Xeris Pharmaceuticals: Marketed Product Company With Platform And Soros Investment Makes Me More Bullish (NASDAQ:XERS)


Xeris Pharmaceuticals (XERS) has a lot going for it since I last covered it; in fact, so many good things are happening to the company that I am going to have to change my neutral stance from last year and become positively bullish.

First, it got its lead candidate, Gvoke, approved in the US last year in September. The product was launched in November 2019, and despite COVID-19, the company also managed to launch the auto-injector version in July 2020.

Since then, sales have increased exponentially. Net sales for Gvoke for the three and nine months ended September 30, 2020 were $9.4 million and $13.1 million, respectively. The company says that “Gvoke prescriptions grew approximately 140% quarter over quarter according to third-party databases. However, the Company believes that these third-party databases do not accurately capture underlying product demand and that Gvoke third quarter 2020 prescription growth may be understated. This is likely due to the estimated nature of prescription growth in these databases, particularly in the launch phase of new products such as Gvoke HypoPen.”

The company presented a trajectory of sales growth of legacy products, key competitor BAQSIMI from Eli Lilly (LLY), and Gvoke.

(Source)

What we see here is that non-legacy product market share has grown slowly but steadily, and since July, when its auto-injector was approved, Xeris’s share of the market has also been growing. BAQSIMI has an advantage here, not because of any particular benefit of the inhalable product itself – we discussed its problems in our last article – but because it launched almost a year ahead of Gvoke’s full launch and it has Eli Lilly behind it. What is important to note here is that Gvoke is not just a product, but a proof of concept of two separate platforms for developing non-aqueous formulations of drugs: XeriSol for small molecules and XeriJect for biologics. So, future product launches from these two platforms will add to Xeris’s revenue.

Then, it got its European approval process in order. Xeris’s Marketing Authorization Application (MAA) for its RTU liquid stable glucagon for the treatment of severe hypoglycemia in people with diabetes is currently under review by the European Medicines Agency (EMA). If approved, the company could launch its RTU glucagon in certain European countries in 2021. It entered into a deal with Clinigen Group plc to deliver Gvoke devices in these countries.

The rest of its pipeline has also done very well. The FDA has designated Xeris’s XP-0863 (diazepam non-aqueous injection) for fast-track review for the treatment of acute repetitive seizures. Earlier, the drug candidate was granted orphan drug designation both for the treatment of acute repetitive seizures and for the treatment of Dravet syndrome. Another of its product candidates, XP-3924, demonstrated positive results from a Phase 2 clinical trial. XP-3924 is a co-formulation of pramlintide and insulin in adults with type 1 diabetes (T1D). Usually, this requires two injections, one for each drug, but XP-3924’s value proposition is that it can do this with just one injection. Earlier, its RTU glucagon product also showed clinical benefit in hypoglycemia in exercise-setting, another indication being targeted by the product.

George Soros took a position in the company after the launch of the Gvoke auto-injector, and that must have interested Soros enough to acquire a 5.3% stake of ~2.5 million common shares in XERS.

Lastly, the other good thing is that management invested in the company. As we can see in the table below, management has mostly purchased stocks in the last 12 months, that too sometimes at prices higher than current ones. Open market insider buys show their confidence in the company.

Insider transactions of last two years

Filing_date

Insider Name

Insider Title

Type

Price

Qty

05/14/20

Shannon John Patrick Jr

See Remarks

Pur

$3.55

22000

05/11/20

Shannon John Patrick Jr

See Remarks

Pur

$3.20

7886

05/11/20

Edick Paul R

See Remarks

Pur

$3.00

33000

03/16/20

Hecht Beth

See Remarks

Pur

$1.97

4000

02/18/20

Shannon John Patrick Jr

See Remarks

Pur

$4.15

12048

02/18/20

Hecht Beth

See Remarks

Pur

$4.15

4000

02/18/20

Edick Paul R

See Remarks

Pur

$4.15

20000

02/18/20

Johnson Kenneth Erland

See Remarks

Pur

$4.15

2410

02/18/20

Deutsch Barry M.

