A brief chat today, Xeris Biopharma, and with us is CEO John Shannon and CFO Steve Piper. Welcome, guys.
Thanks.
For those who don't know, Xeris has an injectable drug delivery pedigree, really broadly applicable technologies that have already yielded an approved product, multiple partnerships, and a pipeline, and in the last few years have also diversified into orphan, ultra-orphan diseases, and those products have actually been outperforming estimates the last couple quarters, allowing you guys already to raise guidance at least twice, I believe, this year.
Mm-hmm, mm-hmm.
So that's been making my job easy, so thank you. Let's start. John, you took the reins as CEO, I think, just last month.
Yeah.
Congrats. But you've been with the company for a good seven years-
Yes
... and ascending roles.
Yeah.
I'm just curious, is your strategic vision for the company any different than prior management?
Yeah, so thanks, Oren, and by the way, I've been looking forward to my very first fireside chat with you, Oren.
Be careful what you wish for.
But yeah, so seven years with the company, Chief Operating Officer, President, move on to CEO is all part of the succession plan. So strategically, what we're trying to do is basically build on the foundation we already have. So my objective really right now, first and foremost, and the whole management team, is to really capture early shareholder value now and also then longer-term shareholder value. And you're saying, "Well, what does that mean?" Right? So from that perspective, it's how do we continue to drive the 20+% growth that we've been driving the last several quarters, 11 quarters in a row? We've got three great products to do that. We need to continue to do that and make investments that'll allow us to do that.
Second is focusing on the expense, and make sure that we're making, you know, investments that continue to drive our growth. We have $77 million in cash. We talked about that. And we don't need to and don't plan to do any dilution and raise incremental cash. So use what we have to drive the growth of our business, and then, as you pointed out, continue to build on our technologies and our pipeline.
All right, let's talk about the commercial business first. In the past, we've always led with Gvoke, your glucagon rescue auto-injector, but Recorlev for Cushing's disease is quickly gaining on Gvoke and will probably soon be your largest product, which is, I guess, what I've always modeled, and I'm glad it's playing out that way. Can you talk about in 2Q and into Q3, you know, the patient trends you've seen both in referrals and patient starts? I think you talked about accelerating trends into Q3, and that's even before your sales, new sales rep, expanded sales force really even hit the ground running. So, give us a heads-up into those trends now.
Sure. So as you pointed out in Q2, and we talked about this in our Q2 earnings, the curve really started to accelerate, both on referrals and new starts. And so when we continue to see that going into the third quarter, a lot of that was fueled by, we did an expansion of the sales force, a smaller one, in the fourth quarter of last year, and starting to really see that happen and drive some of this growth in the back half, or the first half of the year. We added 14 more reps in the third quarter, start of July, and we're continuing to see that acceleration and even more momentum gain in that respect.
That's driven by having reps in the field out finding the patients, and getting them started on Recorlev. A lot of that's out. Those patients are out in the community endocrinology space, and they're being. You know, there's more and more testing and diagnosis going on, which is allowing us to, you know, capture those patients.
Can you remind us, how is Recorlev differentiated from the other products, both on and, I guess, off label in the Cushing's space? And is that, to your knowledge, differentiation really appreciated in the community? Is your message really resonating with doctors?
Yeah, so Recorlev is, I don't know, I believe one of the best options for clinicians to normalize cortisol, bring it down, and keep and sustain those cortisol levels. It works, has multiple mechanisms of action that impacts anything that's being driven, either adrenal or pituitary, so, and it's got the broadest indication out there. So if a physician wants to lower cortisol levels, there's other choices, but this is probably one of the best that they could choose, is Recorlev.
So where are patients coming from? So, you know, between first line, naive to treatment, switchers, and for switchers, what therapies are they switching from?
Yeah. You always ask me that question, and I always give you the same answer. They're coming from everywhere. There's no direct, you know, correlation to where exactly they're coming from. There's some naive, there's some pre-surgery, there's so many post-surgery. They're, you know, coming from other products. They're coming from generics. So it's a little bit of everything. When a clinician gets to a point where they want to normalize and bring down that cortisol level, this is where they go.
