in August of 2022, and the potential entrance of generic competition. As we have discussed previously we continue to seek patents to restore exclusive rights and.
Late 2022, the FDA approved generic version of <unk>, Our 2023 revenue guidance, which I will cover later in my remarks assumes an impact of generic competition on <unk> in 2023.
Moving to record levels were Korolev net revenue for the quarter was $3 8 million.
Which represents a 51% increase over prior quarter and is a direct result of the steady growth of patients on therapy during Q4.
Full year record of left net revenue was $7 4 million.
Given we are less than one year into launch we continue to be pleased with our initial financial performance of our core loss.
In addition to our total product revenue of $109 million, we generated $1 million.
Revenue from existing collaborations and partnerships for total revenue of $110 million in 2022.
Looking ahead for the full year 2023 the.
We expect our total revenue to be in the range of $135 million to $165 million, reflecting combined <unk> <unk> and <unk> net product revenue.
Other revenue from existing and potential collaborations and partnerships other revenues in the year are expected to be episodic based upon our ability to attract new partners and successfully execute work plans meet target product profiles.
<unk> achieve other development milestones on existing agreements.
Moving down the P&L all my remarks will be focused on full year results.
Cost of goods sold increased by $9 3 million for the year 2022 compared to <unk> 21.
The increase was mainly attributed attributable to our sales growth.
Research and development expenses decreased $4 2 million in 2022, when compared to 2021.
The decrease was primarily a result of lower product development costs, driven by internal capital prioritization.
In 2023, we will continue to practice disciplined prioritization and we will be funding our levo phase III program. The completion of their Korolev optic study and continued development work on our proprietary formulation science. All of this will result in a projected modest year over year.
Increase in R&D in 2023.
Selling general and administrative expenses increased by $12 million in 2022, when compared to 21.
This increase was driven by the.
The inclusion of a full year of <unk> commercial infrastructure, and our 2022 financial results, which is not a change on a pro forma basis were korolev commercial costs related to the products launched in 2022.
And our previously communicated <unk> <unk> sales expansion executed in the fourth quarter.
The overall increase to SG&A was partially offset by lower strong bridge acquisition related transaction and restructuring costs in 2022, when compared to 2021.
Looking ahead to 2023, even with the aforementioned sales force expansion in the fourth quarter of 2022, we expect total SG&A to be relatively flat in 2023, when compared to 2022.
From a cash perspective as of December 31, 2022 zero had total cash cash equivalents and short term investments of $122 million compared to 93 million at September 32022.
Our year end cash cash equivalents and short term investments exceeded the high end of our previously issued cash guidance.
As a reminder, $122 million included a drawdown of the final $50 million tranche from the hastened debt facility and an upfront payment of $2 $75 million from the horizon Therapeutics collaboration and option agreement.
Cash utilized in operating activities improved over the course of 2022 supported by strong revenue growth from all three brands disciplined expense management and synergy realization after completing the strawbridge integration.
Cash utilization from operating activities, including restricted cash was $103 million in 2022.
In 2023, we project cash utilization from operating activities in the range of 57% to $77 million as.
As we experienced last year cash utilization in the first quarter is expected to be the highest quarter in 2023, driven by changes in working capital, including investments in inventory to support revenue growth.
Cash utilization is expected to moderate through the middle of 2023 until the fourth quarter, when we expected to achieve cash flow breakeven.
As noted our SG&A expenses to be relatively flat to 2022 and are projecting a modest increase in R&D expenses for 2023, mainly driven by the programs. We are funding that I previously mentioned, considering our growing revenue and anticipated operating expenses in 2020.
Three we expect our total cash cash equivalents and short term investments to end the year in the range of $45 million to $65 million, meaning total cash utilized from operating activities for the year is expected to be in the range of 57% to $77 million.
Assuming we are performing to our guidance, we project to reach cash flow breakeven in the fourth quarter of 2023 and from that point on we will be a self sustaining enterprise.