See Remarks

Pur

$4.15

9639

01/14/20

Prestrelski Steven

Chief Scientific Officer

Sale

$5.50

-10000

11/27/19

Edick Paul R

See Remarks

Pur

$8.55

17935

10/16/19

Prestrelski Steven

Chief Scientific Officer

Sale

$12.01

-27700

04/12/19

Prestrelski Steven

Chief Scientific Officer

Sale

$9.56

-10000

03/12/19

Edick Paul R

See Remarks

Pur

$9.12

30000

02/25/19

Johnson Kenneth Erland

See Remarks

Pur

$10.00

1000

02/22/19

Deutsch Barry M.

See Remarks

Pur

$10.00

5000

02/22/19

Hecht Beth

See Remarks

Pur

$10.00

2500

02/21/19

Redmile Group, LLC

10%

Pur

$10.00

588000

02/12/19

Flynn James E

Possible Member of 10% Group, 10%

Sale

$15.09

-7241

02/07/19

Flynn James E

Possible Member of 10% Group, 10%

Sale

$15.02

-14807

01/30/19

Flynn James E

Possible Member of 10% Group, 10%

Sale

$15.12

-7038

01/25/19

Flynn James E

Possible Member of 10% Group, 10%

Sale

$15.43

-114444

01/15/19

Prestrelski Steven

Chief Scientific Officer

Sale

$0.00

-2300

01/02/19

Prestrelski Steven

Chief Scientific Officer

Sale+OE

$15.82

-15720

(Source: OpenInsider)

In another development, Xeris has requested meetings with the FDA for three of its pipeline programs: RTU glucagon for the treatment of post-bariatric hypoglycemia, RTU glucagon for the treatment of exercise-induced hypoglycemia, and pramlintide-insulin co-formulation in adults with type 1 diabetes mellitus. Xeris anticipates disclosing each program’s proposed path forward based on FDA feedback in the first half of 2021. Based on the outcome of the FDA meeting for its pramlintide-insulin program, the company anticipates seeking a development and commercialization partner to advance this program.

About the company

Xeris is a specialty pharmaceutical company that develops and commercialises ready-to-use injectable and infusable drug formulations using two proprietary platforms called XeriSol and XeriJect. These allow for “the subcutaneous and intramuscular delivery of highly-concentrated, ready-to-use formulations of peptides, small molecules, and proteins using commercially available syringes, auto-injectors, multi-dose pens, and infusion pumps.”

The company’s lead product candidate is Gvoke HypoPen, targeting severe hypoglycemia. It also has a phase 2 trial ongoing for a ready-to-use glucagon for “post-bariatric hypoglycemia, exercise-induced hypoglycemia in diabetes, bi-hormonal artificial pancreas closed-loop systems, congenital hyperinsulinism, and hypoglycemia-associated autonomic failure; and hypoglycemia associated with intermittent and chronic conditions.” These product candidates use a non-aqueous formulation, and that apparently has multiple benefits over aqueous ones.

The Platforms

The company’s proprietary XeriSol and XeriJect non-aqueous formulation technology platforms are designed to improve the stability and solubility of aqueous formulations for certain drugs. These solutions can be packaged in various ways – Vial; Single-use Auto-injector; Prefilled Syringe; Multi-dose Pen; Infusion Pump. About the two platforms, the company says:

The XeriSol formulation technology is best suited for peptides and small molecules that encounter formulation challenges: (1) An aqueous formulation of a peptide or small molecule is created at an optimal, specific pH. This allows the peptide or small molecule to remain soluble at high concentrations in water; (2) The solution is dried into a powder and reconstituted in an aprotic, polar (FDA-approved) liquid. The liquid prevents aggregation and fibrillation of the drug substance; (3) When a ready-to-use XeriSol formulation is injected into a patient, it is effectively placed back into a water environment where it behaves appropriately.

The XeriJect formulation technology is best suited for drugs and biologics consisting of large molecules such as proteins, monoclonal antibodies, and vaccines: (1) Specialized drying or particle engineering techniques are employed to create powders; (2) The powders are “wetted” with biocompatible diluents, creating ultra-concentrated, low-volume paste formulations; (3) The paste formulations are administered via IM or SC using commercially available pens and pumps.

The XeriJect platform has enabled formulation of suspensions with protein concentrations in excess of 400 mg/mL, which is much higher than current aqueous formulation systems where the maximum achievable concentration is 250 mg/mL. These two technology platforms thus can develop products which are not only easier to use, but also less expensive.

