xers-20220331
00018670962022Q1FALSE12/31P3DP3DP7YP2YP3YP4YP7YP10YOther employee benefit plans
Defined Contribution Plan
The Company sponsors an employee retirement plan qualifying under Section 401(k) of the Internal Revenue Code for all eligible employees in the United States. Employees become eligible to contribute to the plan upon meeting certain age requirements and 30 days of service. Commencing in 2019, the Company began discretionary matching employee contributions up to certain limits. For the years ended March 31, 2022 and 2021, the Company made $0.7 million and $0.6 million of matching contributions to the plan, respectively.
Deferred Compensation Plan
The Compensation Committee of the Board of Directors adopted a deferred compensation plan ("Deferred Compensation Plan") in April 2020. The Deferred Compensation Plan allows a select group of executive management and non-employee directors to defer payment of certain of their cash compensation. Participants in the Deferred Compensation Plan who are employees may defer all or a portion of their annual base salaries and all or a portion of their annual cash performance-based compensation. Participants who are non-employee directors may defer all or a portion of their annual cash retainers. The participants’ elective deferrals are 100% vested immediately and accrue interest at a rate of two percent per annum. The Deferred Compensation Plan is unfunded and unsecured. As of March 31, 2022, the total deferred compensation liability under the Deferred Compensation Plan was approximately $1.6 million and was recorded in other current liabilities in the consolidated balance sheets.
0.70.6100two1.6
00018670962022-01-012022-03-3100018670962022-04-30xbrli:shares00018670962022-03-31iso4217:USD00018670962021-12-31iso4217:USDxbrli:shares00018670962021-01-012021-03-310001867096us-gaap:CommonStockMember2020-12-310001867096us-gaap:AdditionalPaidInCapitalMember2020-12-310001867096us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310001867096us-gaap:RetainedEarningsMember2020-12-3100018670962020-12-310001867096us-gaap:RetainedEarningsMember2021-01-012021-03-310001867096us-gaap:CommonStockMember2021-01-012021-03-310001867096us-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-310001867096us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-03-310001867096us-gaap:CommonStockMember2021-03-310001867096us-gaap:AdditionalPaidInCapitalMember2021-03-310001867096us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-310001867096us-gaap:RetainedEarningsMember2021-03-3100018670962021-03-310001867096us-gaap:CommonStockMember2021-12-310001867096us-gaap:AdditionalPaidInCapitalMember2021-12-310001867096us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310001867096us-gaap:RetainedEarningsMember2021-12-310001867096us-gaap:RetainedEarningsMember2022-01-012022-03-310001867096xers:StrongbridgeMember2022-01-012022-03-310001867096us-gaap:CommonStockMember2022-01-012022-03-310001867096us-gaap:AdditionalPaidInCapitalMember2022-01-012022-03-310001867096us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-03-310001867096us-gaap:CommonStockMember2022-03-310001867096us-gaap:AdditionalPaidInCapitalMember2022-03-310001867096us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-03-310001867096us-gaap:RetainedEarningsMember2022-03-310001867096xers:StrongbridgeMember2021-10-052021-10-050001867096us-gaap:WarrantMemberxers:StrongbridgeMember2021-10-050001867096us-gaap:WarrantMember2021-10-052021-10-050001867096us-gaap:WarrantMemberxers:StrongbridgeMember2021-10-052021-10-050001867096us-gaap:MeasurementInputPriceVolatilityMemberus-gaap:WarrantMemberxers:StrongbridgeMember2021-10-05xbrli:pure0001867096xers:StrongbridgeMember2021-10-050001867096xers:StrongbridgeMemberxers:AchievementInNetSalesOfKeveyisIn2023Member2021-10-050001867096xers:StrongbridgeMemberxers:AchievementInNetSalesOfKeveyisIn2023Member2021-10-052021-10-050001867096xers:AchievementInNetSalesOfRecorlevIn2023Memberxers:StrongbridgeMember2021-10-050001867096xers:AchievementInNetSalesOfRecorlevIn2023Memberxers:StrongbridgeMember2021-10-052021-10-050001867096xers:AchievementInNetSalesOfRecorlevIn2024Memberxers:StrongbridgeMember2021-10-050001867096xers:AchievementInNetSalesOfRecorlevIn2024Memberxers:StrongbridgeMember2021-10-052021-10-05xers:contingentValueRight0001867096us-gaap:SellingGeneralAndAdministrativeExpensesMemberxers:StrongbridgeMember2021-07-012022-03-310001867096xers:StrongbridgeMember2021-01-012021-03-310001867096us-gaap:CommercialPaperMember2022-03-310001867096us-gaap:CorporateDebtSecuritiesMember2022-03-310001867096us-gaap:ForeignGovernmentDebtMember2022-03-310001867096us-gaap:CommercialPaperMember2021-12-310001867096us-gaap:CorporateDebtSecuritiesMember2021-12-310001867096us-gaap:USTreasuryAndGovernmentMember2021-12-310001867096us-gaap:MachineryAndEquipmentMember2022-03-310001867096us-gaap:MachineryAndEquipmentMember2021-12-310001867096us-gaap:FurnitureAndFixturesMember2022-03-310001867096us-gaap:FurnitureAndFixturesMember2021-12-310001867096us-gaap:ComputerEquipmentMember2022-03-310001867096us-gaap:ComputerEquipmentMember2021-12-310001867096us-gaap:OfficeEquipmentMember2022-03-310001867096us-gaap:OfficeEquipmentMember2021-12-310001867096xers:SoftwareDomain2022-03-310001867096xers:SoftwareDomain2021-12-310001867096us-gaap:LeaseholdImprovementsMember2022-03-310001867096us-gaap:LeaseholdImprovementsMember2021-12-310001867096us-gaap:DevelopedTechnologyRightsMember2022-01-012022-03-310001867096us-gaap:DevelopedTechnologyRightsMember2022-03-310001867096us-gaap:InProcessResearchAndDevelopmentMember2022-01-012022-03-310001867096us-gaap:InProcessResearchAndDevelopmentMember2022-03-310001867096xers:A2021RestructuringPlanMember2022-03-310001867096us-gaap:EmployeeSeveranceMemberxers:A2021RestructuringPlanMember2022-01-012022-03-310001867096us-gaap:EmployeeSeveranceMember2021-12-310001867096us-gaap:EmployeeSeveranceMember2022-01-012022-03-310001867096us-gaap:EmployeeSeveranceMember2022-03-310001867096xers:ConvertibleNotesMember2020-07-0700018670962020-07-070001867096xers:TermALoanMember2020-04-012020-06-300001867096xers:PPPLoanMember2020-04-012020-06-300001867096xers:ConvertibleNotesMember2022-03-310001867096xers:ConvertibleNotesMember2022-01-012022-03-3100018670962020-07-012020-12-310001867096xers:ConvertibleNotesMember2020-07-012020-12-3100018670962020-10-012020-12-310001867096xers:A2018LoanandSecurityAgreementMember2018-03-310001867096xers:A2018TermALoanMember2018-03-310001867096xers:A2018TermBLoanMember2018-09-300001867096xers:AmendedLoanandSecurityAgreementMember2019-09-300001867096xers:TermALoanMember2019-09-300001867096xers:TermBLoanMember2019-09-300001867096xers:TermCLoanMember2019-09-300001867096xers:A2018TermABLoansMember2020-07-012020-09-300001867096xers:PPPLoanMember2020-04-210001867096xers:TermALoanMember2020-01-012020-06-300001867096xers:ChicagoFultonMarketMember2022-03-310001867096xers:TermDLoanMember2020-10-230001867096xers:TermALoanMember2022