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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number: 001-40880
XERIS BIOPHARMA HOLDINGS, INC.
(Exact name of the registrant as specified in its charter)
Delaware87-1082097
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification No.)
1375 West Fulton Street, Suite 1300
Chicago, Illinois
60607
(Address of principal executive offices)(Zip Code)
(844) 445-5704
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.0001 par value per shareXERSThe Nasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   ☒     No   ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes   ☒     No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨
Accelerated filer
¨
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ☐    No  
As of October 31, 2023, 138,124,595 shares, par value $0.0001 per share, of common stock were outstanding.

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Table of Contents
Summary of the Material Risks Associated with Our Business
Our business is subject to numerous risks and uncertainties that you should be aware of in evaluating our business. These risks include, but are not limited to, the following:
<As a company, we have a limited operating history and limited experience commercializing pharmaceutical products and have incurred significant losses since inception. We may continue to incur losses over the next few years and may not be able to achieve or sustain revenues or profitability in the future.
<
We may never be profitable and we may not be able to continue operations without additional fundings.
<
We may require additional capital to sustain our business, and this capital may cause dilution to our stockholders and might not be available on terms favorable to us, or at all, which could force us to delay, reduce or eliminate our product development programs or commercialization efforts.
<
Our business depends entirely on the commercial success of our products and product candidates. Even if approved, our product candidates may not be accepted in the marketplace and our business may be materially harmed.
<
We operate in a competitive business environment, which may have an adverse impact on our revenue. If we are unable to compete successfully against our existing or potential competitors, our sales and operating results may be negatively affected and we may not successfully commercialize our products or product candidates, even if approved.
<
If we are unable to establish or do not maintain sufficient marketing, sales and distribution capabilities or enter into agreements with third parties to market, sell and distribute our products on terms acceptable to us, we may not be able to generate product revenue and our business, results of operations, and financial condition will be materially adversely affected.
<
Our reliance on third-party suppliers, including single-source suppliers, together with a limited number of possible suppliers and long development lead-times for alternate sources for Gvoke, Keveyis, and Recorlev or our product candidates could harm our ability to develop our product candidates or to continue to commercialize Gvoke, Keveyis, Recorlev or any product candidates that are approved.
<
Reimbursement decisions by third-party payors and consolidation within the healthcare industry and among competitors may have an adverse effect on pricing and market acceptance. If there is not sufficient reimbursement for our products, it is less likely that they will be widely used and pricing pressure may impact our ability to sell our products at prices necessary to support our current business strategies.
 < Clinical failure may occur at any stage of clinical development, and the results of our clinical trials may not support our proposed indications for our product candidates. If our clinical trials fail to demonstrate efficacy and safety to the satisfaction of the Food and Drug Administration ("FDA") or other regulatory authorities, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development of such product candidate.
<
Gvoke, Keveyis, Recorlev and our product candidates may have undesirable side effects which may delay or prevent marketing approval, or, if approval is received, require them to include safety warnings, require them to be taken off the market or otherwise limit their sales.
<
Our failure to successfully identify, develop and market additional product candidates, or acquire additional product candidates or enter into collaborations or other commercial agreements could impair our ability to grow.
<
Our success depends on our ability to protect our intellectual property and proprietary formulation science, as well as the ability of our collaborators to protect their intellectual property and proprietary formulation science.
<
Our stock price has been and will likely continue to be volatile, and you may lose part or all of your investment.
<
Our data collection and processing activities are governed by restrictive regulations governing the use, processing and, in certain jurisdictions, cross-border transfer of personal information.
The summary risk factors described above should be read together with the text of the full risk factors below in the section entitled "Risk Factors" and the other information set forth in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and the related notes, as well as in other documents that we file with the United States Securities and Exchange Commission. The risks summarized above or described in full below are not the only risks that we face. Additional risks and uncertainties not precisely known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition, results of operations and future growth prospects.

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XERIS BIOPHARMA HOLDINGS, INC.
Index to Quarterly Report on Form 10-Q

Page
Part I. Financial Information
Part II. Other Information
Solely for convenience, the trademarks and trade names in this Quarterly Report on Form 10-Q (this "Quarterly Report") are referred to without the ® and ™ symbols, but absence of such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. The trademarks, trade names and service marks appearing in this Quarterly Report are the property of their respective owners.
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Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
XERIS BIOPHARMA HOLDINGS, INC.
Condensed Consolidated Balance Sheets
(in thousands, except share and par value)
September 30, 2023December 31, 2022
Assets(unaudited)
Current assets:
Cash and cash equivalents$46,143$121,966
Short-term investments19,832
Trade accounts receivable, net45,96630,830
Inventory38,14324,735
Prepaid expenses and other current assets7,9679,287
Total current assets158,051186,818
Property and equipment, net6,1855,516
Operating lease right-of-use assets23,4073,992
Goodwill22,85922,859
Intangible assets, net112,475120,607
Other assets4,8074,730
Total assets$327,784$344,522
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$12,078$4,606
Current operating lease liabilities2,3661,580
Other accrued liabilities19,07336,786
Accrued trade discounts and rebates21,55416,818
Accrued returns reserve13,32811,173
Current portion of contingent value rights17,517
Other current liabilities1,1232,658
Total current liabilities87,03973,621
Long-term debt, net of unamortized debt issuance costs190,423187,075
Non-current operating lease liabilities35,1549,402
Non-current contingent value rights5,09925,688
Deferred tax liabilities2,5043,518
Other liabilities3,70031
Total liabilities323,919299,335
Commitments and contingencies (Note 15)


Stockholders’ equity:
Preferred stock—par value $0.0001, 25,000,000 shares and 25,000,000 shares authorized and no shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively
Common stock—par value $0.0001, 350,000,000 shares and 350,000,000 shares authorized as of September 30, 2023 and December 31, 2022, respectively; 138,067,806 and 136,273,090 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively
1414
Additional paid in capital 607,536599,966
Accumulated deficit (603,635)(554,770)
Accumulated other comprehensive loss(50)(23)
Total stockholders’ equity3,86545,187
Total liabilities and stockholders’ equity$327,784$344,522
See accompanying notes to condensed consolidated financial statements.
4

Table of Contents
XERIS BIOPHARMA HOLDINGS, INC.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share data, unaudited)

Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Product revenue, net$41,697 $29,554 $110,855 $76,724 
Royalty, contract and other revenue6,623 171 8,669 380 
Total revenue48,320 29,725 119,524 77,104 
Costs and expenses:
Cost of goods sold8,201 5,260 21,075 16,343 
   Research and development5,034 6,043 15,959 16,011 
   Selling, general and administrative37,287 34,491 108,527 103,388 
   Amortization of intangible assets 2,711 2,711 8,132 8,132 
      Total costs and expenses53,233 48,505 153,693 143,874 
Loss from operations (4,913)(18,780)(34,169)(66,770)
Other income (expense):
   Interest and other income 1,121 472 3,644 735 
   Loss on debt extinguishment, net(2,837) (2,837)(1,223)
   Interest expense (6,847)(3,989)(19,591)(9,735)
   Change in fair value of warrants 17 9 3 1,746 
   Change in fair value of contingent value rights 932 118 3,072 (7,569)
      Total other expense (7,614)(3,390)(15,709)(16,046)
      Net loss before benefit from income taxes(12,527)(22,170)(49,878)(82,816)
Benefit from income taxes338 339 1,013 1,086 
      Net loss$(12,189)$(21,831)$(48,865)$(81,730)
Other comprehensive loss, net of tax:
   Unrealized gains (losses) on investments28 16 (27)(5)
   Foreign currency translation adjustments (1) (1)
      Comprehensive loss $(12,161)$(21,816)$(48,892)$(81,736)
Net loss per common share - basic and diluted$(0.09)$(0.16)$(0.36)$(0.60)
Weighted average common shares outstanding - basic and diluted 138,059,781 135,951,761 137,523,202 135,508,203 
See accompanying notes to condensed consolidated financial statements.


