Today, we’re highlighting Xeris Biopharma Holdings (NASDAQ:XERS). Although the company is experiencing tremendous revenue growth, this has not yet converted into profitability or shareholder appreciation. Can the stock recover? An analysis is provided below.
Xeris Biopharma Overview:
Xeris Biopharma Holdings is a Chicago-based biopharma company. The company is the product of the merger of Xeris and Strongbridge Biopharma last year. Original Xeris shareholders ended up owning roughly 60% of the combined business. The company has numerous items on the market (see below) and more in the works. The stock presently trades at roughly $1.75 per share and has a market valuation of around $230 million.
Product Portfolio
- Gvoke: A ready-to-use liquid glucagon for treating extreme hypoglycemia.
- Keveyis: A treatment for hyperkalemic, hypokalemic, and similar forms of primary periodic paralysis. It was acquired as part of the Strongbridge merger.
- Recorlev: A cortisol production inhibitor that has been shown to treat endogenous hypercortisolemia in adult Cushing’s syndrome patients. The product was bought as part of the Strongbridge acquisition and received FDA approval late last year. It was released in the US in January of this year.
Xeris Biopharma signed a partnership with Tetris (now Arecor) a year ago to commercialize Ogluo in the European Economic Area, the United Kingdom, and Switzerland for severe hypoglycemia in diabetic patients. This arrangement entitles Xeris Biopharma to royalties on net sales in the mid-single digits. It can also get one-time commercial milestone payments if net revenues for a given year exceed pre-defined levels. The commercialization of Ogluo is in its early stages and is not relevant to our investigation.
First Quarter Results:
On May 11th, the firm released its first-quarter results. Xeris Biopharma reported a GAAP loss of 25 cents per share, which was in line with estimates. Revenues increased by more than 170% to just shy of $22 million, a little less than the consensus.
Prescriptions for Gvoke increased by 88% year on year. This product now accounts for 22% of the glucagon market and is gaining market share. The number of Keveyis patients increased by 12% over 1Q2021. Recorlev only launched this quarter and will not see significant sales until the second quarter.
Second Quarter Results:
The firm released its second-quarter results today. Revenues increased by about 185% to little more than $25 million, roughly in line with projections. The GAAP loss was reduced to 19 cents per share in the quarter, four cents higher than the estimate.
Gvoke’s net revenues for the first six months of the year increased 42% to $23.9 million, despite an average price reduction. Prescriptions increased 73% during the same period last year.
Keveyis’ net revenues increased by 20% to $22.1 million in the first half of this year. This was due to a price rise and an 11% increase in sales volume. Recorlev has generated $1.1 million since its inception earlier this year.
Analyst Commentary & Balance Sheet:
Four analysts, including Mizuho Securities and H.C. Wainwright, have reissued Buy ratings on XERS since late April. Price objectives have been set at $6.00 to $6.50 per share. Currently, slightly more than 8% of the outstanding float is owned short. In February, the company’s Chief Scientific Officer sold slightly more than $27,000 in stock. In May, the CEO purchased 100,000 shares. So far in 2022, this is the lone insider activity in this equity.
After the second quarter, the company had more than $110 million in cash and marketable securities. Xeris Biopharma has a comparable amount of long-term debt. During the first quarter conference call, leadership guided a year-end cash balance of $90 million to $110 million. It also expects Xeris to reach cash flow breakeven by the end of 2023.
Verdict
According to analyst consensus, revenues are expected to increase more than 120% to $110 million in FY2022. Analysts predict roughly $160 million in sales in FY2023 as well.
XERS is not pricey in terms of price to projected sales, given its growth. This is especially true if the company continues on its path toward cash flow break even. At the moment, I consider the stock to be a minor ‘watch item,’ which I own through covered call contracts in my portfolio.
Featured Image: Megapixl @Angellodeco