-03-310001867096xers:TermALoanMember2022-01-012022-03-310001867096us-gaap:SecuredDebtMember2022-03-310001867096xers:DelayedDrawTermLoanMember2022-03-310001867096xers:HayfinLoanMember2022-03-310001867096xers:HayfinLoanMember2022-03-012022-03-310001867096xers:HayfinLoanMemberus-gaap:PrimeRateMember2022-03-012022-03-310001867096xers:WarrantsInConnectionWithHayfinLoanAgreementDueMarch2029Member2022-03-310001867096us-gaap:SeniorLoansMember2022-03-310001867096us-gaap:SeniorLoansMember2021-12-310001867096xers:ConvertibleNotesMember2021-12-310001867096us-gaap:DebtMember2022-01-012022-03-310001867096us-gaap:DebtMember2021-01-012021-03-310001867096xers:WarrantsInConnectionWithArmisticeSecuritiesPurchaseAgreementMember2022-03-310001867096xers:AssumedStrongbridgePrivatePlacementWarrantsMember2022-03-310001867096xers:A2018TermAWarrantsMember2022-03-310001867096xers:A2018TermBWarrantsMember2022-03-310001867096xers:WarrantsInConnectionWithCRGLoanAgreementMember2022-03-310001867096xers:WarrantsInConnectionWithCRGLoanAmendmentDatedJanuary2028Member2022-03-310001867096xers:WarrantsInConnectionWithAvenueCapitalLoanAgreementDueMay2025Member2022-03-310001867096xers:WarrantsInConnectionWithAvenueCapitalLoanAgreementDueDecember2025Member2022-03-310001867096xers:WarrantsInConnectionWithHorizonAndOxfordLoanAgreementMember2022-03-310001867096xers:TotalWarrantsAssumedMember2022-03-310001867096xers:A2014WarrantsMember2022-01-012022-03-310001867096xers:A2018TermAWarrantsMember2022-01-012022-03-310001867096xers:A2018TermBWarrantsMember2022-01-012022-03-310001867096xers:A2018TermAWarrantsMember2021-01-012021-03-310001867096xers:A2018TermBWarrantsMember2021-01-012021-03-310001867096us-gaap:FairValueInputsLevel1Member2022-03-310001867096us-gaap:FairValueInputsLevel2Member2022-03-310001867096us-gaap:FairValueInputsLevel3Member2022-03-310001867096us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel1Member2022-03-310001867096us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Member2022-03-310001867096us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel3Member2022-03-310001867096us-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel1Member2022-03-310001867096us-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel2Member2022-03-310001867096us-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel3Member2022-03-310001867096xers:ForeignGovernmentInvestmentsMember2022-03-310001867096xers:ForeignGovernmentInvestmentsMemberus-gaap:FairValueInputsLevel1Member2022-03-310001867096xers:ForeignGovernmentInvestmentsMemberus-gaap:FairValueInputsLevel2Member2022-03-310001867096xers:ForeignGovernmentInvestmentsMemberus-gaap:FairValueInputsLevel3Member2022-03-310001867096us-gaap:FairValueInputsLevel1Member2021-12-310001867096us-gaap:FairValueInputsLevel2Member2021-12-310001867096us-gaap:FairValueInputsLevel3Member2021-12-310001867096us-gaap:FairValueInputsLevel1Memberus-gaap:USTreasuryAndGovernmentMember2021-12-310001867096us-gaap:USTreasuryAndGovernmentMemberus-gaap:FairValueInputsLevel2Member2021-12-310001867096us-gaap:USTreasuryAndGovernmentMemberus-gaap:FairValueInputsLevel3Member2021-12-310001867096us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel1Member2021-12-310001867096us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Member2021-12-310001867096us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel3Member2021-12-310001867096us-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel1Member2021-12-310001867096us-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel2Member2021-12-310001867096us-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel3Member2021-12-310001867096xers:ForeignGovernmentInvestmentsMember2021-12-310001867096xers:ForeignGovernmentInvestmentsMemberus-gaap:FairValueInputsLevel1Member2021-12-310001867096xers:ForeignGovernmentInvestmentsMemberus-gaap:FairValueInputsLevel2Member2021-12-310001867096xers:ForeignGovernmentInvestmentsMemberus-gaap:FairValueInputsLevel3Member2021-12-310001867096xers:StonebridgeMember2021-10-052021-10-0500018670962021-10-052021-10-0500018670962022-01-2800018670962021-03-170001867096us-gaap:PrivatePlacementMember2022-01-032022-01-030001867096us-gaap:CommonStockMemberus-gaap:PrivatePlacementMember2022-01-032022-01-030001867096us-gaap:CommonStockMemberus-gaap:PrivatePlacementMember2022-01-030001867096us-gaap:PrivatePlacementMemberus-gaap:WarrantMember2022-01-032022-01-030001867096us-gaap:PrivatePlacementMemberus-gaap:WarrantMember2022-01-0300018670962011-12-3100018670962018-06-300001867096xers:A2018StockOptionandIncentivePlanMember2022-01-012022-03-310001867096xers:A2018StockOptionandIncentivePlanMember2021-01-012021-03-310001867096xers:A2018StockOptionandIncentivePlanMember2022-03-310001867096us-gaap:EmployeeStockMember2018-06-300001867096us-gaap:EmployeeStockMember2022-01-012022-03-310001867096us-gaap:EmployeeStockMember2021-01-012021-03-310001867096us-gaap:EmployeeStockMember2022-03-310001867096xers:EquityInducementPlanMember2019-03-310001867096xers:EquityInducementPlanMember2022-03-3100018670962020-12-102020-12-100001867096srt:MinimumMemberxers:ExchangeOfferMember2022-01-012022-03-310001867096xers:AssumedPlansMember2022-03-310001867096srt:MinimumMemberus-gaap:ShareBasedCompensationAwardTrancheOneMemberus-gaap:EmployeeStockOptionMember2022-01-012022-03-310001867096srt:MinimumMemberus-gaap:EmployeeStockOptionMemberus-gaap:ShareBasedCompensationAwardTrancheTwoMember2022-01-012022-03-310001867096us-gaap:ShareBasedCompensationAwardTrancheThreeMembersrt:MinimumMemberus-gaap:EmployeeStockOptionMember2022-01-012022-03-310001867096srt:MaximumMemberxers:ExchangeOfferMember2022-01-012022-03-310001867096us-gaap:EmployeeStockOptionMember2022-03-310001867096us-gaap:EmployeeStockOptionMember2022-01-012022-03-310001867096us-gaap:RestrictedStockUnitsRSUMember2021-12-310001867096us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-03-310001867096us-gaap:RestrictedStockUnitsRSUMember2022-03-310001867096us-gaap:CostOfSalesMember2022-01-012022-03-310001867096us-gaap:CostOfSalesMember2021-01-012021-03-310001867096us-gaap:ResearchAndDevelopmentExpenseMember2022-01-012022-03-310001867096us-gaap:ResearchAndDevelopmentExpenseMember2021-01-012021-03-310001867096us-gaap:SellingGeneralAndAdministrativeExpensesMember2022-01-012022-03-310001867096us-gaap:SellingGeneralAndAdministrativeExpensesMember2021-01-012021-03-310001867096srt:ScenarioForecastMemberus-gaap:PurchaseCommitmentMember2017-04-012023-03-310001867096us-gaap:PurchaseCommitmentMember2022-03-310001867096us-gaap:ConvertibleDebtSecuritiesMember2022-01-012022-03-310001867096us-gaap:ConvertibleDebtSecuritiesMember2021-01-012021-03-310001867096us-gaap:StockOptionMember2022-01-012022-03-310001867096us-gaap:StockOptionMember2021-01-012021-03-310001867096us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-03-310001867096us-gaap:RestrictedStockUnitsRSUMember2021-01-012021-03-310001867096us-gaap:WarrantMember2022-01-012022-03-310001867096us-gaap:WarrantMember2021-01-012021-03-31