5

Table of Contents
XERIS BIOPHARMA HOLDINGS, INC.
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands, except share data, unaudited)

 Common StockAdditional Paid In
Capital
Accumulated Other Comprehensive LossAccumulated DeficitTotal
Stockholders'
Equity
 SharesAmount
Balance, December 31, 2021
124,873,316 $13 $555,359 $(31)$(460,110)$95,231 
Net loss— — — — (33,714)(33,714)
Issuance of common stock related to Armistice equity offering10,238,908 1 29,999 — — 30,000 
Issuance of warrants related to loan agreement— — 2,080 — — 2,080 
Exercise of stock options11,228 — 8 — — 8 
Vesting of restricted stock units (net of 197,257 shares withheld for tax)
404,743 — (416)— — (416)
Stock-based compensation— — 3,301 — — 3,301 
Other comprehensive loss— — — (35)— (35)
Balance, March 31, 2022135,528,195 $14 $590,331 $(66)$(493,824)$96,455 
Net loss— — — — (26,185)(26,185)
Exercise of stock options2,561 — (3)— (3)
Vesting of restricted stock units (net of 1,317 shares withheld for tax)
— — — — —  
Stock-based compensation— — 3,152 — — 3,152 
Issuance of common stock through employee stock purchase plan389,987 — 510 — — 510 
Other comprehensive loss— — — 14 — 14 
Balance, June 30, 2022135,920,743 $14 $593,990 $(52)$(520,009)$73,943 
Net loss— — — — (21,831)(21,831)
Vesting of restricted stock units (net of 19,007 shares withheld for tax)
40,809 — (28)— — (28)
Stock-based compensation— — 2,941 — — 2,941 
Other comprehensive loss— — — 15 — 15 
Balance, September 30, 2022135,961,552 $14 $596,903 $(37)$(541,840)$55,040 
 Common StockAdditional Paid In
Capital
Accumulated Other Comprehensive LossAccumulated DeficitTotal
Stockholders'
Equity
 SharesAmount
Balance, December 31, 2022
136,273,090 $14 $599,966 $(23)$(554,770)$45,187 
Net loss— — — — (16,834)(16,834)
Vesting of restricted stock units (net of 743,677 shares withheld for tax)
1,018,187 — (863)— — (863)
Stock-based compensation— — 2,564 — — 2,564 
Other comprehensive loss— — — (6)— (6)
Balance, March 31, 2023137,291,277 $14 $601,667 $(29)$(571,604)$30,048 
Net loss— — — — (19,842)(19,842)
Exercise of stock options14,036 — 32 — — 32 
Vesting of restricted stock units (net of 13,525 shares withheld for tax)
129,033 — (25)— — (25)
Stock-based compensation— — 2,928 — — 2,928 
Issuance of common stock through employee stock purchase plan577,784 — 549 — — 549 
Other comprehensive loss— — — (49)— (49)
Balance, June 30, 2023138,012,130 $14 $605,151 $(78)$(591,446)$13,641 
Net loss— — — — (12,189)(12,189)
Vesting of restricted stock units (net of 28,000 shares withheld for tax)
55,676 — (72)— — (72)
Stock-based compensation— — 2,457 — — 2,457 
Other comprehensive loss— — — 28 — 28 
Balance, September 30, 2023138,067,806 $14 $607,536 $(50)$(603,635)$3,865 

See accompanying notes to condensed consolidated financial statements.
6



XERIS BIOPHARMA HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)
Nine Months Ended September 30,
20232022
Cash flows from operating activities:
     Net loss $(48,865)$(81,730)
     Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation 1,141 1,033 
Amortization of intangible assets8,132 8,132 
Amortization of premium/discount on investments (1,117)148 
Amortization of debt discount and debt issuance costs 1,678 1,111 
Amortization of operating right-of-use assets628  
Stock-based compensation 7,949 9,394 
Loss on extinguishment of debt2,837 1,223 
Loss on disposal of property and equipment321 236 
Change in fair value of warrants (3)(1,746)
Change in fair value of contingent value rights(3,072)7,569 
Changes in operating assets and liabilities:
Trade accounts receivable
(15,136)(10,062)
Prepaid expenses and other current assets
1,170 (2,758)
Inventory
(13,403)(1,960)
Accounts payable
7,312 (5,008)
Other accrued liabilities
(12,005)(12,135)
Accrued trade discounts and rebates
4,736 4,280 
Accrued returns reserve
2,155 3,277 
Supply agreement liabilities(6,720)(5,280)
Operating lease liabilities6,645  
Other1,123 (2,496)
Net cash used in operating activities(54,494)(86,772)
Cash flows from investing activities:
Capital expenditures(2,131)(392)
Purchases of investments(43,741) 
Sales and maturities of investments25,000 25,685 
Net cash (used in) provided by investing activities (20,872)25,293 
Cash flows from financing activities:
     Proceeds from equity offerings 30,000 
     Proceeds from issuance of debt 97,295 
Repayment of debt (43,496)
     Payments of debt issuance costs (4,816)
Payments for loss on extinguishment of debt (737)
     Proceeds from issuance of employee stock purchase plan shares549 510 
     Proceeds from exercise of stock awards32 8 
     Repurchase of common stock withheld for taxes(960)(447)
Net cash (used in) provided by financing activities (379)78,317 
Increase in cash, cash equivalents and restricted cash(75,745)16,838 
Cash, cash equivalents and restricted cash, beginning of year 126,314 67,271 
Cash, cash equivalents and restricted cash, end of year $50,569 $84,109 
7



XERIS BIOPHARMA HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)
Nine Months Ended September 30,
20232022
Supplemental schedule of cash flow information:
Cash paid for interest$22,065 $7,689 
Supplemental schedule of non-cash activities:
Issuance of warrants related to loan agreement$ $2,080 
Initial operating lease right-of-use assets for adoption of ASU 2016-02$ $(6,277)
Initial current and non-current operating lease liabilities for adoption of ASU 2016-02$ $14,013 
Accrued debt issuance costs$1,007 $ 
Settlement agreement with debt and warrant holders accounted for as extinguishment and re issuance of debt:
Extinguishment of convertible note$(31,975)$ 
Issuance of convertible note$33,574 $ 

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that agrees to the same amounts shown in the condensed consolidated statements of cash flows (in thousands):
As of September 30,
20232022
Cash flows from operating activities:
Cash and cash equivalents$46,143 $84,109 
Restricted cash included in Other assets (1)
4,426  
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows$50,569 $84,109 
(1) These restricted cash items are primarily security deposit in the form of letters of credit for the Company to secure lease.

See accompanying notes to condensed consolidated financial statements.
8



XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Note 1. Organization and nature of the business
Nature of business
Xeris Biopharma Holdings, Inc. ("Xeris Biopharma" or the "Company") is a growth-oriented biopharmaceutical company committed to improving patients' lives by developing and commercializing clinically meaningful products across a range of therapies. The Company currently has three commercially available products: Gvoke, a ready-to-use, liquid-stable glucagon for the treatment of severe hypoglycemia; Keveyis, the first therapy approved in the United States to treat hyperkalemic, hypokalemic, and related variants of Primary Periodic Paralysis ("PPP"); and Recorlev, a cortisol synthesis inhibitor for the treatment of endogenous hypercortisolemia in adult patients with Cushing’s syndrome approved by the Food and Drug Administration ("FDA") in December 2021. The Company also has a pipeline of development programs to bring new products forward using its proprietary formulation science, XeriSol and XeriJect.
As used herein, the "Company" or "Xeris" refers to Xeris Pharmaceuticals, Inc. ("Xeris Pharma") when referring to periods prior to the acquisition of Strongbridge Biopharma plc ("Strongbridge") on October 5, 2021 and to Xeris Biopharma when referring to periods on or subsequent to October 5, 2021.
Throughout this document, unless otherwise noted, references to Gvoke include Gvoke PFS, Gvoke HypoPen, Gvoke Kit and Ogluo (glucagon).
Liquidity and capital resources
The Company has incurred operating losses since inception and has an accumulated deficit of $603.6 million as of September 30, 2023. The Company expects to continue to incur net losses for at least the next 12 months beyond the issuance date of these condensed consolidated financial statements. Based on the Company’s current operating plans, existing working capital at September 30, 2023, the Company believes that its cash resources are sufficient to sustain operations and capital expenditure requirements for at least the next 12 months from the issuance date of these condensed consolidated financial statements.
If needed, the Company may elect to finance its operations through equity or debt financing along with revenues. There can be no assurance that such funding may be available to the Company on acceptable terms, or at all, or that the Company will be able to successfully market and sell Gvoke, Keveyis and Recorlev. Market volatility resulting from geopolitical instability resulting from the ongoing military conflicts between Russia and Ukraine and Israel and Hamas, rising interest rates, inflationary pressures, the tightening of lending standards, a potential shutdown of the U.S. government, any further deterioration in the macroeconomic economy or financial services industry resulting from actual or potential bank failures, or other factors could also adversely impact the Company's ability to access capital as and when needed. The issuance of equity securities may result in dilution to stockholders. If the Company raises additional funds through the issuance of additional debt, which may have rights, preferences and privileges senior to those of the Company's common stockholders, the terms of the debt could impose significant restrictions on the Company's operations. The failure to raise funds as and when needed could have a negative impact on the Company's financial condition and ability to pursue its business strategies. If additional funding is not secured when required, the Company may need to delay or curtail its operations until such funding is received, which would have a material adverse impact on the business prospects and results of operations.
Note 2. Basis of presentation and summary of significant accounting policies and estimates
Basis of presentation
The condensed consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"), including those for interim financial information, and with the instructions for Quarterly Reports on Form 10-Q and Article 10 of Regulation S-X issued by the U.S. Securities and Exchange Commission (the "SEC").
In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the periods presented. The results of operations for such periods are not necessarily indicative of the results that may be expected for any future period. The accompanying financial statements should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2022 included in the Company's Annual Report on Form 10-K filed with the SEC on March 8, 2023.
Certain information and disclosures normally included in the annual financial statements prepared in accordance with GAAP, but that is not required for interim reporting purposes, have been condensed or omitted.
Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification ("ASC") and Accounting Standards Update ("ASU") issued by the Financial Accounting Standards Board ("FASB").
9



XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Basis of consolidation
These condensed consolidated financial statements include the financial statements of Xeris Biopharma Holdings, Inc. and subsidiaries. All intercompany transactions have been eliminated.
Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses included in the financial statements and accompanying notes. Actual results could differ from those estimates.
Revenue recognition
The Company applies the guidance in ASC 606, Revenue Recognition, to all contracts with customers within the scope of the standard.
The Company sells product primarily to wholesalers or a specialty pharmacy that subsequently resell to retail pharmacies or patients. The Company enters into arrangements with payors, group purchasing organizations, and healthcare providers that provide for government-mandated or privately-negotiated rebates, chargebacks and discounts related to the Company’s products. The Company currently sells Gvoke, Keveyis and Recorlev in the United States only.
Revenue is recognized when the Company's customer (e.g., a wholesaler or specialty pharmacy) obtains control of promised goods or services, which is when the Company's obligations under the terms of the contract with the customer are satisfied, based on the consideration the Company expects to receive in exchange for those goods or services.
Revenues are recorded at the net product sales price, which includes estimated allowances for patient copay assistance programs, prompt payment discounts, payor rebates, chargebacks, service fees, and product returns, all of which are recorded at the time of sale to the pharmaceutical wholesaler or specialty pharmacy. The Company applies significant judgments and estimates in determining some of these allowances. If actual results differ from its estimates, adjustments are made to these allowances in the period in which the actual results or updates to estimates become known.
Such revenue is reported as product revenue, net in the condensed consolidated statements of operations and comprehensive loss.
Additionally, the Company earns revenue from research collaborations for the use of Xeris’ proprietary formulation technology platforms and royalties from branded products. Such revenue is recognized as earned in accordance with contract terms when it can be reasonably estimated and collectability is reasonably assured. This revenue is reported as royalty, contract and other revenue in the condensed consolidated statements of operations and comprehensive loss.
Concentration of credit risk
For the three and nine months ended September 30, 2023, four customers accounted for 98% and 97% of the Company’s gross product revenue, respectively. For the three and nine months ended September 30, 2022, the same four customers accounted for 97% and 96% of the Company’s gross product revenue, respectively. At September 30, 2023 and December 31, 2022, the same four customers accounted for 86% and 99% of the trade accounts receivable, net, respectively.
New accounting pronouncements
Adopted accounting standards
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This standard requires entities to estimate an expected lifetime credit loss on financial assets ranging from short-term trade accounts receivable to long-term financings and report credit losses using an expected losses model rather than the incurred losses model that was previously used and establishes additional disclosures related to credit risks. For available-for-sale debt securities with unrealized losses, the standard requires allowances to be recorded instead of reducing the amortized cost of the investment. This standard limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and requires the reversal of previously recognized credit losses if the fair value increases. This standard would have been effective for the Company for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. The effective date of ASC Topic 326 was then delayed until fiscal years beginning after December 15, 2022 for SEC filers that are eligible to be smaller reporting companies under the SEC’s definition, as well as private companies and not-for-profit entities. The Company adopted this standard beginning on January 1, 2023, and it did not have a material impact on the financial statements.
Pending accounting standards
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This standard eliminates certain accounting models to simplify the accounting for convertible instruments,
10



XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
expands the disclosure requirements related to the terms and features of convertible instruments, and amends the guidance for the derivatives scope exception for contracts settled in an entity’s own equity. This standard enhances the consistency of earnings-per-share ("EPS") calculations by requiring that an entity use the if-converted method and that the effect of potential share settlement be included in diluted EPS calculations and disclosures. This standard is effective for the Company for fiscal years beginning after December 15, 2023. Early adoption is permitted but not earlier than periods beginning after December 15, 2020. The Company is currently evaluating the impact the adoption of this new standard will have on the financial statements and disclosures.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This standard provides optional expedients for the application of GAAP, if certain criteria are met, to contracts and other transactions that reference London Inter-bank Offered Rate ("LIBOR") or other reference rates that are expected to be discontinued because of reference rate reform. This standard is effective for all entities as of March 12, 2020 through December 31, 2022. On December 21, 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, which extends the period of time entities can utilize the reference rate reform relief guidance under ASU 2020-04 from December 31, 2022 to December 31, 2024. The Company is currently evaluating the impact the adoption of this standard will have on the financial statements and disclosures.
Note 3. Disaggregated revenue
Disaggregated revenue by product is as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Product revenue (in thousands):
Gvoke
$17,735 $13,663 $48,406 $37,595 
Keveyis
15,865 13,371 42,708 35,506 
Recorlev 8,097 2,520 19,741 3,623 
Product revenue, net41,697 29,554 110,855 76,724 
Royalty, contract and other revenue6,623 171 8,669 380 
Total revenue$48,320 $29,725 $119,524 $77,104 
11



XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Note 4. Short-term investments
The Company classifies investments in debt securities as available-for-sale. Debt securities are comprised of liquid investments that are highly rated securities and, as of September 30, 2023, consist of U.S. government securities, all with remaining maturities of less than one year. Debt securities as of September 30, 2023 had an average remaining maturity of 0.2 years. The debt securities are reported at fair value with unrealized gains or losses recorded in accumulated other comprehensive income (loss) in the condensed consolidated balance sheets. The cost of short-term investments is adjusted for amortization of premiums or accretion of discounts to maturity, and such amortization or accretion, as well as interest income, are included in interest and other income in the condensed consolidated statements of operations and comprehensive loss. Refer to "Note 12 - Fair Value Measurements," for information related to the fair value measurements and valuation methods utilized.
There were no short-term investments as of December 31, 2022. The following table represents the Company’s short-term investments by major security type as of September 30, 2023 (in thousands):
September 30, 2023
Amortized
Cost
Gross Unrealized
Gains
Gross Unrealized LossesTotal
Fair Value
Investments:
     U.S. government securities$19,859 $ $(27)$19,832 
        Total available-for-sale investments$19,859 $ $(27)$19,832 
Allowance for Credit Losses
For available-for-sale securities in an unrealized loss position, the Company first assesses whether they are intended to be sold, or if it is more likely than not that the Company will be required to sell, the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through earnings. For available-for-sale securities that do not meet the above criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the severity of the impairment, any changes in interest rates, market conditions, changes to the underlying credit ratings and forecasted recovery, among other factors. The credit-related portion of unrealized losses, and any subsequent improvements, are recorded in interest income through an allowance account. Any impairment that has not been recorded through an allowance for credit losses is included in other comprehensive loss on the statements of operations and comprehensive loss. No credit loss allowance was recorded in the three and nine months ended September 30, 2023.
Note 5. Inventory
The components of inventory consist of the following (in thousands):  
September 30, 2023December 31, 2022
Raw materials$17,187 $7,410 
Work in process7,792 11,367 
Finished goods13,164 5,958 
Inventory$38,143 $24,735 
Inventory reserves were $2.0 million and $1.3 million at September 30, 2023 and December 31, 2022, respectively.
12



XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Note 6. Property and equipment
Property and equipment consist of the following (in thousands):
September 30, 2023December 31, 2022
Lab equipment
$4,153 $3,841 
Furniture and fixtures
539 1,355 
Computer equipment
728 474 
Office equipment97 8 
Software
374 307 
Leasehold improvements
5,984 5,065 
Total property and equipment11,875 11,050 
Less: accumulated depreciation and amortization(5,690)(5,534)
     Property and equipment, net$6,185 $5,516 
Depreciation and amortization expense relating to property and equipment was $0.4 million and $0.4 million for the three months ended September 30, 2023 and 2022, respectively. Depreciation and amortization expense relating to property and equipment was $1.1 million and $1.0 million for the nine months ended September 30, 2023 and 2022, respectively.
Note 7. Intangible assets
Identified intangible assets consist of the following (in thousands):
Life (Years)September 30, 2023December 31, 2022
Gross assetsAccumulated amortizationNetGross assetsAccumulated amortizationNet
Definite-lived intangible asset - Keveyis5$11,000 $(4,400)$6,600 $11,000 $(2,750)$8,250 
Definite-lived intangible asset - Recorlev14121,000 (15,125)105,875 121,000 (8,643)112,357 
Total intangible assets$132,000 $(19,525)$112,475 $132,000 $(11,393)$120,607 
As of September 30, 2023, expected amortization expense for intangible assets subject to amortization for the next five years and thereafter is as follows (in thousands):
2023 remaining2,711 
202410,843 
202510,843 
202610,293 
20278,643 
Thereafter69,142 
     Total$112,475 
13



XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Note 8. Other accrued liabilities
Other accrued liabilities consist of the following (in thousands):
September 30, 2023December 31, 2022
Accrued employee costs$11,726 $13,400 
Supply agreement - current portion 6,720 
Accrued supply chain costs161 562 
Accrued marketing costs1,083 2,593 
Accrued debt issuance costs1,007  
Accrued research and development costs
425 1,411 
Accrued restructuring charges268 2,799 
Accrued interest expense
504 4,656 
Accrued other costs
3,899 4,645 
Other accrued liabilities
$19,073 $36,786 
Note 9. Restructuring costs
After the completion of the acquisition of Strongbridge on October 5, 2021, the Company undertook a restructuring plan to streamline the organization and realize operating expense synergies. The Company incurred total restructuring costs of approximately $11.1 million, which primarily related to employee termination costs. These costs were fully recognized and recorded by 2022 in selling, general and administrative expenses in the condensed consolidated statements of operations and comprehensive loss. The Company anticipates the plan will be paid out by the fourth quarter of 2023.
The following table summarizes the restructuring reserve for the nine months ended September 30, 2023 (in thousands):
Restructuring Costs
Balance accrued at December 31, 2022
2,799 
   Payments(2,531)
Balance accrued at September 30, 2023
$268 
Note 10. Long-term debt
Convertible Senior Notes
In June 2020, Xeris Pharma completed a public offering of $86.3 million aggregate principal amount of Xeris Pharma's 5.00% Convertible Senior Notes due 2025 (the "2025 Convertible Notes"), including $11.3 million pursuant to the underwriters' option to purchase additional notes, which was exercised in full in July 2020. Since January 15, 2021, the 2025 Convertible Notes bear cash interest at the rate of 5.00% per annum, payable semi-annually in arrears on January 15 and July 15 of each year.
Xeris Pharma incurred debt issuance costs of $5.1 million in connection with the issuance of the 2025 Convertible Notes. At any time before the close of business on the second scheduled trading day immediately before the maturity date, holders of 2025 Convertible Notes may convert their 2025 Convertible Notes at their option into shares of the Company’s common stock, together, if applicable, with cash in lieu of any fractional share, at a conversion rate of 326.7974 shares of the Company's common stock per $1,000 principal amount of 2025 Convertible Notes. In the second half of 2020, $39.1 million in principal amount of 2025 Convertible Notes were converted into 13,171,791 shares of Xeris Pharma’s common stock.
On September 29, 2023, the Company completed the exchange of $32.0 million in aggregate principal amount of the 2025 Convertible Notes for $33.6 million in aggregate principal amount of new 8.00% Convertible Notes due 2028 (the "2028 Convertible Notes" and together with the 2025 Convertible Notes, the "Convertible Notes"). As of September 30, 2023, the outstanding balance of the 2025 Convertible Notes was $15.2 million and the outstanding balance of the 2028 Convertible Notes was $33.6 million.
The Company evaluated the exchange agreement for debt modification and concluded that the debt qualified for debt extinguishment. Upon extinguishment, the Company recognized the new 2028 Convertible Notes at their fair value of $34.1 million, and derecognized the carrying value of $32.0 million for the 2025 Convertible Notes and $0.7 million of unamortized initial debt issuance costs resulting in a net loss on debt extinguishment of $2.8 million.
14



XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The 2025 Convertible Notes are governed by the terms of a base indenture for senior debt securities dated June 30, 2020 (the "2025 Base Indenture"), as supplemented by the first supplemental indenture dated June 30, 2020 (the "First Supplemental Indenture"), and the second supplemental indenture dated October 5, 2021 (the "Second Supplemental Indenture" and together with the 2025 Base Indenture and First Supplemental Indenture, the "2025 Indenture"), among the Company, Xeris Pharma and U.S. Bank Trust Company, National Association (f/k/a U.S. Bank National Association), as trustee (the "Trustee"). The 2028 Convertible Notes are governed by the terms of an indenture for senior debt securities dated September 29, 2023 (the "2028 Indenture" and together with the 2025 Indenture, the "Indentures") among the Company, Xeris Pharma and the Trustee. The 2025 Convertible Notes and the 2028 Convertible Notes will mature on July 15, 2025 and July 15, 2028, respectively, unless earlier converted or redeemed or repurchased.
The Convertible Notes are senior, unsecured obligations and are equal in right of payment with Xeris Pharma's existing and future senior, unsecured indebtedness, senior in right of payment to its future indebtedness, if any, that is expressly subordinated to the Convertible Notes, and effectively subordinated to its existing and future secured indebtedness to the extent of the value of the collateral securing that indebtedness. The Convertible Notes are structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, and (to the extent Xeris Pharma is not a holder thereof) preferred equity, if any, of the Company’s other direct and indirect subsidiaries.
As a result of the transactions associated with the acquisition of Strongbridge, and pursuant to the Second Supplemental Indenture, the 2025 Convertible Notes are no longer convertible into shares of common stock of Xeris Pharma. Instead, subject to the terms and conditions of the 2025 Indenture, the 2025 Convertible Notes will be exchangeable into cash and shares of common stock of the Company in proportion to the transaction consideration payable pursuant to the transaction agreement for the acquisition of Strongbridge, and the "Reference Property" provisions in the 2025 Indenture.
The fair value of the Convertible Notes is determined from using current interest rates based on credit ratings and the remaining term of maturity. As of September 30, 2023, the fair value of the Convertible Notes was approximately $48.9 million. The fair value of the convertible debt was estimated using inputs for volatility, the Company’s stock price, time to maturity, the risk-free rate and the Company’s credit spread, some of which are considered Level 3 inputs in the fair value hierarchy disclosed in "Note 12 - Fair value measurement."
Loan Agreement
In September 2019, Xeris Pharma entered into an Amended and Restated Loan and Security Agreement (the "Oxford Loan Agreement") with Oxford Finance LLC ("Oxford"), as the collateral agent and a lender, and Silicon Valley Bank, as a lender ("SVB", and together with Oxford, the "Prior Lenders"). The Oxford Loan Agreement provided for the Prior Lenders to extend up to $85.0 million in term loans to Xeris Pharma in three tranches, of which $60.0 million was drawn down in September 2019.
In June 2020, Xeris Pharma paid a portion of the term loan equal to the sum of $20.0 million, plus all accrued and unpaid interest. In November 2020, an additional $3.5 million was drawn from the term loan.
In March 2022, the Company, Xeris Pharma and certain subsidiary guarantors of the Company entered into a Credit Agreement and Guaranty (as amended, modified or amended and restated from time to time, the "Hayfin Loan Agreement") with the lenders from time to time parties thereto (the "Lenders") and Hayfin Services LLP, as administrative agent for the Lenders (in such capacity, together with its successors and assigns, the "Agent"), pursuant to which the Company and its subsidiaries party thereto granted a first priority security interest on substantially all of their assets, including intellectual property, subject to certain exceptions. The Hayfin Loan Agreement provided for the Lenders to extend $100.0 million in term loans to the Company on the closing date and up to an additional $50.0 million in delayed draw term loans during the one year period immediately following the closing date (collectively, the "Loans"). On December 28, 2022, the Company borrowed the full amount of such $50.0 million delayed draw term loan under the Hayfin Loan Agreement. In conjunction with the execution of the Hayfin Loan Agreement, the Oxford Loan Agreement remaining balance of $43.5 million and fees of $2.1 million in connection with the loan repayment were paid. In addition to utilizing the proceeds to repay the obligations under the Oxford Loan Agreement in full, the proceeds were otherwise used for general corporate purposes.
The Loans incur interest at a floating per annum rate in an amount equal to the sum of (i) 9.0% (or 8.0% per annum if the replacement rate in effect is the Wall Street Journal Prime Rate) plus (ii) the greater of (x) (1) CME Group Benchmark Administration Limited (CBA) Term SOFR (or the replacement rate, if applicable) if CBA Term SOFR is greater than 1.00% plus 0.26161% or (2) 1.00% if CME Term SOFR is less than 1.00% and (y) one percent (1.00%) per annum (or 2.0% per annum if the replacement rate in effect is the Wall Street Journal Prime Rate). The Company has incurred total debt issuance costs of approximately $3.6 million related to the Hayfin Loan Agreement, which are being amortized to interest expense over the life of the loan using the effective interest method. The remaining balance of unamortized debt issuance costs have been reflected as a direct reduction to the loan balance. The effective interest rate, including the amortization of debt discount and debt issuance costs, amounts to approximately 11.8%. The debt outstanding under the Hayfin Loan Agreement approximates fair value due to the variable interest rate on the debt.
The Loans will mature on March 8, 2027; provided, however, the Loans will mature on January 15, 2025 if the 2025 Convertible Notes are outstanding as of such date and either (i) the maturity date thereof has not been extended to a date on or after September 4,
15



XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
2027 or (ii) the Company has not received net cash proceeds from one or more permitted equity raises or permitted raises of convertible debt which, together with no more than $15.6 million of cash on hand, is sufficient to redeem and discharge the 2025 Convertible Notes in full.
The components of debt are as follows (in thousands):
September 30, 2023December 31, 2022
Convertible Notes$49,331 $47,175 
Loan facility145,286 144,487 
Less: unamortized debt issuance costs(4,194)(4,587)
     Long-term debt, net of unamortized debt issuance costs$190,423 $187,075 
The following table sets forth the Company’s future minimum principal payments on the Convertible Note and the loan facility (in thousands):
2023 remaining$ 
2024 
202515,200 
2026 
2027150,000 
Thereafter33,574 
$198,774 
For the three and nine months ended September 30, 2023, the Company recognized interest expense of $6.8 million and $19.6 million, respectively, of which $0.6 million and $1.7 million, respectively, related to the amortization of debt discount and issuance costs. Other expense in the three and nine months ended September 30, 2023 included a $2.8 million loss on extinguishment of debt related to the exchange of 2025 Convertible Notes for 2028 Convertible Notes, which completed in September 2023. For the three and nine months ended September 30, 2022, the Company recognized interest expense of $4.0 million and $9.7 million, respectively, of which $0.4 million and $1.1 million, respectively, related to the amortization of debt discount and issuance costs. Other expense in the nine months ended September 30, 2022 included a $1.2 million loss on extinguishment of debt related to the Oxford Loan Agreement with the Prior Lenders, which was fully repaid in March 2022.
16



XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Note 11. Warrants
On January 3, 2022, the Company entered into a securities purchase agreement in connection with a private placement with an affiliate of Armistice Capital, LLC ("Armistice") for aggregate gross proceeds of approximately $30.0 million. In accordance with the purchase agreement, the Company issued to Armistice an aggregate of (i) 10,238,908 shares of the Company’s common stock, par value $0.0001 per share at a purchase price of $2.93 per share, and (ii) warrants to purchase an aggregate of 5,119,454 shares of the Company's common stock at an exercise price of $3.223 per share. The warrants became exercisable immediately upon the closing of the transaction and have a term of five years from the earliest of the date (a) of effectiveness of the resale registration statement, which was February 7, 2022, (b) all of the shares of the Company’s common stock issued or issuable to Armistice under the securities purchase agreement and all shares of the Company's common stock issuable upon exercise of the warrants (the "Warrant Shares") have been sold pursuant to Rule 144 or may be sold pursuant to Rule 144 without the requirement for the Company to be in compliance with the current public information required under Rule 144 and without volume or manner-of-sale restrictions, (c) following the one-year anniversary of the date of closing provided that the holder of Shares or Warrant Shares is not an affiliate of the Company, or (d) all of the shares and Warrant Shares may be sold pursuant to an exemption from registration under Section 4(a)(1) of the Securities Act without volume or manner-of-sale restrictions.
Associated with the Hayfin Loan Agreement disclosed in "Note 10 - Long-term debt," the Lenders also received warrants to purchase 1,315,789 shares of the common stock of the Company at a price of $2.28 per share. The warrants are (i) exercisable until March 8, 2029; (ii) freely transferable and detachable from the Loans; and (iii) subject to customary warrant holder rights and protections, including structural-based anti-dilution protection and adjustments for stock dividends, splits, combinations, reclassifications and the like.
As of September 30, 2023, the following warrants were outstanding:
Warrants classified as liabilities:
Outstanding Warrants
Exercise Price per Warrant
Expiration
Date
2018 Term A Warrants
53,720$11.169February 2025
2018 Term B Warrants
40,292$11.169
September 2025
94,012
Warrants classified as equities:
Warrants in connection with CRG loan agreement309,122$9.410July 2024
Warrants in connection with CRG loan amendment in January 2018978,628$12.760January 2025
Warrants in connection with Avenue Capital loan agreement209,633$2.390May 2025
Warrants in connection with Avenue Capital loan agreement209,633$2.390December 2025
Warrants in connection with Horizon and Oxford loan agreement125,999$3.130December 2026
Warrants in connection with Armistice securities purchase agreement5,119,454$3.223February 2027
Warrants in connection with Hayfin Loan Agreement1,315,789$2.280March 2029
8,268,258
The Company recognized gains of $8,000 and $9,000 upon the change in fair value of the warrants during the three months ended September 30, 2023 related to the 2018 Term A Warrants and the 2018 Term B Warrants, respectively. The Company recognized gains of $71 and $2,000 upon the change in fair value of the warrants during the nine months ended September 30, 2023 related to the 2018 Term A Warrants and the 2018 Term B Warrants, respectively.
The Company recognized gains of $8,000 and $1,000 upon the change in fair value of the warrants during the three months ended September 30, 2022 related to the 2018 Term A Warrants and the 2018 Term B Warrants, respectively. The Company recognized gains of $42,000 and $27,000 upon the change in fair value of the warrants during the nine months ended September 30, 2022 related to the 2018 Term A Warrants and the 2018 Term B Warrants, respectively. The Company recognized gains of $1.7 million related to the expiration of the assumed Strongbridge private placement warrants in June 2022.
Note 12. Fair value measurements
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are classified and disclosed in one of the following categories:
Level 1: Measured using unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
17



XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Level 2: Measured using quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs, other than quoted prices in active markets, that are observable either directly or indirectly.
Level 3: Measured based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable from objective sources (i.e., supported by little or no market activity).
Fair value measurements are classified based on the lowest level of input that is significant to the measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, which may affect the valuation of the assets and liabilities and their placement within the fair value hierarchy levels. The determination of the fair values stated below considers the market for the financial assets and liabilities, the associated credit risk and other factors as required. The Company considers active markets as those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
The following tables present the Company’s fair value hierarchy for those assets and liabilities measured at fair value as of September 30, 2023 and December 31, 2022 (in thousands):
Total as of
September 30, 2023
Level 1Level 2Level 3
Assets
Cash and cash equivalents:
     Cash and money market funds$46,143 $46,143 $ $ 
Investments:
     U.S. government securities$19,832 $19,832 $ $ 
Other assets:
Restricted cash$4,426 $4,426 $ $ 
Liabilities
Current portion of contingent value rights$17,517 $ $ $17,517 
Non-current contingent value rights$5,099 $ $ $5,099 
Warrant liabilities$6 $ $ $6 
Total as of December 31, 2022
Level 1Level 2Level 3
Assets
Cash and cash equivalents:
     Cash and money market funds$121,966 $121,966 $ $ 
Other assets:
Restricted cash$4,348 $4,348 $ $ 
Liabilities
Contingent value rights$25,688 $ $ $25,688 
Warrant liabilities$9 $ $ $9 
Contingent Value Rights
As part of the 2021 acquisition of Strongbridge, the Company issued contingent value rights ("CVRs") representing additional contingent consideration of up to $1.00 for each CVR upon the achievement of the following:
Keveyis Milestone: $0.25 per CVR, upon the earlier of the first listing of any patent in the FDA's Orange Book for Keveyis by the end of 2023 or the first achievement of at least $40 million in net revenue of Keveyis in 2023;
18



XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
2023 Recorlev Milestone: $0.25 per CVR, upon the first achievement of at least $40 million in net revenue of Recorlev in 2023; and
2024 Recorlev Milestone: $0.50 per CVR, upon the first achievement of at least $80 million in net revenue of Recorlev in 2024.
There are approximately 74.1 million CVRs. Up to 10.5 million CVRs may be issued to holders of Strongbridge rollover options and assumed warrants upon the exercise thereof. CVRs are settleable in cash, common stock, or a combination of cash and common stock, at the Company's sole election.
Contingent consideration obligations are recorded at their estimated fair values and these obligations are revalued at each reporting period until the related contingencies are resolved. The CVRs are adjusted to fair value using the methods described above at the end of each reporting period. Significant changes which increase or decrease the probabilities of achieving the related milestones or shorten or lengthen the time required to achieve such events would result in corresponding increases or decreases in the fair values of these obligations.
The Company has determined that the CVR liabilities' fair values are Level 3 items within the fair value hierarchy. The following table presents the change in the CVR liabilities (in thousands):
Balance at December 31, 2022
$25,688 
Change in fair value of CVRs(3,072)
Balance at September 30, 2023
$22,616 
Balance at Current portion of contingent value rights$17,517 
Balance at Non-current contingent value rights5,099 
Balance at September 30, 2023
$22,616 
Note 13. Stock compensation plan
In 2011, the Company adopted the 2011 Stock Option Issuance Plan (the "2011 Plan") and subsequently amended it to authorize the Board of Directors to issue up to 4,714,982 incentive stock option and non-qualified stock option awards.
The 2018 Stock Option and Incentive Plan (the "2018 Plan") was adopted by the Board of Directors in April 2018 and approved by the Company's stockholders in June 2018 to award up to 1,822,000 shares of common stock. The 2018 Plan replaced the 2011 Plan as the Board of Directors decided not to make additional awards under the 2011 Plan following the closing of the IPO, which occurred in June 2018. The 2018 Plan allows the compensation committee to make equity-based and cash-based incentive awards to the Company's officers, employees, directors and other key persons (including consultants). No grants of stock options or other awards may be made under the 2018 Plan after the tenth anniversary of the effective date.
As of September 30, 2023, there were 3,962,766 shares of common stock available for future issuance under the 2018 Plan.
The 2018 Employee Stock Purchase Plan (the "ESPP") was adopted by the Board of Directors in April 2018 and approved by the Company's stockholders in June 2018 to issue up to 193,000 shares of common stock to participating employees. Through the ESPP, eligible employees may authorize payroll deductions of up to 15% of their compensation to purchase up to the number of shares of common stock determined by dividing $25,000 by the closing market price of Xeris common stock on the offering date. The purchase price per share at each purchase date is equal to 85% of the lower of (i) the closing market price per share of Xeris common stock on the employee’s offering date or (ii) the closing market price per share of Xeris common stock on the purchase date. Each offering period has a six-month duration and purchase interval. As of September 30, 2023, there were 76 shares available for issuance under the ESPP.
The Equity Inducement Plan (the "Inducement Plan") was adopted by the Board of Directors in February 2019. The Inducement Plan allows the Company to make stock option or restricted stock unit awards to prospective employees of the Company as an inducement to such individuals to commence employment with the Company. The Company uses this Inducement Plan to help it attract and retain prospective employees who are necessary to support the commercialization of products and the expansion of the Company generally. As of September 30, 2023, there were 365,949 shares of common stock available for future issuance under the Inducement Plan.
Assumed Plans
On the acquisition date of Strongbridge, the Company assumed all then-outstanding stock options and shares available and reserved for issuance under some legacy equity incentive plans of Strongbridge, including the Strongbridge 2015 equity compensation plan and Strongbridge 2017 inducement plan (collectively, the "Assumed Plans"). Shares reserved under the Assumed Plans will be available
19



XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
for future grants. The Company also assumed all then-outstanding stock options from the rest of the legacy equity incentive plans of Strongbridge without assuming the shares available and reserved for issuance under these plans. The number of shares subject to stock options outstanding under all Strongbridge legacy equity incentive plans are included in the tables below. As of September 30, 2023, there were 2,531,897 shares reserved for future grants under the Assumed Plans.
Stock options
Stock options are granted with an exercise price equal to the market price of the Company’s stock at the date of grant. Stock option awards typically vest over either two, three or four years after the grant date and expire seven to ten years from the grant date.
The fair value of each option is estimated on the date of grant using a Black-Scholes option valuation model that uses the assumptions noted in the following table. The expected term of options represents the period of time that options granted are expected to be outstanding. The risk-free interest rate for periods during the contractual life of the option is based on the United States Treasury yield curve in effect at the time of grant. The expected stock price volatility assumption is based on the historical volatilities of a peer group of publicly traded companies as well as the historical volatility of the Company's common stock, since the Company began trading subsequent to the IPO in June 2018, over the period corresponding to the expected life as of the grant date. The expected dividend yield is based on the expected annual dividend as a percentage of the market value of the Company’s ordinary shares as of the grant date.
Stock option activity under the 2011 Plan, 2018 Plan, Inducement Plan and Assumed Plans for the nine months ended September 30, 2023 was as follows:
Number of OptionsWeighted Average Exercise Price
Per Share
Weighted Average Contractual Life (Years)
Outstanding - December 31, 20229,700,161$5.37 4.76
Granted  
Exercised(14,036)2.33 
Forfeited(12,541)5.48 
Expired(426,020)8.50 
Outstanding - September 30, 20239,247,564$5.23 4.10
Vested and expected to vest at September 30, 20239,247,564$5.23 4.10
Exercisable - September 30, 20238,973,009$5.24 4.01
At September 30, 2023, there was a total of $0.8 million of unrecognized stock-based compensation expense related to stock options that is expected to be recognized over a weighted average period of 1.1 years.
20



XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Restricted Stock Units
The Company grants Restricted Stock Units ("RSUs") to employees. RSUs that are granted vest over either three or four years in equal annual installments beginning on the one-year anniversary of the date of grant, provided that the employee is employed by the Company on such vesting date. If and when the RSUs vest, the Company will issue one share of common stock for each whole RSU that has vested, subject to satisfaction of the employee’s tax withholding obligations. Upon vesting and settlement of RSUs or exercise of stock options, at the election of the grantee, the Company does not collect withholding taxes in cash from employees. Instead, the Company withholds upon settlement as RSUs vest, or as stock options are exercised, the portion of those shares with a fair market value equal to the amount of the minimum statutory withholding taxes due. The withheld shares are accounted for as repurchases of common stock. Stock-based compensation expense related to RSUs is recognized on a straight-line basis over the employee’s requisite service period.
A summary of outstanding RSU awards and the activity for the nine months ended September 30, 2023 was as follows:
Number of UnitsWeighted Average Grant Date Fair Value
Per Share
Unvested balance - December 31, 20225,255,560$3.25 
Granted7,610,4001.33 
Vested(1,988,098)3.66 
Forfeited (448,887)1.68 
Unvested balance - September 30, 2023
10,428,975$1.83 
As of September 30, 2023, there was $12.7 million of unrecognized stock-based compensation expense related to RSUs, which is expected to be recognized over the weighted-average remaining vesting period of 2.0 years.
The following table summarizes the reporting of total stock-based compensation expense resulting from stock options, RSUs and the ESPP (in thousands):
 Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Research and development202 332 $1,156 $1,295 
Selling, general and administrative2,255 2,609 6,793 8,099 
     Total stock-based compensation expense$2,457 $2,941 $7,949 $9,394 
Note 14. Leases
The Company has non-cancellable operating leases for office and laboratory space, which expire at various times in 2031 and 2037. The non-cancellable lease agreements provide for monthly lease payments, which increase during the term of each lease agreement.
On September 29, 2022, Xeris Pharma amended and restated its existing lease with Fulton Ogden Venture, LLC to expand the leased premises to accommodate the Company’s relocation of its headquarters to such premises. The term of the space existing prior to the amendment and restatement commenced on January 1, 2021 and the lease for the combined expanded space commenced on April 1, 2023. The term of the amended and restated lease will expire on March 31, 2036, unless extended or earlier terminated pursuant to the terms of the lease.
All of the Company's leases are classified as operating leases, which are included as operating lease right-of-use assets and current and non-current operating lease liabilities in the condensed consolidated balance sheets. The Company’s operating lease costs are included in operating expenses in the accompanying condensed consolidated statements of operations and comprehensive loss. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.
A majority of the Company's lease agreements include fixed rental payments. Certain lease agreements include fixed rental payments that are adjusted periodically by a fixed rate. The fixed payments, including the effects of changes in the fixed rate or amount, and renewal options reasonably certain to be exercised, are included in the measurement of the related lease liability. The exercise of lease renewal options is at the Company's sole discretion. The depreciable life of assets and leasehold improvements are limited by the expected lease term, which includes renewal options reasonably certain to be exercised. The majority of the Company's real estate leases require that the Company pay maintenance, real estate taxes and insurance in addition to rent. These payments are generally
21



XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
variable and based on actual costs incurred by the lessor. Therefore, these amounts are not included in the consideration of the contract when determining the right-of-use asset and lease liability but are reflected as variable lease expenses.
As the interest rate implicit in the lease is not readily determinable, the Company uses the incremental borrowing rate as the discount rate. The Company considers observable inputs as of the effective date of the ASC 842 adoption including the credit rating, existing borrowings and other relevant borrowing rates, such as risk-free rates like the United States Treasury rate, and then adjusting as necessary for the appropriate lease term. The incremental borrowing rate is reassessed if there is a change to the lease term or if a modification occurs and it is not accounted for as a separate contract. As of September 30, 2023, the Company’s operating leases had a weighted-average remaining lease term of 11.8 years and a weighted-average discount rate of 11.9%.
Supplemental cash flow information related to the Company’s operating and finance leases was as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases$365 $624 $1,283 $1,682 
Right of use assets obtained in exchange for new lease obligations:
Operating leases$ $ $20,043 $ 
The Company reports the amortization of operating lease right-of-use assets and the change in operating lease liabilities on a net basis in other in the operating activities of the accompanying condensed consolidated statements of cash flows.
The components of lease expense were as follows (in thousand):
Three Months Ended September 30,Nine Months Ended September 30,
Lease cost2023202220232022
Operating lease expense$1,394 $532 $3,157 $1,532 
Variable lease cost286 212 938 652 
Sublease income(54)(54)(162)(158)
Total lease cost$1,626 $690 $3,933 $2,026 
As of September 30, 2023, maturities of lease liabilities are summarized as follows (in thousands):
2023 remaining$365 
20243,495 
20256,080 
20266,232 
20276,389 
Thereafter51,990 
Total lease payments74,551 
Less: Effect of discounting to net present value(37,031)
Present value of lease liabilities $37,520 
Operating lease liabilities, current2,366 
Operating lease liabilities, non-current35,154 
Total operating lease liabilities$37,520 
22



XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Note 15. Commitments and contingencies
Commitments
Commitments to Taro
The Company has a supply agreement with Taro Pharmaceuticals North America, Inc. ("Taro") to produce Keveyis. In 2023, the Company amended the agreement to extend the initial term until March 2027. As part of the agreement, as amended, the Company has agreed to certain annual minimum marketing spend requirements and minimum purchase order quantities for each year, which in the case of the minimum purchase order quantities, is based on the previous year's purchases.
Leases
As of September 30, 2023, the Company had unused letters of credit of $4.4 million, which were issued primarily to secure leases. These letters of credit are collateralized by $4.4 million of restricted cash, which is recorded in other assets in the condensed consolidated balance sheets.
Contingencies
Litigation
From time to time, the Company may become involved in various legal actions arising in the ordinary course of business. As of September 30, 2023, management was not aware of any existing, pending or threatened legal actions that would have a material impact on the financial position or results of operations of the Company.
Long Term Debt
In the event the 2025 Convertible Notes are still outstanding as of January 15, 2025 and the maturity date thereof has not been extended to a date on or after September 4, 2027, then unless the Company has received net cash proceeds from one or more permitted equity raises or permitted raises of convertible debt which, together with no more than $15.6 million of cash on hand, is sufficient to redeem and discharge the 2025 Convertible Notes in full, the loans outstanding under the Hayfin Loan Agreement will mature on January 15, 2025.
Note 16. Net loss per common share
Basic and diluted net loss per common share are determined by dividing net loss applicable to common stockholders by the weighted average common shares outstanding during the period. For all periods presented, the shares issuable upon conversion, exercise or vesting of Convertible Notes, warrants, stock option awards and RSUs have been excluded from the calculation because their effects would be anti-dilutive. Therefore, the weighted average common shares outstanding used to calculate both basic and diluted net loss per common share are the same.
The following potentially dilutive securities were excluded from the computation of diluted weighted average common shares outstanding due to their anti-dilutive effect:
As of September 30,
20232022
Shares to be issued upon conversion of Convertible Notes15,939,216 15,416,667 
Vested and unvested stock options
9,247,564 9,818,748 
Restricted stock units
10,428,975 5,228,961 
Warrants
8,362,270 8,362,270 
Total anti-dilutive securities excluded from EPS computation 1
43,978,025 38,826,646 
1 Total anti-dilutive securities exclude CVRs which are settleable in cash, additional Xeris Biopharma shares, or a combination, at the election of the Company.
23


