Hello, everyone and welcome to the Xeris Biopharma Third Quarter 2023 Financial Results Call. My name is Bruno. I'll be operating your call today. [Operator Instructions] I will now hand over to your host, Allison Wey, Senior Vice President of Investor Relations. Please go ahead.

Thank you, Bruno. Good morning and welcome to Xeris Biopharma's third quarter financial results conference call and webcast. A press release with the company's financial results was issued earlier this morning and can be found on our website. We are joined this morning by Paul Edick, Chairman and CEO; John Shannon, our Chief Operating Officer; and Steve Pieper, our Chief Financial Officer. After our prepared remarks, we will open the lines for questions. In addition, we will be extending the Q&A portion to answer a number of questions we've been routinely receiving from some of our shareholders. Before we begin, I'd 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 press release and risk factors included in our SEC filings, including our quarterly report on Form 10-Q that will be filed later today. Any forward-looking statements in this call represent our views only as of the date of this call and subject to applicable laws. We disclaim any obligations to update such statements. I'll now turn the call over to Paul.

Thanks, Allison. Good morning to everybody and thank you for joining us today. I'm excited to once again say that the entire Xeris organization continues to perform at a very high level, most importantly delivering for patients and we remain focused on building a substantial patient-centric, self-sustaining biopharma enterprise. We recorded total net revenue of $48 million in the third quarter which is a 63% increase from the third quarter of 2022, making this the fourth consecutive quarter of at least 50% net revenue growth from prior year and we posted a 27% increase from the second quarter of this year. We are executing on all 3 pillars of our business. First, our 3 innovative commercial products -- Gvoke, Keveyis and Recorlev -- collectively generated approximately $42 million in net product revenue in the third quarter, an impressive 41% increase over third quarter last year and 13% increase over second quarter of this year. Second, our highly targeted new product development pipeline, we're now over 80% enrolled in our levothyroxine Phase 2 clinical study. And third, our value-added technology partnerships. We successfully formulated the ultra-concentrated ready-to-use subcutaneous version of XeriJect TEPEZZA. And by executing on all pillars, our performance allows us to, once again, tighten our full year 2023 total revenue guidance to between $160 million and $165 million, meaning we expect to hit the top end of our original 2023 guidance. Steve will discuss our financial performance in more detail. For now let's dig into the commercial business a bit more. Gvoke had another record quarter of net revenue and prescriptions, generating $17.7 million in net revenue which is a 30% increase compared to third quarter of 2022. Total prescriptions for the third quarter were over 58,000, growing 52% compared to the same period last year and a 14%…

Thanks, Paul and good morning, everyone. As Paul mentioned, we are executing on all fronts. We have continued to generate net revenue growth across all 3 products. We succeeded in formulating the prespecified target product profile of XeriJect TEPEZZA. We continued to demonstrate disciplined cash management. We exited the third quarter in an extremely healthy cash position and are on track to hit cash flow breakeven for the fourth quarter. Lastly, we created significant financial flexibility to run our business by exchanging approximately 2/3 of our 5% convertible senior notes due in 2025 for 8% convertible senior notes due in July 2028, leaving only $15 million of the 2025 convertible notes remaining and no other debt due until 2027. For the third quarter, total revenue was a record $48.3 million, representing more than a 60% increase over the same quarter last year. The increase was driven by strong patient demand for all 3 products, coupled with the successful formulation of the prespecified target product profile for XeriJect TEPEZZA which triggered a one-time revenue recognition in the quarter of $6 million. Gvoke net revenue for the quarter was a record $17.7 million, representing a 30% increase compared to the same period last year. Year-to-date net revenue was $48.4 million, representing a 29% increase compared to last year. In the quarter, Gvoke prescriptions topped 58,000 for the first time, a 52% increase compared to the same period in 2022. In the third quarter, the total glucagon prescription market grew 16% versus prior quarter. Gvoke total prescriptions grew 14% in the same period, ending the quarter with total retail market share of approximately 29%. Gvoke's strong performance has continued into October, ending the month with a total retail prescription market share of over 31%. Moving to Recorlev. Recorlev net revenue was $8.1 million…

[Operator Instructions] We do have our first question comes from David Amsellem from Piper Sandler.