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 March 31, 2022
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.)
180 N. LaSalle Street, Suite 1600
Chicago, Illinois
60601
(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 April 30, 2022, 135,530,756 shares, par value $0.0001 per share, of common stock were outstanding.



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:
<
Our business may be adversely affected by the ongoing coronavirus pandemic.
<As a company, we have a limited operating history and limited experience commercializing pharmaceutical products and have incurred significant losses since inception. We expect to incur losses over the next few years and may not be able to achieve or sustain revenues or profitability in the future.
<
Although we generate revenue from Gvoke, Keveyis, Recorlev and Ogluo, we have not yet generated revenue from any of our current or future product candidates, and may never be profitable.
<
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 would 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.
<
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, and a limited number of options for alternate sources for Gvoke, Keveyis, and Recorlev or our product candidates could harm our ability to develop our product candidates or 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 more generally 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 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.
<
We operate in a competitive business environment and, 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.
<
Our success depends on our ability to protect our intellectual property and proprietary technology, as well as the ability of our collaborators to protect their intellectual property and proprietary technology.
<
We may not be able to successfully integrate and combine the businesses of Xeris and Strongbridge following the completion of the Transactions and we may not realize the anticipated benefits from the Transactions.
<
Our stock price has been and will likely continue to be volatile, and you may not be able to resell shares of our common stock at or above the price you paid.
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 U.S. 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.