So obviously, for an orphan drug, one of the big challenges is to get patients onto therapy in the first place, right, to get through adjudication. You talk about accelerating and record referrals. How about the trends of converting a referral to a start in terms of the overall success rates, speed of conversion? You know, is that improving over time, or is that-
Yeah
... steady?
Well, yeah, we're... It gets better every day.
Mm.
As you spend more time with the clinicians and the patients and understanding what the payers need in order to, you know, get these patients started, our teams get better and better at that every day. And so yes, it's accelerating. But the most exciting part is we're still bringing in and raising the top of the funnel-
Sure
... with referrals. So we're actually, you know, pushing it up, but also filling it up as fast as we can.
Right. I mean, it's fine if that gap is widening because the top of the funnel-
Right
... is accelerating, for sure.
Exactly.
As you bring in more patients, does the friction become less, you know, for each incremental one in terms of whether it's physician experience-
Yeah
- in the prior authorization process, or even on the payer side?
Yeah, I think the physician experience on getting the patient started, as well as getting through the payer process, improves the more and more patients that they treat. And there's more and more clinicians that are becoming that have multiple patients, and then that's really where you accelerate that time to start.
This product's somewhat unique in that there is an important titration period, right, for this drug. I think you start low, and in your clinical trials there, you know, there was a significantly higher average dose than-
Mm
... certainly patients are starting on.
Yeah.
What are you seeing with success rates if once you get patients on a therapy, physicians successfully titrating them up?
So clinicians in this space, they all start low and go slow in terms of the titration up, and so we're seeing that, that's different than what you did in the clinical trials. You tried to get them up there high and really quickly normalize cortisol. We're seeing the most of them are seeing very, very good success, starting low, going slow, managing through that process, and we'll continue to see that, so our overall dose rates are lower right now because we're bringing in so many new patients, and they're starting out at that level. So we're just going to let that kind of work its way-
Mm
... right? And let that evolve as we go, and focus on bringing in new patients and getting them started.
At some point, are you able to- I mean, obviously, getting them to the right dose is important for optimal therapy, right?
Mm.
You know, are you able to see a difference in terms of efficacy when patients are dosed up higher? And, you know, I guess, do you need to nudge doctors up, or is it just, you know, let-
It would be all anecdotal-
Yeah
... at this point, and you know, some clinicians are saying, "I love it at this level. I'm fine with what I'm getting." Some may want to bring it up.
So you touched earlier on the market growth.
Mm.
Can you just talk a little more about that? Like, why? What has changed? I mean, the Cushing's market is not new.
No.
What are we seeing lately that's changing and accelerating the growth of that market?
So, what's happening in that market is more and more clinicians are looking at, you know, cortisol levels. So when they're looking at resistant diabetes or resistant obesity, before maybe it even shows up as full Cushing's syndrome, you know, what are they doing? So if they're testing earlier, they're testing more, they're seeing the levels of cortisol rise, and then they're looking to treat that underlying cause. So part of what we're doing, you know, part of that solution is if you want to get that cortisol down and you want to normalize it, then again, Recorlev becomes one of the best options in their tool bag.
Have you ever talked about, I guess, down the road, big picture, how you see the market shaking out, given the product profiles on off-label, different parts of the market are able to use the therapies on or off label? You know, how big a slice of the pie, how much market share do you think you could ultimately capture, and have you ever even spoken about the peak revenue opportunity for this product?
We don't even think about market share. Peak revenue, there's, you know, there's numbers out there that say it could be $250-$300 million. We think we could do at least that with this product, and the trajectory would tell you that we're on a good path towards that. So I see there, there's a lot of runway in this space, and like I said, it's cortisol is becoming more and more relevant.
Sure
... in the treatment of some of these, other conditions and situations.
Vastly larger conditions.
Yeah.
Yeah.
Yeah.
All right, let's pivot to Gvoke. Time's flying. That's your glucagon rescue. Obviously, we're entering the very important back to school season.
Right
... for that product. It's sort of like the EpiPen model for people who aren't that familiar with the-
Yeah
... the dynamics in that space.