Just a few. First on Recorlev. Can you go into some specifics on what the patient footprint is like? And what you're seeing in terms of patients who are treatment naive versus treatment experience? And how you're thinking about the trajectory in 2024? And then secondly, on Recorlev, just competitive landscape longer term. Can you talk to the potential presence of Corcept's relacorilant and then how that could impact Recorlev? And then lastly on Gvoke, can you just talk to how you're thinking about the presence of Amphastar in the market with Baqsimi and what your view is regarding share of voice in the space with the product changing hands?

Thanks, David. I'm going to do my best. I'm kind of losing my voice here. I may need to go to John Shannon for some of these answers. Let me start at the end of your question, Gvoke, share voice and competition. We think the market actually -- and I've said this many, many times. We need other voices in this market. The goal is to have 15 million people who are on insulin or sulfonylureas to be protected to have that fire extinguisher in the home to be carrying their Gvoke HypoPen or any ready-to-use rescue glucagon. That's the goal because people can die. So more voice, more activity, more people talking about rescue glucagon, ready-to-use products, we think is a really good thing. We're hoping Lilly would be -- continue to be loud in the market. But we're looking forward to Amphastar helping to build market penetration. In terms of Corcept and the new product or the replacement product, I think it's going to be pretty much that. At least our view is it's going to be pretty similar in performance and they're going to be trading out business. As you know and as we've talked about, Korlym is a pretty big product and one that doesn't really normalize cortisol. We normalize cortisol. And so we think we've got a better product. We think it performs better and we're starting to see, as a result, physicians who are beginning to use Recorlev first line. That says a lot about a product that's so young in its life span. And then, Recorlev in terms of patient footprint, I'm not quite sure what you mean by that. And then the competitive environment with Recorlev, can you help?

What I meant is how many patients are on drug. That's what I meant.

You sneaky guy, you. We are -- for competitive reasons, we don't really talk about that. And I know that's a metric that everyone would love to have. But right now, we're too new in the business and we're growing and -- but relative to that, we're being -- we're having great success versus the competition. And our referral base continues to be strong. And the variability in Recorlev is the speed with which we convert those referrals into actual patients on drug.

Our next question comes from Juan Luis from Blaire Partners.

So another Recorlev question for me. I was curious, just broad strokes, what proportion of existing Recorlev patients have reached stable or maintenance doses? And anecdotally, could you talk about what's discontinuation rates you're seeing, if any, for Recorlev so far?

So it's too early to have a sense of the DC rate but I would tell you it's very, very low, single digits. And reasons could vary in terms of end of the year insurance, various other things. So it's too early to have a handle on an ongoing DC rate but so far negligible. In terms of patients being stable at whatever dose, we're still really early in the whole titration. I mean, we're seeing people who sort of level out in the 400 range but are not at the end of their titration. We're seeing people who remain at starting doses for quite a while. So physicians aren't being terribly aggressive at the titration but we are starting to see titration. The optimal dose in the 500 to 600 range, very few have really gotten there yet.

Got it. And one question for Gvoke as well. I was curious if you could talk a little bit more about any back-to-school trends you might have seen in the quarter or other drivers of the revenue growth in 3Q.

Yes. I mean, our -- I think we did well in back-to-school. As you know, back-to-school is very much a pediatric endocrinology period. Lilly has historically been very strong in pediatric endocrinology. Also, it's a really tiny segment of the market. And by and large, has been saturated over time. Most kids have something and most parents make sure they have something. But it's a pretty small segment. Where we're getting the vast majority of our growth and is really with adults. And that's where the opportunity is. Of the 15 million, probably 14 million are adults and not kids. So that's really what we're targeting as adult. And during the period back-to-school, we did well in peds but we also did really well in adult during that period and continued to grow both our total scripts and share.

I would now like to turn the call over to Alison Way for additional Q&A. Over to you.

Thanks, Rene. At this time, the team will take questions that we've been receiving from some of our shareholders. So we've grouped the questions by topic. So let's start with the financial question, Steve. Is Xeris committed to cash flow positive and no dilution?