2


XERIS BIOPHARMA HOLDINGS, INC.

Index to Quarterly Report on Form 10-Q
Three Months Ended March 31, 2022
Page
Part I. Financial Information
Item 1. Financial Statements
Part II. Other Information
Signatures
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.
3


PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
XERIS BIOPHARMA HOLDINGS, INC.
Condensed Consolidated Balance Sheets
(in thousands, except share and par value)
March 31, 2022December 31, 2021
Assets(unaudited)
Current assets:
Cash and cash equivalents$103,771$67,271
Short-term investments28,37735,162
Trade accounts receivable, net23,38317,456
Inventory16,87218,118
Prepaid expenses and other current assets5,1474,589
Total current assets177,550142,596
Property and equipment, net6,2916,627
Goodwill22,85922,859
Intangible assets, net128,739131,450
Other assets2,184829
Total assets$337,623$304,361
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$11,091$8,924
Other accrued liabilities34,35849,088
Accrued trade discounts and rebates14,99315,041
Accrued returns reserve5,4314,000
Other current liabilities6191,987
Total current liabilities66,49279,040
Long-term debt, net of unamortized debt issuance costs137,63988,067
Contingent value rights25,34722,531
Supply agreement liability, less current portion5,991
Deferred rent6,9426,883
Deferred tax liabilities4,5344,942
Other liabilities2141,676
Total liabilities241,168209,130
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 March 31, 2022 and December 31, 2021, respectively
Common stock—par value $0.0001, 350,000,000 shares and 350,000,000 shares authorized as of March 31, 2022 and December 31, 2021, respectively; 135,528,195 and 124,873,316 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively
1413
Additional paid in capital 590,331555,359
Accumulated deficit (493,824)(460,110)
Accumulated other comprehensive loss(66)(31)
Total stockholders’ equity96,45595,231
Total liabilities and stockholders’ equity$337,623$304,361
See accompanying notes to condensed consolidated financial statements.
4


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

Three Months Ended March 31,
20222021
Product revenue, net$21,910 $8,051 
Royalty, contract and other revenue163 144 
Total revenue22,073 8,195 
Costs and expenses:
Cost of goods sold, excluding amortization of intangible assets6,273 1,826 
   Research and development6,250 4,032 
   Selling, general and administrative35,913 19,077 
   Amortization of intangible assets 2,711  
      Total costs and expenses51,147 24,935 
Loss from operations (29,074)(16,740)
Other income (expense):
   Interest and other income 68 100 
   Interest expense (3,521)(1,791)
   Change in fair value of warrants 1,221 20 
   Change in fair value of contingent value rights (2,816) 
      Total other expense (5,048)(1,671)
      Net loss before benefit from income taxes(34,122)(18,411)
Benefit from income taxes408  
      Net loss$(33,714)$(18,411)
Other comprehensive loss, net of tax:
   Unrealized (losses) on investments(35)(17)
   Foreign currency translation adjustments 1 
      Comprehensive loss $(33,749)$(18,427)
Net loss per common share - basic and diluted$(0.25)$(0.30)
Weighted average common shares outstanding - basic and diluted 135,032,782 61,245,220 
See accompanying notes to condensed consolidated financial statements.


5


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

 Common StockAdditional Paid In
Capital
Accumulated Other Comprehensive
Income (Loss)
Accumulated DeficitTotal
Stockholders'
Equity
 SharesAmount
Balance, December 31, 2020
59,611,202 $6 $371,134 $6 $(337,385)$33,761 
Net loss— — — — (18,411)(18,411)
Issuance of common stock upon equity offering6,553,398 1 26,924 — — 26,925 
Exercise of stock options20,213 — 32 — — 32 
Vesting of restricted stock units and related repurchases148,643 — (365)— — (365)
Stock-based compensation— — 2,461 — — 2,461 
Other comprehensive loss— — — (16)— (16)
Balance, March 31, 2021
66,333,456 $7 $400,186 $(10)$(355,796)$44,387 
 Common StockAdditional Paid In
Capital
Accumulated Other Comprehensive
Income (Loss)
Accumulated 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 and warrants upon 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 and related repurchases404,743 — (416)— — (416)
Stock-based compensation3,301 — — 3,301 
Other comprehensive loss— — — (35)— (35)
Balance, March 31, 2022
135,528,195 $14 $590,331 $(66)$(493,824)$96,455 

See accompanying notes to condensed consolidated financial statements.