Sure.
What kind of trends are you seeing with regards to prescription volumes, year-over-year growth rates, market share heading into back to school versus your expectations?
We're seeing very consistent trends that we've seen in the past couple of years. Gvoke is very persistently growing through the year. As you know, part of our job with Gvoke is to get to the 14 million people that don't have any kind of protection, people that are on insulin or sulfonylureas, and get to them and make sure they have a ready-to-use glucagon, like Gvoke HypoPen, just in case. I mean, that's really, you know, what you're trying to drive. And the guidelines, all the medical guidelines support that. They're all in agreement that they should, so really trying to get the physicians to move to that practice. And we continue to drive market growth that way.
So, the market's been growing about 10-ish, you know, 10% each year, and we're driving that, and we're capturing pretty much all the new news in that respect. So that's causing us to actually gain share-
Sure
... and drive the market.
Right. So sort of segue to my next question.
Yeah.
Which is, you know, for a while, it was all about competing for share.
Yeah.
You had some generic old, you know, inferior kits out there.
Yeah.
You have an intranasal product-
Mm
... that was with Lilly before it's changed hands, called Baqsimi, and you were rapidly gaining share. I'm curious, at what point do you think that shakes out to be relatively stable, or are we already close to that now, where it becomes all about market growth?
It's all about market growth-
Already
... and it really was from the very beginning. So the kits went away fast.
Right.
Right? They're at... I don't know, there's 18% left in, are in the kits. Maybe that gets down to 10%, I don't know, over time. So it's all about market growth, and, and that's where the, that's where the value is and the opportunity is. It's in the 14 million that aren't protected versus the few that the competition may have.
Sure.
So we're focused on that and trying to drive our growth from there.
Right. So, like, I guess, how do you change practice?
Mm.
So, you know, I mentioned EpiPen, right? So everyone's very familiar with that market.
Yeah.
Everyone knows whoever's allergic to bees or peanuts, they've got one to six EpiPens somewhere.
Right
... scattered about their lives.
Yeah.
You got millions of people taking insulin and other drugs that are putting them at risk for hypoglycemia, and almost none of them are getting-
Yeah
Prescriptions for glucagon, despite—I mean, the product's doing really well, but obviously the headroom is massive. You know, you're just one relatively small company. How does that change?
It changes at the physician office and in the physician practice, and our teams are focused on... It's gonna take time, by the way.
Mm.
It's not gonna happen overnight. So our teams are focused on, you know, mandates within the office, you know, alerts in the EMRs, and things like that that can help remind physicians that, "Hey, you got someone on insulin. Have you talked about glucagon? And do they have a ready-to-use glucagon?" So we know that once they do that, and they prescribe it, most people will then go pick it up.
Mm.
So that's the key, is to you know get them reminded that, "Hey, you should have this," because they haven't had it. They never... They may have gotten it 20 years ago and when-
Yeah
... but they never, and it was the kit, and they couldn't do it anyways.
Right.
And they wouldn't have done it anyways. So this is, you know, a different situation. So we're trying to drive that home, and we got the guidelines that support that. So it makes sense medically to the clinicians. It's just, can we, you know, change the standard of practice within their offices to include that in with
I mean, I know endocrinologists are pretty old school, and it's definitely, you know. And I have other companies in the space that are struggle to change practice. But when you have guidelines, I mean, can you walk. Can your rep go in and say, "Hey, Doc, here's the guidelines. Are you prescribing one of these?" And they go, "not exactly." Is that enough?
The endocrinologists know the guidelines.
Yeah.
First of all, they're extremely busy.
Yeah.
But a lot of people with diabetes are treated by the primary care physicians, and they have big diabetes practices. They don't know the guidelines, so part of what we've been doing is bringing that in and trying to educate on that. And, you know, that's where the biggest opportunity is over time, to get them into the standard of practice of making sure they have a ready-to-use glucagon, like Gvoke HypoPen.