Pipeline

Xeris is currently progressing with clinical studies in several areas, including management of severe hypoglycemia and post-bariatric hypoglycemia (PBH). Through a series of grant-supported collaborations, the company is exploring additional uses for ready-to-use glucagon in mild-to-moderate hypoglycemia. Additionally, it is evaluating stable, liquid glucagon as a combination therapy inside a physiological, closed-loop, bi-hormonal artificial pancreas. In non–glucagon-based research projects, clinical studies are underway for the treatment of acute repetitive seizures (ARS).

(Image source: Company website)

Competition and market potential

BAQSIMI from Eli Lilly is the key competitor of Gvoke. BAQSIMI was approved in 2019. It has quickly attained a dominant position in the non-legacy market, however, Gvoke is catching up quarter over quarter. I discussed Gvoke’s competition in my earlier article. The glucagon market is a nearly half-billion USD market growing at a CAGR of 6.2%. There are two types of products: injectables and nasal. Among emergency products, we have Eli Lilly’s GEK and Novo Nordisk’s GlucaGen. The procedure for making and delivering either is complex, and is described by Xeris as follows:

“Each kit is sold as a vial of lyophilized, glucagon powder with an exposed syringe/needle that contains a liquid diluent. The glucagon powder must be combined with the liquid diluent at the time of use and drawn into a syringe in accordance with a complex multi-step reconstitution and dose calibration procedure. Additionally, once reconstituted, the glucagon must be used immediately because once the lyophilized glucagon is combined with water, the solution becomes unstable and can fibrillate, rendering it inactive and potentially toxic.”

Gvoke solves this problem by making injectable formulations easier to make, while BAQSIMI uses a nasal formulation. However, the nasal formulation has a problem delivering adequate quantities in certain situations. Zealand Pharma (ZEAL) has a similar product called Hypopal, which will come a year after Gvoke but will be its closest competitor.

Financials

Stock price: $4.66 at close of 11/17/2020 below midpoint of 52-week range of $1.42-9.69.

Market capitalization: $243.90 million.

Shares outstanding: 48.98 million, of which 49.14% is with institutions, 32.99% with the public, 16.47% with hedge funds and 1.40% with insiders.

Wall Street analysts are very bullish, with an average rating of 4.59/5 and price target of $11, unchanged over the quarter.

High 36.04% short interest, with 14.5 million shares to cover in 5 days.

Cash balance: $141.74 million as of 9/30/2020.

Debt burden: $119.39 million as of 9/30/2020.

Cash burn: Total operating expenses were $104.6 million in the TTM.

Cost of revenues was $7.5 million in the TTM.

Revenue estimates: 2020: $22.71 million; 2021: $59.98 million; 2022: $110.90 million.

Risks

The company received a warning letter from the FDA for false and misleading TV advertising. The letter said:

This TV ad makes false or misleading claims and representations about the risks associated with and efficacy of Gvoke. Thus, the TV ad misbrands Gvoke within the meaning of the Federal Food, Drug and Cosmetic Act (FD&C Act) and makes its distribution violative. 21 U.S.C. 352(N); 331(A); 321(N). See 21 CFR 202.1(E)(5). These violations are concerning from a public health perspective because they create a misleading impression about the safety and effectiveness of Gvoke, a drug that is used for the treatment of severe hypoglycemia and is also associated with several serious and life-threatening risks, including the risk of hypersensitivity reactions that patients have experienced from a previous exposure to other formulations of glucagon.

Th agency continued with a list of the adverse effects of Gvoke:

Gvoke is contraindicated in patients with pheochromocytoma, insulinoma, and in patients with a known hypersensitivity to glucagon or to any of the excipients in Gvoke. The PI also contains warnings and precautions regarding catecholamine release in patients with pheochromocytoma, hypoglycemia in patients with insulinoma, hypersensitivity and allergic reactions, lack of efficacy in patients

Note that there is no Gvoke-specific adverse event listed here; these are things that happen with all glucagon formulations, and yet, they are approved because they save lives. Xeris’s problem was not the adverse events as such, but the failure to mention those exhaustively. It is correcting that now.

Despite approval, the company has a market cap bordering on microcap, and trading volume could be improved.

Bottom line

Xeris has a running revenue stream, a platform that can produce multiple products, a decent cash runway despite having a high debt burden, subdued stock prices and high short interest. Put all these together and we have here a recipe for a high risk-reward stock. The risk-reward profile was good enough for George Soros.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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