Thanks, Alison. So as we discussed, we will achieve cash flow breakeven for the fourth quarter and plenty -- we will have plenty of cash to meet our obligations moving forward. Therefore, we don't anticipate diluting shareholders.

Thanks, Steve. Another one coming your way. At this point -- at what point do you expect to achieve full year profitability, not just cash flow breakeven but net income?

So, we haven't given guidance to that level. But as I mentioned a few times here this morning, we have enough cash to meet our obligations while continuing to invest in the growth in the enterprise and remain a self-sustaining company.

Our next one. Why are operational expenses scaling in tandem with revenue growth?

Actually, our operating expenses on a year-to-date basis grew by 7%, whereas our total revenue grew by 55%. Translated to dollars, operating expenses grew by $10 million compared to revenue growth of over $42 million. And half of that expense growth is due to an increase in cost of goods sold and an increase in cost of goods sold is expected in a company where revenues are growing like Xeris are.

Thank you. Can you provide some insight into the strategies in place to ensure enhanced operating levers?

So as I just covered, we continue to grow our revenues significantly faster while holding our operating expenses at a growth rate that is a fraction of our revenue growth. This really means that we're executing on our strategy.

Thanks. When will we see better operating leverage in that so far this year, expenses are growing nearly as fast as revenue?

So I think we just covered that, that revenues are growing at a much higher clip than expenses are.

Thanks. What initiatives are being considered to curtail elevated SG&A expenses?

So as I covered in my prepared remarks, our continuous management of expenses has actually resulted in a decrease in SG&A relative to last quarter and we are expecting a further decrease in the fourth quarter.

Thanks. Are there plans in motion to mitigate interest burdens through strategic longer payments?

So in addition to what I just covered from operating expense management, we are equally focused on our cost to finance the enterprise. We, like many others, are facing an increased cost of borrowing, given the macroeconomic hyperinflationary environment. The good news is, given the health of our business, we can meet these obligations. That being said, we are actively looking for ways to reduce that cost burden.

Thank you. Would Xeris consider a buyback with extra cash on hand to reduce the float?

Good question. Currently, we believe investing in our 3 pillars to support our growth strategy will deliver greater value for the company and our shareholders rather than a share buyback. Therefore, we have no immediate plans to do a share buyback.

The last one for you, Steve. Please address the CVRs for the legacy Strongbridge shareholders.

Sure. As I mentioned in my opening remarks, year-to-date 2023 Keveyis revenue is over $42 million, exceeding the CVR Keveyis milestone of $40 million. This achievement will trigger the CVR milestone in 2023 which will be settled in Xeris equity in late Q1 2024. We believe that the delivery of over $40 million of Keveyis revenue this year is a great outcome for Xeris and our shareholders.

Thanks, Steve. The next set of questions is about our commercial products and the pipeline. So why are Gvoke sales growing slowly. John, do you want to take that?

Sure. Well, first of all, we don't agree with the characterization that Gvoke sales have grown slowly. This year alone, you just heard, we've grown Gvoke prescriptions over 50% compared to last year. The glucagon market in the same time period is growing approximately 10%. So Gvoke growth is significantly outpacing the market growth. We're very proud of what our commercial team has been able to get -- have been able to get Gvoke in the hands of people with diabetes and we certainly wouldn't characterize 50% increase as slow growth.

Thanks, John. Can you please elaborate on initiatives in place to accelerate the sales momentum for both Gvoke and Ogluo?

Sure. Let me go backwards. Let me start with Ogluo. As you know, we've licensed Ogluo to our European partner Arecor. They are executing on their plan which consists of increasing utilization in the countries where they've already launched and they continue to launch in additional countries where it makes sense in Europe. With regard to Gvoke in the U.S., as I mentioned previously, we've already seen a 50% growth in prescriptions this year alone. So our sales and marketing teams will continue to execute our commercial plans which are driving awareness, increasing utilization and most importantly, leveraging the recently updated medical guidelines from ADA, Endo, ACE, all of which Paul just mentioned earlier. Basically recommend that anyone on insulin or sulfonylureas should have a ready-to-use glucagon on hand, such as Gvoke, just in case of a severe low blood sugar. Our commercial team is focused on making this new standard of care outlined in all the medical guidelines the new standard of practice for health care professionals.