Okay. Let's talk about Keveyis. This was sort of an afterthought-
Yeah
... a little bit when you acquired Strongbridge and moved into orphan. We thought, "Okay, well, there's this one asset. It's not about that. That's gonna roll over any second, generics coming into the market." And just quarter after quarter, it's been surprising to the upside, generating cash. And I guess now that you've had a generic in the market, and it's had limited impact, how confident are you going forward that maybe that product is just gonna be more resilient until further notice, and not fall off a cliff?
Yeah, we're more and more confident-
Yeah
... as we get through each and every quarter, with KEVEYIS. It's a very resilient product. The healthcare professionals and the patients really will fight for brand. It's important, you know, all the things that company can do and physicians do in order to support people who have PPP, and what it takes to be able to treat that, even staying on drug. So, we've seen that. And so even if, even as we've lost some patients on to generic, we've seen a lot of them come back.
Interesting.
And, so that dynamic is working, and we continue to see that holding strong. We said last quarter was the first time in the last three or four quarters that we actually patients stayed flat, and we're kind of seeing the same thing going into the third quarter as well. We're really flattening out and not seeing any declines.
That's been a real positive surprise.
Yeah.
Let's pivot to the pipeline, right? You've got your once-weekly levothyroxine injection product, which is already through, you know, some phase II work, and I'm pretty excited about this product. But I also know there's a lot TBD-
Yeah
... on this front, 'cause it's pretty unique and a potentially pretty massive opportunity that no one's gonna rush into lightly.
Yeah.
So I'm just curious, when is your end of phase II meeting with the FDA, and, you know, what are your base case assumptions for potential pivotal requirements for this product?
Yeah, so we're excited about it, too.
Yeah.
You know, this is a great opportunity for patients. It's a once-weekly subQ levothyroxine, bypasses all the challenges of oral bioavailability of the daily orals. In our phase II trial, we showed that we can raise TSH levels with 40% less drug, very smoothly and quickly. So we're very excited. We have an end of phase II meeting. We'll probably have a couple meetings with the FDA between now and the end of the year, because we wanna make sure we build a plan and put together plans that will really make this differentiated, both at the label standpoint. It's really, you know, how do you get through the payers and make sure you get the right things in your study so that you can, you know, get that kind of information in the label?
For example, the current ones don't have anything about TSH levels in their current labels.
Mm.
So there's a lot of stuff that we need to work out with them. You know, give us till the end of the year to work out the clinical plan-
Yeah
... and the pathway. Give us, you know, part of the first quarter to be able to then articulate what's that, what's that opportunity look like? What's the patient population? How are we gonna go after it, and what's it gonna take to drive that growth? So-
Yeah, it seems like a really interesting opportunity for the FDA, really, to, you know, you have 100 million prescriptions a year for a product with a quite outdated label, and-
Yeah
... not really, like, a modern package.
Yeah.
And so I could see how they would actually be quite interested in-
Yeah
... helping you help them.
So more to come there.
Are you interested in definitely developing this yourself, to the finish line, or is this maybe to consider a potentially larger market, you know, maybe partnering?
Yes and yes. Because, I mean, so first of all, it fits right into our business. The, you know, with respect to Gvoke and Recorlev, it fits right into that endocrinology space, and then into that primary care aspect of it. So yes, we could do it. We want to do it. We want to keep as much value for that for us and for shareholders, and then we also, you know, would certainly could leverage a partner. It's a big market and opportunity.
All right, and another big part of your pipeline is this, and I won't worry about that clock. We can go a little over, by the way.
Okay. Okay.
You've got all these partnerships-
Mm-hmm.
and some disclosed, some partly disclosed. We don't have all the details.
Yeah.
I think we all know, based on what you have disclosed, that these could be, like, pretty large value drivers for the company.
Yeah.
But I don't think you're getting really any credit for any of them in your stock, understandably, because we don't have any visibility. So, with the caveat that they're not your programs to give disclosures on, but, you know, what could investors look forward to at all, whether it's potential milestones or even the timing of milestones, in your view?
Mm.
Like, should we be thinking in 2025 we're gonna get some news there, so they can start to maybe put some valuation on these?
You hit it in the front end.
Yeah.
You said it's out of your control.