6


XERIS BIOPHARMA HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands; unaudited)
Three Months Ended March 31,
20222021
Cash flows from operating activities:
     Net loss $(33,714)$(18,411)
     Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation 321 337 
Amortization of intangible assets2,711  
Amortization of investments 50 154 
Amortization of debt issuance costs 219 251 
Stock-based compensation 3,301 2,461 
Loss on extinguishment of debt1,323  
Change in fair value of warrants (1,221)(20)
Change in fair value of contingent value rights2,816  
Changes in operating assets and liabilities:
Trade accounts receivable
(5,927)(2,063)
Prepaid expenses and other current assets
(58)(15)
Inventory
(157)(3,482)
Accounts payable
2,168 1,651 
Other accrued liabilities
(13,658)(2,790)
Accrued trade discounts and rebates
(48)(265)
Accrued returns reserve
1,431 (270)
Deferred rent59  
Other(8,025)(1,494)
Net cash used in operating activities(48,409)(23,956)
Cash flows from investing activities:
Capital expenditures16 (429)
Purchases of investments (7,920)
Sales and maturities of investments6,700 34,650 
Net cash provided by investing activities 6,716 26,301 
Cash flows from financing activities:
     Proceeds from equity offerings30,000 27,000 
     Proceeds from issuance of debt97,295  
Repayment of debt(43,496) 
     Payments of debt issuance costs(4,360) 
Payments for loss on extinguishment of debt(837) 
     Proceeds from exercise of stock awards8 26 
     Repurchase of common stock withheld for taxes(416)(365)
Net cash provided by financing activities
78,194 26,661 
Effect of exchange rate changes on cash and cash equivalents
(1) 
Increase in cash and cash equivalents 36,500 29,006 
Cash and cash equivalents, beginning of period
67,271 37,598 
Cash and cash equivalents, end of period
$103,771 $66,604 
Supplemental schedule of cash flow information:
            Cash paid for interest
$3,769 $2,238 
Supplemental schedule of non-cash investing and financing activities:
Issuance of warrants related to loan agreement$2,080 $ 
Accrued equity offering costs$ $56 
See accompanying notes to condensed consolidated financial statements.

7


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 biopharmaceutical company committed to developing and commercializing innovative solutions to enhance the lives of people with life-threatening diseases. The Company's primary focus is on therapies for patient populations in endocrinology, neurology, and gastroenterology. The Company currently has three commercially available products, Gvoke, a ready-to-use liquid glucagon for the treatment of severe hypoglycemia, Keveyis, the first and only U.S. Food and Drug Administration (“FDA”) approved therapy for primary periodic paralysis (“PPP”), and Recorlev, approved by the FDA in December 2021 for the treatment of endogenous hypercortisolemia in adult patients with Cushing’s Syndrome. The Company also has a pipeline of development programs to extend the current marketed products into new indications and uses or bring new products forward using the proprietary formulation technology platforms, XeriSolTM and XeriJectTM.
On October 5, 2021, Xeris Pharmaceuticals, Inc. ("Xeris Pharma") acquired Strongbridge Biopharma plc (“Strongbridge”), a biopharmaceutical company commercializing therapies for rare diseases with significant unmet needs. Immediately following the acquisition and related transactions, both Xeris Pharma and Strongbridge became wholly owned subsidiaries of Xeris Biopharma. The common stock of Xeris Pharma and the ordinary shares of Strongbridge were de-registered after completion of the Transactions (as defined below in Note 3). On October 6, 2021, Xeris Biopharma’s common stock, par value $0.0001 per share, commenced trading on the Nasdaq Global Select Market (“Nasdaq”) under the ticker symbol “XERS”. See “Note 3 – Business combination” for a more detailed description of the Transactions.
As used herein, the “Company” or "Xeris" refers to Xeris Pharma when referring to periods prior to the acquisition of Strongbridge, an Irish public limited company, on October 5, 2021 and to Xeris Biopharma when referring to periods on or subsequent to October 5, 2021. As a result, Xeris Pharma became the predecessor to Xeris Biopharma Holdings, Inc. upon completion of the Merger on October 5, 2021.
Liquidity and capital resources
The Company has incurred operating losses since inception and has an accumulated deficit of $493.8 million as of March 31, 2022. The Company expects to continue to incur net losses for at least the next 12 months beyond the issuance date of these consolidated financials. Based on the Company’s current operating plans, existing working capital at March 31, 2022 and capital raised in the first quarter, the Company believes the cash resources are sufficient to sustain operations and capital expenditure requirements for at least the next 12 months from the issuance date of these consolidated financial statements. If needed, the Company may elect to finance the 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 the COVID-19 pandemic, and geopolitical instability resulting from the ongoing military conflict between Russia and Ukraine, rising interest rates, the tightening of lending standards 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 our common stockholders, the terms of the debt could impose significant restrictions on the 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 the business strategies. If additional funding is not secured when required, the Company may need to delay or curtail the 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, 2021 included in the Company's Annual Report on Form 10-K filed with the SEC on March 11, 2022.
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”).
8