I want to clarify for everyone, what we mean by cash flow breakeven.
Cash flow breakeven in its simplest terms means cash inflows will meet or exceed cash outflows. This will be further evidenced on our balance sheet.
We expect our cash cash equivalents and short term investments balances at December 31, 2023 to be at or above our September 32023 balances.
Furthermore, and to reiterate our previous position, we do not plan to raise capital to fund our operations as we become a self sustaining enterprise.
I will now turn the call back to Paul.
Thanks, Steve.
That's the picture of outstanding performance for the quarter and the year.
As I said at the beginning of our call. We are building a substantial patient centric commercially focused self sustaining.
Enterprise with multiple products in multiple therapeutic areas are highly targeted development pipeline that has significant long term promise and increasingly value added technology partnerships.
And critically important to this journey is consistently meeting the needs of our patients and their caregivers.
What you heard today is confirmation that we are continuing to progress very successfully on that journey.
We started 2023 building on our tremendous 2022 performance.
Through continued revenue growth careful allocation of resources and prudent expense management, we expect 2023 to be a pivotal year.
For <unk> on that journey.
Now operator, if you would please open the lines for questions.
Thank you as a reminder, if you'd like to ask a question you compress stone one on the telephone keypad.
Thank you for your largest petroleum question you May press Star two.
And show you on muted locally when asking your question.
Our first question for today comes from Alright lets not from H C. Wainwright. Your line is now open. Please go ahead.
Thanks, Congrats on executing across the board in that solid guidance I have a few on that guidance I think thats a wider range than you've given in the past and so obviously, there's several moving parts I was wondering if could just talk about those.
Is this mostly giving a wide berth for potential recall of growth. So early in the launch.
Or the converse generic impact uncertainty.
The biggest lever there up or down and then I have follow ups. Thanks.
Thanks, Oren Youre, absolutely correct, its a wider range than normal and yes, it's because there are a lot of moving parts.
We're in the early stages of the recall of launch.
How that goes.
Going to be yet to be determined.
We've yet to see any real impact on <unk>, but not to say there won't be some and we do.
Don't know sitting here today, what thats going to look like.
That being said the low end of our range is still a 30% 32% ish growth over prior year.
So at any point in the range, we're still growing.
Really really nicely.
Yes.
Alright, and I guess regarding converse.
To your understanding is there anything operationally for <unk>.
Bill out there in the market at all at this point or this is just a theoretical.
Net debt.
Toriente whoever is actually commercializing that has to has to really set up.
Infrastructure that doesn't even exist as far as you can tell the Doc even able to riders have been able to fill a generic prescription.
Yes, so <unk>.
So far no, but we heard as recently as Friday that they now have a specialty pharmacy and are beginning to ship product to the specialty pharmacy.
Physicians have yet to be able to substitute or hasn't been product in the in the in the chain.
The one thing to keep in mind is when you look at a <unk> patient, we surround that patient with more than just a drug delivered from the pharmacy.
We have a group called <unk>.
Our patient.
Fares managers that really spend a great deal of time with patients helping them through their drug initiation, they're titration you always say.
Have any side effects there to call them on a regular basis.
To help them with insurance.
They help them navigate the pharmacy and make sure that they've got their drugs and they get their prescriptions filled.
We have a group that are mentors.
We have current.
<unk> patients, who spend time hold hands with new <unk> patients.
And we have the specialty pharmacy that is one single pharmacy dedicated to their wellbeing interacts with their physicians on a regular basis.
So until such time as a generic company sets up all of that.
Sure.
We believe patients will be inclined to.
Take the time and energy and effort to appeal a generic mandate.
And that's one of the reasons. We think we can we can defend the considerable amount of this business, we will see how that goes.
You actually segue to my last one and I appreciate it on record.
My belt that we have Laurent.
Yeah, exactly so that patient support and you mentioned walking them through.
Asian, titration et cetera.
On record Lev.
Obviously pacer.