Yeah, sure.
So it's really challenging for us to be transparent about these partnerships. They're other people's products. When they hit the milestones are out of our control. We generally formulate for them, give them the product, and then they take it from there. So from our perspective, it's hard to, you know, tell you when the next one's gonna hit and when that's gonna hit. So, you know, we're, and it's not consistent. So I think the best thing we can do is communicate when something meaningful and is relevant in terms of our revenue or, you know, operations, that we can then communicate around that. So we continue to run the ones that we've got going. There's three that are public.
We're doing more, and we're, you know, looking to do more of these technology partnerships, so.
All right. Steve, I've been leaving you hanging here.
Yeah, go-
Yeah.
Sorry.
Go get him. I was hoping you'd get him.
You keep looking over at Steve.
I know.
On the 2Q call, I mean, you both, I guess, talked about trying to give better visibility for investors going forward. Revenue guidance has been pretty wide, and I guess understandably, with some levers that were uncertain.
Yeah
... the last couple of years. Can we hope for maybe narrower guidance in 2025?
The direct answer is yes.
All right.
Yeah, and I would say further to that point, we realize, and recognize, and acknowledge that the initial guidance that we provided this year on the revenue range was problematic for investors, particularly at the low end, which implied a single-digit growth rate.
Yeah.
It really further implied that we weren't confident in the growth prospects of this business. As you know, we've tightened the range, raised the bottom end twice this year, the second time more substantively, which should demonstrate that we have ultimate confidence in this fast-growing commercial business of ours.
Right. I guess it's a fine line between being conservative and projecting confidence, right?
Yes.
So I guess that's why you get paid the big bucks, and I don't.
Yes.
But, speaking also of investor sentiment, you know, I know an area that you certainly hear a lot about, and I certainly do as well, is investor confidence, or lack thereof, in you guys getting to cash flow breakeven without having to do any dilutive financing, which you mentioned right up top here today. I mean, your predecessor and you have said the same thing over and over again, which is, "We don't need to raise." That said, we do see burn-
Mm-hmm.
... you know, quarter after quarter lately.
Yeah.
Can you just give us a little better color on, you know, when do you think we can confidently expect to see, with conservative revenue assumptions, to see that really narrow, and, you know, could we even see it as early as, you know, within next year, breakeven?
Yeah. So thanks for the question-
Yeah
... and the opportunity to clarify this. So, yeah, so first of all, we haven't provided 2025 guidance, but I think it's a fair assumption. Based on the, the, rapid growth of our commercial products, the healthy gross margin profile, it's reasonable to assume and extrapolate that out and say, "Look, you know, 2025 is a fair assumption in terms of breakeven." When that happens, TBD, we're, we're gonna go through a budget process and figure out, you know, what, what's in from an expense perspective. But I think just based on the growth trajectory of this business, which is 20%, very healthy, disciplined expense management, right? We've talked about, a little bit about expanding on the Recorlev side, but, you know, that, those are investments to drive growth.
If we continue to remain disciplined, I think, you know, sitting here today, that's a fair assumption, that 20-
Good. I think that'd be really welcome to hear.
Mm.
We got, like, a minute here we could squeeze in, John. Maybe this isn't fair, but-
Yeah
... in the last few seconds, you know, you guys have about $200 million in revenue almost this year, and you're trading at less than three times, and I don't without any obvious cliffs in sight, and, you know, growing double digits. What do you think the Street's missing here, with regards to your business and why you're not getting full credit for this, looking at it differently?
Yeah, I think they need to see us continue to execute, both on the revenue growth and deliver on what you guys are talking about, is can we show that we're sustainable on our own without having to raise or dilute patience of shareholders anymore? I mean, that's what we have to show them. You know, we're certainly on a path to be able to do that, and I think right now it's a show-me thing.
Yeah.
Right? Prove it.
I think when the sentiment changes, it changes fast, so.
Yeah.
Yeah
... I'll be here.
Yeah.
All right.
Yeah.
Thanks so much for joining us, and good luck with your future quarters next week.
Thanks, Oren.
Take care.
Appreciate it.