Thanks, John. In addition, can we expect any material updates on the sales progression of Ogluo in the European market and timing of any associated milestone received?

Well, first, Ogluo is doing fine in Europe. In the near term, we don't expect any material updates regarding Ogluo and we don't have any near-term expectations regarding milestones.

Thanks. Considering the pronounced prevalence of diabetes in specific international markets such as Mexico, could the team shed some light on the market entry strategy for Gvoke?

So we've evaluated all the larger markets outside the U.S. And with the exception of our partnership in Europe, based on the market opportunity assessment, financial analysis, the economics simply don't work for Xeris. And therefore, we don't have any plans to launch Gvoke in any other major markets.

Thanks, John. Any updates on the Keveyis patent? Paul, do you want to take that?

Yes. There -- as I've mentioned it a couple of times in our previous calls, we have continued to go through the appeal process. We're now in the process of filing our appeal with the Federal Circuit Court and that we'll update as we have future events.

Thanks. Are there plans to add more to the development pipeline other than levothyroxine in the coming quarters?

We've said we're going to be very disciplined about how we approach our pipeline and how we use our technologies for our own portfolio. Right now, levothyroxine once-weekly sub-Q injection is our focus. It's the best opportunity that we have. That said, down the road, as we are able from an allocation of resources perspective, we will continue to use our technologies to develop new products that we can bring into our pipeline and eventually into our portfolio. Right now, the focus is levothyroxine.

Thanks, Paul. Moving on to our XeriJect technology and the current and potential partnerships. So please provide a comprehensive update on the strategic trajectory with Regeneron, Amgen-Horizon, outlining anticipated timelines and potential inflection points expected by year end 2023.

This is a great question and I think people are going to hate the answer. The projects and partnerships that we have with both Amgen Horizon and Regeneron are highly confidential. We're working on other people's molecules and other people's products with our formulation technology and there's very little that we're able to say publicly. What I can say is Amgen-Horizon has gone quite well. We hit the target product profile. We got our payment and now we're waiting on their decision whether they want to pick up the license for further development. I think that's a great outcome. The Horizon, I've said previously, we're in the process of formulating the initial products. They could continue to add products from the platform. And they can -- at any time and they can pick up a license at any point in time for continued development as well. So we're very pleased with where those partnerships are at this point. I will add that they do take time. I mean the formulation process is not something that happens overnight.

Thanks, Paul. So what are the competitive advantages of the XeriJect platform relative to other providers of the subcutaneous injection process? John, do you want to take that?

Sure. So with our XeriJect platform, we can reach ultra-high concentrated sub-Q injections. So what does that mean? Our XeriJect technology allows us to formulate 400 to 600 milligrams per milliliter in a sub-Q delivery that can be administered in a 15- to 30-second injection through a very small gauge needle. This is in comparison to other technologies and might deliver a 1- to 7-minute sub-Q infusion. Our Xeriject technology allows us to formulate drugs that are traditionally IV administration and potentially moving them out of the infusion center or doctor's office into a self-administration form, potentially even at home.

That's great. So, John, can you talk to how your team identifies potential medicines like TEPEZZA or potential partners that could benefit from having a XeriJect formulation on their molecule?

Well, yes, I think it just covered the value proposition of XeriJect. So the ideal candidate today is a drug that is currently IV administered in an infusion center or a doctor's office and could benefit from becoming a sub-Q administration, potentially at home. So when talking to companies, we focus on those types of products as true partnering opportunities.

Right, thanks. So Paul, how long does it take to determine if the technology platform is a good fit?

Yes. Each partnership is different and we go through several months of formulation refinement to work to achieve a desired target product profile. As John was going through, the identification of a target is immediately a fit. We've not failed to formulate anything that we've attempted to or been given by a potential partner to formulate. At the end of the day, getting to whether or not that is a viable asset takes several rounds of formulation and hundreds of rounds of optimization of that formulation.

So then why has no one moved forward with a license yet?