Patient titration is an important part of that dynamic and you mentioned I think.
Some small uptick or beginning patients beginning to up titrate there.
What are you seeing from existing patients. The earliest patients in terms of that trend an up titration and is that a process that you guys in your specialty pharmacy and your support hub or services.
Sort of holding their hands are walking them and or their physicians through that process or at this point do you really just have to hope docks.
<unk>.
The follow up the monitoring and the titration.
Yes, so good question.
It isn't a hope hope is not a really good strategy.
But it is different.
When you look at the clinical study the clinical study was a very structured environment patients were brought back every couple of weeks and the titration was on a schedule.
In the real World.
<unk> are starting at the lowest dose.
And they are managing the patients.
And the lowest possible dose throughout the process. So the titration is happening.
Lower than you would've seen in the clinical study, but more or less what we had anticipated because physicians tend to like to start low and go slow because thats prudent approach and we support that so in this situation. It's more in the hands of the physician than it is in our patient managers.
Our people do interact with the physician and we interact with them on behalf of the patient to make sure that they are going back through the tests that need to be monitored monitored that they are at the right dose when they get to the end of the month of Pharmacy says you still want him on this dose do you want to titrate them just to make sure. So.
As interactions that helped manage the patient, but it is a slower and more.
Pains, taking leap process painstaking process on the part of the physician.
Alright, Thanks, I'll get back in the queue I appreciate it.
Thank you. Our next question comes from right around a release from SCP Securities. Your line is now open. Please go ahead.
Great. Thanks, Good morning, everyone. So wanted to tag on to the 2023 guidance question earlier.
Curious how large do you think the contribution might be from the other revenues piece that you described from partnerships and collaborations.
That's a really good question.
So the.
Without us knowing.
Our partner Horizon.
Made public the $2 $75 million upfront and then the potential $6 million payment on achievement of the target product profile.
We don't know at this point Rwanda.
Those two could fall in both fall into 2023.
It depends on how fast we go with hitting the target product profile and the formulation on a couple of others of these programs.
Yeah.
Some of them go really fast because it's easy to formulate and some of them. We have to go through three or four cycles, sometimes six cycles of optimization.
To really get to the right.
Milligrams per per milliliter.
So at this stage it is hard to tell as we do more of them and as we get more through the process, we'll be able to better guide you as to when some of those milestones might hit in the future.
Right now it's.
And you have to understand we've moved this whole process from what was with some companies way back when we were talking years ago. It was kind of like a science project to now it's a real development project and at some point here hopefully ended the year early next year, we'll have a good line of sight on.
How that development project is going to play out in each one of these deals.
Okay, great very helpful and I wanted to ask a bit about record level. Two so do you have any.
Updates on your expectations for prescribing grows.
First half of 2023 and could it be impacted by possible deductible reset dynamics in the new calendar year.
Yes every every rare and ultra rare product is impacted by deductible resets at the beginning of the year.
As we've discussed in the past with <unk>. For example, you see some what we call soft discontinued because they have to re up their insurance at the beginning of every year.
And those.
And large I'll come back onto therapy after a little while.
We are anticipating we will see a similar dynamic with <unk>, because it's a rare disease.
It has to have to requalify in get insurance approved.
On a frequent basis actually.
That's all factored into our guidance, it's all factored into what we believe the drug is going to do over time.
We were well aware of that going in.
Yes, it makes sense and last one for me I was curious if you could give us any updates on payer coverage for our core labs like what.
Ballpark proportion of patients seem to be having like very broad access realm.
Relatively low hurdles things like that.
The hurdles are all the same everybody goes through a prior authorization.
Just as the case.
And we are successful on behalf of the patient.
As often as we thought we would be we win more than we lose.
I wouldn't say, it's 80%, 90%, but it's definitely better than 50%.
Okay, great. Thanks for that.
Oh and by the way those that we lose we often times when on appeal.
<unk>.
So the patient has never lost lost last until they're really lost lost loss.
Got it thanks.