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cautionary statements for forward-looking information
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and notes to those financial statements appearing elsewhere in this Quarterly Report on Form 10-Q and with the audited financial statements and the notes to those financial statements included in the Annual Report on Form 10-K filed on March 8, 2023 with the U.S. Securities and Exchange Commission. In addition to financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. All statements in this document other than statements of historical fact are, or could be, "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "will," "would," "may," "should," "expects," "focus," "goal," "intends," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue," and terms of similar meaning are also generally intended to identify forward-looking statements. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including without limitation, the regulatory approval of our product candidates, our ability to market and sell our products and product candidates if approved, and factors discussed in Item 1A of Part II of this Quarterly Report on Form 10-Q. Any forward-looking statements contained herein speak only as of the date hereof, and Xeris expressly disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
Overview
Unless otherwise indicated, references to "Xeris," the "Company," "we," "our" and "us" in this Quarterly Report on Form 10-Q refer to Xeris Biopharma Holdings, Inc. Throughout this document, unless otherwise noted, references to Gvoke include Gvoke PFS, Gvoke HypoPen, Gvoke Kit and Ogluo (glucagon).
We are focused on building an innovative, self-sustaining, growth-oriented biopharmaceutical company committed to improving patients’ lives by developing and commercializing clinically meaningful products across a range of therapies. We are uniquely positioned to achieve this through our three commercial products and our proprietary formulation science (XeriSol and XeriJect), which generates partnerships and enhances our product candidates.
Commercial Products
Our top priority is maximizing the potential of our three commercial products:
Gvoke is a ready-to-use, liquid-stable glucagon for the treatment of severe hypoglycemia. The product is indicated for use in pediatric and adult patients with diabetes age 2 years and above and can be administered in 2 simple steps. The estimated total addressable market for this drug is approximately $5.0 billion in the United States.
Keveyis is the first therapy approved in the United States to treat hyperkalemic, hypokalemic, and related variants of Primary Periodic Paralysis ("PPP"). PPP is a rare genetic, neuromuscular disorder that can cause extreme muscle weakness and/or paralysis; some forms are also commonly associated with myotonia or muscle stiffness. The estimated total addressable market for this therapy is greater than $0.5 billion in the United States.
Recorlev is a cortisol synthesis inhibitor approved for the treatment of endogenous hypercortisolemia in adult patients with Cushing’s syndrome for whom surgery is not an option or has not been curative. Endogenous Cushing’s syndrome is a rare but serious and potentially fatal endocrine disease caused by chronic elevated cortisol exposure. The estimated total addressable market for this therapy is approximately $3.0 billion in the United States.
Our proprietary formulation capabilities
Our company name, Xeris, is derived from the ancient Greek word xērós meaning 'dry' or 'without water/non-aqueous'. Our proprietary, non-aqueous formulation capabilities are designed to enable the convenient injection of medicines previously uninjectable or poorly injectable when utilizing aqueous approaches. Both XeriSol and XeriJect offer the opportunity to create ready-to-use, room-temperature stable, highly concentrated, injectable formulations of both small and large molecules. These proprietary formulation capabilities can enable subcutaneous (SC) or intramuscular (IM) administration in lieu of intravenous (IV) infusion, allow for convenient, cost-effective storage, and provide an improved patient, caregiver, and healthcare provider experience. XeriSol and XeriJect have broad applications and enable us to develop our own internal product development candidates in endocrinology, neurology and other therapeutic areas. They also enable us to pursue formulation and development partnerships pursuant to which our proprietary formulation science is applied with the goal of enhancing the product formulation, delivery and clinical profile of other companies’ proprietary drugs and biologics.
Patents
We currently own 174 patents issued globally, including a composition of matter patent covering our ready-to-use glucagon formulation that expires in 2036. Included in the total patents, we have 60 granted patents globally related to our platform technologies and 7 patents granted in the United States and listed in the United States FDA Orange Book covering proprietary formulations of levoketoconazole (the active pharmaceutical ingredient in Recorlev) and the uses of such formulations in treating certain endocrine-related diseases and syndromes. The latter includes United States Patent Nos. 11,020,393 and 11,278,547, which were granted on June
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1, 2021 and March 22, 2022, respectively, and which provide patent protection through 2040 for the use of Recorlev in the treatment of certain patients with persistent or recurrent Cushing’s syndrome.
Financing
We have funded our operations to date primarily with proceeds from the sale of our preferred and common stock and debt financing. We have received gross proceeds of $253.0 million from public equity offerings of our common stock (including Xeris Pharma’s June 2018 initial public offering ("IPO") and our February 2019, February 2020, June 2020 and March 2021 offerings), $30.0 million from a private placement of our common stock in January 2022, $104.9 million from sales of our preferred stock, $86.3 million from our June 2020 Convertible Notes offering, $63.5 million from the Amended and Restated Loan and Security Agreement (as amended, the "Oxford Loan Agreement") with Oxford Finance LLC and Silicon Valley Bank, $150.0 million from the Hayfin Loan Agreement in 2022, which was fully drawn down and was used in part to repay the remaining balance of $43.5 million of the Oxford Loan Agreement in March 2022, and an exchange of $32.0 million of the 2025 Convertible Notes for $33.6 million of 2028 Convertible Notes. In addition, we filed a shelf registration statement on Form S-3 with the SEC in August 2019, which covered the offering, issuance and sale by us of up to an aggregate of $250.0 million of our common stock, preferred stock, debt securities, warrants and/or units. We simultaneously entered into a Sales Agreement with Jefferies LLC, as sales agent, to provide for the offering, issuance and sale by us of up to $50.0 million of our common stock from time to time in "at-the-market" offerings under the shelf. We sold an aggregate of 204,427 shares of common stock in at-the-market offerings under the shelf for gross proceeds of $1.8 million.
For the nine months ended September 30, 2023 and September 30, 2022, we reported net losses of $48.9 million and $81.7 million, respectively. We have not been profitable since inception, and, as of September 30, 2023, our accumulated deficit was $603.6 million. In the near term, we expect to continue to incur significant expenses, operating losses and net losses as we:
<continue our marketing and selling efforts related to commercialization of Gvoke, Keveyis and Recorlev;
<continue our research and development efforts;
<continue to operate as a public company; and
<continue to fund our operations with an increased cost of borrowing due to a higher interest rate environment and tighter lending requirements.
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We may continue to seek public equity and debt financing to meet our capital requirements. There can be no assurance that such funding may be available to us on acceptable terms, or at all, or that we will be able to commercialize our product candidates, if approved. In addition, we may not be profitable even if we commercialize any of our product candidates.
Outlook and strategies
Our goal is to build an innovative, self-sustaining, growth-oriented biopharmaceutical company committed to improving patients’ lives by developing and commercializing clinically meaningful products across a range of therapies. To achieve our goal, we are pursuing the following strategies:
<
Drive growth through effective commercial execution of our innovative products. We have three innovative commercial products (Gvoke, Keveyis, and Recorlev) all of which fill unique, unmet needs. Additionally, Gvoke and Recorlev are in the very early stages of their product lifecycles and both leverage our experienced and growing leadership presence in the endocrinology community. We are focused on executing against the opportunities made possible by Gvoke, Recorlev, and Keveyis in order to maintain our momentum of growth and enable the financial self-sufficiency of our Company.
<
Continue to leverage our proprietary formulation science and expertise to develop our internal new product candidates. We have established a proven capability to bring new and innovative products through the development and regulatory process to successful commercialization. XeriSol and XeriJect have broad application and have the potential to be utilized across a range of potential product candidates in multiple therapeutic areas. Our immediate focus is on developing XP-8121, a once weekly subcutaneous injection of levothyroxine, and eventually generating significant benefits for patients and value for our company.
<
Collaborate with pharmaceutical and biotechnology companies to apply our formulation science to enhance the formulations of their proprietary products and candidates. We are pursuing formulation and development partnerships to apply our XeriSol and XeriJect formulation platforms to enhance the drug delivery and clinical profile of other companies’ proprietary drugs and biologics. We currently are collaborating with several major pharmaceutical companies on the development of formulations of their proprietary therapeutics with XeriSol or XeriJect. Our strategic goal is to ultimately enter into commercial licensing agreements with these partners upon successful completion of formulation development.
We believe these three distinct pillars of our strategy can bring new products to market and transform the lives of patients with life-impacting diseases and ultimately drive value for Xeris’ shareholders. Pursuing these strategies provides Xeris with a range of value driving opportunities that are incremental to the value already realized by the Xeris enterprise.