That's a good question and we get asked that a lot. That is 100% in the purview of the partner. In today's world of monoclonal antibodies and biologics and large molecules, it's incredibly competitive. One of the reasons that it's so confidential in terms of what we can and can't talk about. But the price of entry is no longer an IV product. The price of entry for a lot of these molecules for a lot of these companies is really you have to at least be a subcutaneous injection. And then once we can deliver that, what happens is every one of those companies goes through their own internal prioritization process to say, okay, of all the assets that we have, what do we want to spend money on in clinical development? So it's more of a market-based analysis that they're doing on their pipeline. We're giving them the sub-Q option at the end of the day. If you look at some of the partnerships, Merck, very successful formulation process but they chose not to take their product forward for competitive reasons in the market that they were targeting. Same thing with -- well, similar with Asahi Kasei a couple of years ago, they -- we've successfully formulated. Their product failed to meet its endpoint in clinical studies. So nothing to do with us. So it's a process and it's a decision that is a pipeline-based decision for portfolios in the partner companies.

Thanks, Paul. The last few questions are for you. So why aren't management and the Board buying any Xeris share?

That's a good question. Our management team has bought -- I think every single member of our management team has acquired shares with their own investments. We always have and whatever companies we're in, we will continue to do that. And I, as I think people can see in the public record, buy shares at least annually, kind of almost semi-annually. I believe in this company and I continue to invest heavily with my own assets in this business and I believe eventually it's going to really pay off in a pretty significant way.

And you haven't sold any shares, correct?

None of the shares have been sold. I don't even contemplate selling at this point.

Thanks, Paul. You've mentioned in the past that part of the Xeris strategy includes acquisitions and that [indiscernible]. What is the likelihood of a purchase of an additional asset or an organization in 2024 given your recent statements?

I don't know the answer to that. I think as things become available, we're very active. We're looking at a lot of things. We look at anything that we come across our radar. We're going to be very opportunistic but our goal is to continue to add to the enterprise. So if there's an opportunity to efficiently financially benefits us to add a product that's affordable, we'll pursue it. Same thing with potential company acquisitions.

Thanks. Has the company been approached with any acquisition office to date? And if so, could you delineate the financial parameters that would make such a transaction compelling?

Yes. As a public company, nobody will ever answer that question.

So what efforts are being undertaken to cultivate and deepen relationships with institutional funds and how might achieving a cash flow breakeven point influence long-term institutional participation?

I think moving to cash flow breakeven or getting to profitability in any company is going to attract more and better institutional investment. I mean, that's almost a given, I think. We spent a great deal of time with all of our shareholders and investors, from minor retail all through some of the biggest institutions in the business. And we're at a lot of banking conferences. I think we're going to 3 in the next couple of weeks. And our calendars are full. So we're constantly having those conversations.

Thanks. And one final question. The team has had success together building other companies. Is this team still committed to returning the same results as in the past. Paul, as the leader of this team, what are your strategic goals for Xeris over the medium term?

So when talking about the team, the team is 100% committed. We came together to build an enterprise and we're not done with that. We're really still in the early stages. We continue to execute and have demonstrated this by driving significant revenue growth over all 3 products. We've built a promising pipeline. It may be a single asset but it could be a blockbuster asset. And we've established an emerging technology business. And I emphasize the word emerging, it's early. And we've done this in the face of significant headwinds over the years which speaks to the kind of DNA we've built in this company. And I think in closing, we're building a growth-oriented biopharmaceutical company committed to improving patient lives across the range of therapies and as a self-sustaining and continuing self-sustaining organization. I think that's it for the questions. I appreciate everybody sending them in. We hopefully have accumulated and aggregated the questions that came in, in a lot of different forms to answer a lot of questions. I think there's, to some degree, a lot of the questions we get pretty routinely. And hopefully, we've clarified as best possible. And I'd like to thank everybody for joining us today for your thoughtfulness. And if you have additional questions, please continue to send them into Allison. And to conclude, I'd like to say that we're very proud of our performance to date and look forward to growing in enterprise for which we can all be proud. And once again, to thank the healthcare professionals and the patients and the Xeris employees who make it happen every day.

Thank you, Paul.

Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines. Have a great day. Thank you.