As a reminder, if you'd like to ask a question star one on your telephone keypad.
Our next question comes from David <unk> from Piper Sandler David Your line is now open. Please go ahead.
Hey, Thanks, So just had a few first.
Just going back to the guidance I know.
It's a fairly wide range, you mentioned a lot of moving parts, but.
At the lower end of the range or Paul you talked about over 30% year over year growth and I guess I'm just trying to get a sense of you know.
How youre thinking about <unk> role in that obviously, it's growing but can you give us more granularity in terms of.
What you think.
The growth range could be here I know that there are some things in the marketplace.
Have changed with the kits.
Being discontinued, but you also have the generic as well come from anther Star. So just talk about.
The puts and takes on <unk> and how aggressively you think their product to grow in 2023. That's number one number two I wanted to pick your brain longer term on a record level.
Ask you about competitive dynamics.
As you know of course that has got their next generation cortisol modulator, <unk> Atlanta, and I'm, just wondering to the extent that that product bears fruit do you think that that could prove to be a headwind in any way for <unk>. So just talk about that longer term and then lastly, just remind us when do you think is the earliest you could file on the Levothyroxine.
<unk>.
Injectable product. Thank you.
Okay.
Let me start with <unk>.
We expect <unk> to continue to grow very much like it has in the past.
Right now <unk> is basically shouldering the majority of the market growth also we're not seeing much activity from Lilly at all.
So.
Especially as the market grows continues to improve.
<unk> is going to continue to improve in terms of growth I think we see it being growing as well in 2003 as it did in 'twenty two.
Tom.
The.
And to start generic is having zero impact I have to tell you. We've had a couple of people bring that up on roadshow things.
The legacy products continue to decline if theres any impact of the generic.
It's on the legacy kits.
Lilly discontinued theirs.
Novo was just deemphasizing theirs.
The generics are kind of filling the void of what business still exists, but the new ready to use products are over 70% of the market now trending towards 75%.
Will the kits still maintain 10%, 15%, 20% over time, maybe that's what legacy products tend to do in most categories, but it's not it's not impacting us we continue to grow we continue to take share in.
And the market continues to show evidence of rebounding in terms of growth.
And in terms of record <unk> competitive dynamics.
We're being very successful against everybody.
As you would anticipate when you have a new drug in a rare disease category.
Especially one that looks like this with multiple players. The first order of business for physicians is to see how well, we do and they give us the train Rex I mean literally people that they've put on everything that it doesn't work that give them to us.
And were proving that our patients on our drug do quite well.
And then we start moving into other competitive products that our drug is a better option for so korlym is a perfect example, because the whole objective here is to normalized cortisol.
Patients on that drug feel good, but it doesn't normalized cortisol and little by little we're getting to a point, where we're having we're engaging in those conversations more and more with physicians in terms of.
Great your patient feels good, but youre not really meeting that.
The medical need and we will start getting we're starting to get some of those patients.
Whether or not their drug that's coming in a couple of years is going to be changed that dynamic.
I don't know at this point I don't think so but we'll see.
Recall of competitive dynamic.
So you can handle that korlym it that can handle that.
And levo.
So we should we've said we're going to start the phase II study mid year by the time, we complete that study get data a year later, we go to the FDA then you've got a phase III program, which is a couple of years. So I think we're targeting somewhere.
In the 2026% to 2028.
For that drug to hit the market is wide.
Range, because we're at the beginning of phase II, we don't have a.
Line of sight on sleep.
Korea.
Sure.
Okay somebody it's helpful. Thank you.
Thank you we have no further questions at this time, so I'll hand back to Paul <unk> for any further remarks.
Okay. Thank you for joining the call. This morning and for your continued support as we execute on our enterprise development strategy.
I also want to personally thank all of our shareholders our tremendous employees the health care community, our patients and their caregivers for your patients hardware support and continued belief in our mission have a great rest of your day.
Thank you for joining today's call you may now disconnect your lines.
Yes.