Development of product candidates
Once Weekly Subcutaneous Injection of Levothyroxine (XP-8121)
We conducted a Phase 1 clinical study with product candidate Levothyroxine XP-8121, an early-stage program designed to address maintenance therapy in patients with congenital or acquired hypothyroidism who require continuous thyroid hormone replacement. We commenced a Phase 2 dose-finding study of XP-8121 in April 2023. The study is designed to assess XP-8121 in patients receiving oral thyroid replacement therapy to establish the average once-weekly dose, accrue chronic safety data, and facilitate a future Phase 3 program in consultation with the FDA.
Levothyroxine and Hypothyroidism
The thyroid gland is responsible for the synthesis, storage, and release of metabolic hormones including thyroxine (T4) and triiodothyronine (T3). These hormones are crucial in the regulation of critical metabolic processes and are vital for normal growth and development during fetal life, infancy, and childhood.
Therapeutically, levothyroxine is administered as a replacement for deficient thyroid hormones. The goal of the therapy is restoration of the euthyroid state which can reverse the clinical manifestations of hypothyroidism and significantly improve quality of life. The treatment of choice for correction of hypothyroidism is currently continuous daily oral administration of levothyroxine. It is one of the most widely prescribed drug products in the United States, but the complexity of maintaining biochemical and clinical euthyroidism in patients undergoing treatment with oral levothyroxine is challenging. It has been reported that nearly 40% of patients undergoing treatment with oral levothyroxine are either over- or under-treated due to factors that include, but are not limited to, drug formulation, use of the drug with food, adherence to the drug, use of concomitant medications, and pre-existing medical conditions. Many patients failing to reach target thyroid stimulating hormone ("TSH") levels are managed by simply increasing their levothyroxine daily dose. However, levothyroxine is a drug with a narrow therapeutic index, meaning that relatively small deviations from the proper dose can cause a clinically meaningful shift in pharmacological effects when administered to a patient; thus, the titration of levothyroxine oral drug may be a tailored and incremental process.
XP-8121 Overview
XP-8121 is a novel formulation for subcutaneous administration that could potentially mitigate many of the challenges associated with oral formulations, such as identification of an ideal dose due to absorption variation and medication adherence for patients who have difficulty maintaining a stable, therapeutic serum level. Preclinical studies of XP-8121 showed a sustained plasma exposure profile and similar highest concentration of a drug in the blood, or Cmax, when compared with equivalent doses of the oral formulation. We
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conducted a Phase 1 study of XP-8121 to evaluate the pharmacokinetics, safety and tolerability, and potential for weekly dosing in the treatment of hypothyroidism.
The Phase 1 clinical study was a single ascending dose crossover design in 30 healthy participants to compare matching doses of oral levothyroxine (Synthroid) and subcutaneous XP-8121. The primary endpoints of the study were to characterize the absorption and elimination kinetics of XP-8121 and compare bioavailability of XP-8121 to oral levothyroxine. Secondary endpoints were safety and tolerability of XP-8121.
In October 2022, we reported positive topline Phase 1 data of XP-8121. The data showed that subjects receiving XP-8121 subcutaneous had slower absorption, lower peak plasma, and higher extended exposure compared to Synthroid PO at the comparable dose of 600 μg. In addition, exposure was proportional over the range of ascending XP-8121 doses studied. Simulations based on a population pharmacokinetic model indicated that exposure from weekly XP-8121 1200 μg SC doses overlapped daily Synthroid PO 300 μg suggesting a dose conversion factor of 4x. Importantly, single SC doses of XP-8121 at all doses were well-tolerated and the XP-8121 doses studied were generally comparable to Synthroid 600 μg PO with respect to the safety findings. In June 2023, we initiated a non-randomized, open-label, single arm, self-controlled Phase 2 study to determine a target dose conversion factor from stably dosed oral levothyroxine to XP-8121 in patients with hypothyroidism and also assess the safety and tolerability after once-weekly subcutaneous injections.
Components of our Results of Operations
The following discussion sets forth certain components of the statement of operations of Xeris for the three and nine months ended September 30, 2023 and 2022 as well as factors that impact those items.
Product revenue, net
Product revenue, net, represents gross product sales less estimated allowances for patient copay assistance programs, prompt payment discounts, payor rebates, chargebacks, service fees, and product returns, all of which are recorded at the time of sale to the pharmaceutical wholesaler or other customer. We apply significant judgment and estimates in determining some of these allowances. If actual results differ from our estimates, we make adjustments to these allowances in the period in which the actual results or updates to estimates become known.
Royalty, contract and other revenue
Royalty and contract revenue is recognized as earned in accordance with contract terms when it can be reasonably estimated and collectability is reasonably assured.
Cost of goods sold
Cost of goods sold primarily includes product costs, which include all costs directly related to the purchase of raw materials, charges from our contract manufacturing organizations, and manufacturing overhead costs, as well as shipping and distribution charges. Cost of goods sold also includes losses from excess, slow-moving or obsolete inventory and inventory purchase commitments, if any. Manufacturing costs for Gvoke and Recorlev incurred prior to approval and initial commercialization were expensed as research and development expenses.
Research and development expenses
Research and development expenses consist of expenses incurred in connection with the discovery and development of our product candidates. We recognize research and development expenses as incurred. Research and development expenses that are paid in
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advance of performance are capitalized until services are provided or goods are delivered. Research and development expenses include:
<
the cost of acquiring and manufacturing preclinical study and clinical trial materials and manufacturing costs related to commercial production and scale-up until a product is approved and initially available for commercial sale;
<expenses incurred under agreements with contract research organizations ("CROs") as well as investigative sites and consultants that conduct our preclinical studies and clinical trials;
<personnel-related expenses, which include salaries, benefits and stock-based compensation;
<laboratory materials and supplies used to support our research activities;
<outsourced product development services;
<expenses relating to regulatory activities, including filing fees paid to regulatory agencies; and
<allocated expenses for facility-related costs.
Research and development activities are central to our business model. We expect to continue to incur significant research and development expenses as we advance our pipeline candidates and in particular plan and conduct clinical trials, prepare regulatory filings for our product candidates, and utilize internal resources to support these efforts. Our research and development costs have declined as compared to previous levels as a result of directing significant funding to our commercial activities.
Our research and development expenses may vary significantly over time due to uncertainties relating to the timing and results of our clinical trials, feedback received from interactions with the FDA and the timing of regulatory approvals.
Selling, general and administrative expenses
Selling, general and administrative expenses consist primarily of compensation and related personnel costs, marketing and selling expenses, professional fees and facility costs not otherwise included in research and development expenses.
Amortization of intangible assets
Amortization of intangible assets relates to the amortization of our products: Keveyis and Recorlev. These two intangible assets are being amortized over a five-year and fourteen-year period, respectively, using the straight-line method.
Other income (expense)
Other income (expense) consists primarily of interest expense related to our convertible debt, Hayfin Loan Agreement, Oxford Loan Agreement, interest income earned on deposits and investments, gains and losses on extinguishment of debt and lease remeasurement, and the change in fair value of our warrants and CVRs.
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Results of Operations
The following table summarizes our results of operations for the three and nine months ended September 30, 2023 and 2022 (in thousands):
 Three Months Ended September 30,ChangeNine Months Ended September 30,Change
20232022$%20232022$%
Product revenue:
Gvoke
$17,735 $13,663 $4,072 29.8 $48,406 $37,595 $10,811 28.8 
Keveyis
15,865 13,371 2,494 18.7 42,708 35,506 7,202 20.3 
Recorlev8,097 2,520 5,577 nm19,741 3,623 16,118 nm
Product revenue, net41,697 29,554 12,143 41.1 110,855 76,724 34,131 44.5 
Royalty, contract and other revenue6,623 171 6,452 nm8,669 380 8,289 nm
Total revenue48,320 29,725 18,595 62.6 119,524 77,104 42,420 55.0 
Cost and expenses:
Cost of goods sold, excluding amortization of intangible assets8,201 5,260 2,941 55.9 21,075 16,343 4,732 29.0 
Research and development5,034 6,043 (1,009)(16.7)15,959 16,011 (52)(0.3)
Selling, general and administrative37,287 34,491 2,796 8.1 108,527 103,388 5,139 5.0 
Amortization of intangible assets2,711 2,711 — — 8,132 8,132 — — 
Total cost and expenses53,233 48,505 4,728 9.7 153,693 143,874 9,819 6.8 
Loss from operations(4,913)(18,780)13,867 (73.8)(34,169)(66,770)32,601 (48.8)
Other income (expense):
Interest and other income1,121 472 649 nm3,644 735 2,909 nm
Loss on debt extinguishment(2,837)— (2,837)nm(2,837)(1,223)(1,614)132.0 
Interest expense(6,847)(3,989)(2,858)71.6 (19,591)(9,735)(9,856)101.2 
Change in fair value of warrants17 88.9 1,746 (1,743)nm
Change in fair value of contingent considerations932 118 814 nm3,072 (7,569)10,641 nm
Total other expense (7,614)(3,390)(4,224)124.6 (15,709)(16,046)337 (2.1)
Net loss before benefit from income taxes(12,527)(22,170)9,643 (43.5)(49,878)(82,816)32,938 (39.8)
Benefit from income taxes338 339 (1)(0.3)1,013 1,086 (73)(6.7)
          Net loss$(12,189)$(21,831)$9,642 (44.2)$(48,865)$