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 who 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 and Ogluo (European brand name of Gvoke) in the United Kingdom.
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 other customer. 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.
Refer to the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 for further discussion of the Company's accounting policies.
New accounting pronouncements
Recently issued accounting pronouncements
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This update requires that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers. This standard requires that an acquirer recognize and measure such contract assets and contract liabilities under Topic 606, Revenue from Contracts with Customers, as if it had originated the contracts. This standard also allows for election of certain practical expedients, which are applied on an acquisition-by-acquisition basis. This standard is effective for the Company for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, including for any interim period, and if elected, this standard is applied retrospectively for any acquisitions that occurred in the fiscal year of interim adoption. Since the Company already adopted ASC 2014-09, Revenue from Contracts with Customers (Topic 606), which provides a single comprehensive accounting model on revenue recognition for contracts with customers, the Company elected to early adopt ASU 2021-08 in the fourth quarter 2021 as the Company completed the acquisition of Strongbridge. Therefore, the Company has accounted for the acquisition of all contracts with customers from the Strongbridge acquisition in accordance with ASC 606. Under previous U.S. GAAP, the Company would have discounted the acquired contracts with customers to present value as of the acquisition closing date.
In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40). This standard addresses issuer’s accounting for certain modifications or exchanges of freestanding equity-classified written call options. This standard is effective for all entities, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted. The Company adopted this standard in first quarter 2022 and it did not have a material impact on the financial statements.
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, expands the disclosure requirements related to the terms and features of convertible instruments, and amends the guidance for the
9


XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
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 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. The Company does not currently expect the adoption of this new standard to have a material impact on the financial statements.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This standard eliminates certain exceptions in the current guidance related to the approach for intra-period tax allocation and the methodology for calculating income taxes in an interim period and amends other aspects of the guidance to help clarify and simplify U.S. GAAP. This standard will be effective for the Company for annual periods beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022. Early adoption of this standard is permitted. The Company does not currently expect the adoption of this new standard to have a material impact on the financial statements.
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 will require 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 fair value increases. This standard is effective for the Company for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. On November 15, 2019, the FASB delayed the effective date of FASB ASC Topic 326 for certain small public companies and other private companies. As amended, the effective date of ASC Topic 326 was 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 is currently evaluating the impact the adoption of this new standard will have on the financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The new standard requires lessees to record a right-of-use asset and a lease liability for all leases with a term of greater than twelve months regardless of their classification. Leases will be classified as either operating or finance leases under the new guidance. Operating leases will result in straight-line expense in the income statement, similar to current operating leases, and finance leases will result in more expense being recognized in the earlier years of the lease term, similar to current capital leases. This standard is effective for the Company for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. The FASB has extended the effective date of this standard for certain companies. As amended in ASU 2020-05, this standard will be effective for the Company for fiscal years beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022. The Company is currently evaluating the impact the adoption of this new standard will have on the financial statements and related disclosures; however, since the Company is a lessee to certain leases for property whose terms exceed twelve months, it expects, once adopted, to report assets and liabilities related to these leases on the balance sheet.
Note 3. Business combination
On May 24, 2021, Xeris Pharma issued an announcement pursuant to Rule 2.5 of the Irish Takeover Panel Act 1997 (as amended), Takeover Rules, 2013, disclosing that the boards of directors of Xeris Pharma and Strongbridge (with the exception of Jeffrey W. Sherman, M.D., a director in common to both companies, who abstained from the voting), had reached agreement on the terms of a recommended acquisition of Strongbridge by Xeris Pharma (the “Acquisition”). Xeris Pharma, Strongbridge, Xeris Biopharma and Wells MergerSub, Inc., a Delaware corporation (“MergerSub”), entered into a Transaction Agreement, dated as of May 24, 2021 (the “Transaction Agreement”).
On October 5, 2021 (the "acquisition closing date"), pursuant to the Transaction Agreement, Xeris Pharma completed the acquisition of Strongbridge. Upon completion of the Acquisition, (a) the Company acquired Strongbridge by means of a scheme of arrangement (the “Scheme”) under Irish law pursuant to which the Company acquired all of the outstanding ordinary shares of Strongbridge (“Strongbridge Shares”) in exchange for (i) 0.7840 of a share of the Company’s common stock (“Company Shares”) and cash in lieu of fractions of Company Shares in exchange for each Strongbridge Share held by such Strongbridge Shareholders and (ii) one (1) non-tradeable CVR, worth up to a maximum of $1.00 per Strongbridge Share settleable in cash, additional Company Shares, or a
10


XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
combination of cash and additional Company Shares, at the Company’s sole election and (b) MergerSub merged with and into Xeris Pharma, with Xeris Pharma, as the surviving corporation in the merger (the “Merger,” and the Merger together with the Acquisition, the “Transactions”).
Upon completion of the Merger, (a) each share of Xeris Pharma common stock was assumed by the Company and converted into the right to receive one Company Share and any cash in lieu of fractional entitlements due to a Xeris Pharma shareholder and (b) each Xeris Pharma option, stock appreciation right, restricted share award and other Xeris Pharma share based award that was outstanding was assumed by the Company and converted into an equivalent equity award of the Company, which award was subject to the same number of shares and the same terms and conditions as were applicable to the Xeris Pharma award in respect of which it was issued. On October 6, 2021, the Company’s common stock, par value $0.0001 per share, commenced trading on the Nasdaq Global Select Market (“Nasdaq”) under the ticker symbol “XERS”.
At the effective time of the Scheme, Strongbridge’s outstanding equity awards were treated as set forth in the Transaction Agreement, such that (i) each Strongbridge Share Award was vested and settled for Strongbridge Shares immediately prior to the effective time of the Scheme, (ii) each Strongbridge Option became fully vested and exercisable immediately prior to the effective time of the Scheme, (iii) each unexercised Strongbridge Option was assumed by the Company and converted into an option to purchase Company Shares (each, a “Strongbridge Rollover Option”), with the exercise price per Company Share and the number of Company Shares underlying the Strongbridge Rollover Option adjusted to reflect the conversion from Strongbridge Shares into Company Shares, provided that each Strongbridge Rollover Option will continue to have, and be subject to, the same terms and conditions that applied to the corresponding Strongbridge Rollover Option (except for terms rendered inoperative by reason of the Acquisition or for immaterial administrative or ministerial changes that are not adverse to any holder other than in any de minimis respect), provided that the terms of each Strongbridge Rollover Option with an exercise price of $4.50 or less (prior to the adjustment described above) were amended to provide that it shall remain exercisable for a period of time following the effective time of the Scheme equal to the lesser of (A) the maximum remaining term of such corresponding Strongbridge Option and (B) the fourth anniversary of the effective date of the Merger, in each case regardless of whether the holder of such Strongbridge Rollover Option experiences a termination of employment or service on or following the effective time of the Scheme and (iv) the Company issued to each holder of a Strongbridge Rollover Option one CVR with respect to each Strongbridge Share subject to the applicable Strongbridge Option, provided that in no event shall such holder be entitled to any payments with respect to such CVR unless the corresponding Strongbridge Option has been exercised on or prior to any such payment.
Additionally, on completion of the Acquisition, (a) each outstanding and unexercised Strongbridge warrant (except private placement warrants) was assumed by the Company such that, upon exercise, the applicable holders will have the right to have delivered to them the reference property (as such term is defined in the Strongbridge assumed warrants) and (b) each outstanding and unexercised Strongbridge private placement warrant was assumed by the Company such that the applicable holders will have the right to subscribe for Company Shares, in accordance with certain terms of the Strongbridge private placement warrants.
The Acquisition was accounted for as a business combination using the acquisition method of accounting under the provisions of ASC 805, Business Combinations.
The Acquisition will diversify and increase the Company’s revenue base into the specialized commercial platforms and expand the development pipeline. Additionally, the Company expects to achieve significant synergies by eliminating redundant processes and headcount, most notably within the commercial, executive and general and administrative functions.
Acquisition consideration
The acquisition-date fair value of the consideration transferred totaled $169.1 million, which consisted of the following:
Fair value of consideration transferred (in thousands, except share number)
Xeris Biopharma Holdings, Inc. common shares (58,082,606 shares)
$137,655 
Unexercised Strongbridge options assumed by Xeris Pharma and converted into options to purchase Company Shares
6,404 
Strongbridge warrants 2,467 
Contingent consideration (Contingent value rights)
22,531 
Total consideration$169,057 
The Company’s acquisition accounting is primarily pending final valuation and potential CVR fair value adjustments to the consideration. The fair value of the common stock issued was determined based on the closing market price of shares of the Company’s common stock on the acquisition date.
11


XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The fair value of the private placement warrants was determined using the Black-Scholes valuation model which considers the expected terms of the private placement warrants from the acquisition closing date as well as the risk-free interest rate, current exercise price of $2.50 multiplied by (the average of Xeris Pharma closing prices for the 20-day period ending three trading days prior to acquisition closing date/the average of Strongbridge closing prices for the 20-day period ending three trading days prior to acquisition closing date) and a volatility of 50%.
The CVRs represent contingent additional consideration of up to $1.00 for each CVR, payable to CVR holders, to satisfy future performance milestones, settleable in cash, common stock, or a combination of cash and common stock, at the Company's sole election. The CVRs are conditioned 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 sales of Keveyis in 2023;
2023 Recorlev Milestone: $0.25 per CVR, upon the first achievement of at least $40 million in net sales of Recorlev in 2023; and
2024 Recorlev Milestone: $0.50 per CVR, upon the first achievement of at least $80 million in net sales of Recorlev in 2024.
Refer to "Note 12 - Fair Value Measurements", for information related to the fair value measurements on CVRs and valuation methods utilized.
As of the acquisition closing date, there were approximately 74.1 million CVRs. There will be additional issuance of up to 10.5 million. CVRs to holders of Strongbridge rollover options and assumed warrants upon exercise.
Preliminary purchase price allocation
In accordance with ASC 805, Xeris Pharma was determined to be the accounting acquirer in the Acquisition. The Company has applied the acquisition method of accounting that requires, among other things, that identifiable assets acquired and liabilities assumed generally be recognized on the balance sheet at fair value as of the acquisition date. In determining the fair value, the Company utilized various forms of the income, cost and market approaches depending on the asset or liability being fair valued. The estimation of fair value required significant judgment related to future net cash flows (including revenue, operating expenses, and working capital), discount rates reflecting the risk inherent in each cash flow stream, competitive trends, market comparables and other factors. Inputs were generally determined by taking into account historical data (supplemented by current and anticipated market conditions), trends and growth rates.
The initial allocation of the purchase price was based on preliminary valuations and assumptions. During the fourth quarter of 2021, the Company did record $4.9 million of net deferred tax liabilities based on jurisdictional outcomes. Otherwise, there were no material measurement period adjustments.
12


XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The table below presents the estimated fair value that was allocated to Strongbridge’s assets and liabilities based upon fair values as determined by the Company (in thousands):
Fair Value
Cash and cash equivalents$38,469 
Trade accounts receivable4,344 
Inventory1,862 
Prepaid expenses and other current assets4,683 
Property and equipment161 
IPR&D121,000 
Other intangible asset11,000 
Other assets860 
Total identifiable assets acquired182,379 
Accounts payable(279)
Other accrued liabilities(13,703)
Accrued trade discounts and rebates(4,844)
Supply agreement liability(12,000)
Deferred tax liabilities(4,942)
Other liabilities(413)
Total liabilities assumed(36,181)
Net identifiable assets acquired146,198 
Goodwill22,859 
Net assets acquired$169,057 
The above allocation of the purchase price is provisional and is still subject to change within the measurement period (up to one year from the acquisition date) as a result of additional information obtained with regards to facts and circumstances that existed as of the acquisition date. The final allocation of the purchase price is expected to be completed as soon as practicable, but no later than one year from the date of the Transactions.
The following is a description of the methods used to determine the fair values of significant assets and liabilities.
In-process research and development ("IPR&D") and other intangible asset
The IPR&D intangible asset represents the recording of the acquired IPR&D indefinite-lived intangible asset related to Recorlev. The other intangible asset represents the commercial product in the form of Keveyis. The fair value for the IPR&D and other intangible assets were based on assumptions developed by management and other information compiled by management including, but not limited to, discounted future expected cash flows. The fair value of intangibles relies heavily on projected future net cash flows including, but not limited to, key assumptions for revenue and operating expenses. The discount rates used for intangible assets are based on current market rates and reflect the risk inherent in each cash flow stream. The estimated useful life of the intangible asset of Keveyis is five years which reflects the time period in which the Company expects to receive the benefits of the related cash flows.
Goodwill
The excess of the consideration transferred over the fair value of assets acquired and liabilities assumed was recognized as goodwill. The goodwill is generated from operational synergies and cost savings the Company expects to achieve from the combined operations and Strongbridge’s knowledgeable and experienced workforce. The majority of the goodwill is not expected to be deductible for tax purposes.
Transaction costs
In connection with the Transactions, the Company incurred significant expenses in the 2021, such as transaction costs (e.g., bankers' fees, legal fees, consultant fees, etc.). The transaction costs totaled $8.6 million and were recorded in the selling, general and administrative expenses in third quarter 2021 through first quarter 2022.
13


XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Supplemental pro forma information
The following unaudited supplemental pro forma financial information assumes the companies were combined as of January 1, 2021. The pro forma financial information as presented below is for informational purposes only and is based on estimates and assumptions that have been made solely for purposes of developing such pro forma information. This is not necessarily indicative of the results of operations that would have been achieved if the Acquisition had taken place on January 1, 2021, nor is it necessarily indicative of future results. Consequently, actual results could differ materially from the unaudited pro forma financial information presented below. The following table presents the pro forma operating results as if Strongbridge had been included in the Company's Condensed Consolidated Statements of Operations as of January 1, 2021 (unaudited, in thousands):
Three Months Ended
March 31,
20222021
Revenue
$22,073 $16,577 
Net loss
$(33,714)$(28,737)
These amounts have been calculated after applying the Company’s accounting policies and adjusting the results of Xeris to reflect the additional depreciation and amortization that would have been charged assuming the fair value adjustments to intangible assets had been applied on January 1, 2021.
The unaudited supplemental pro forma information above does not include any cost saving synergies from operating efficiencies. There is a tax impact on the pro forma adjustments due to deferred tax liabilities being greater than the deferred tax assets in Ireland. For the other non-Irish entities, there is no tax impact of the pro forma adjustments reflected as both companies are, and have been for some time, in net operating loss positions and have full valuation allowances against their net deferred tax assets on both a historical and pro forma basis.
Note 4. Short-term investments
The Company classifies investments in debt securities as available-for-sale. Debt securities are comprised of highly liquid investments with minimum “A” rated securities and, as of March 31, 2022, consist of U.S. Treasury and agency bonds and corporate entity commercial paper and securities, all with maturities of more than three months but less than one year at the date of purchase. Debt securities as of March 31, 2022 had an average remaining maturity of 0.4 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 sheet. Refer to "Note 12 - Fair Value Measurements", for information related to the fair value measurements and valuation methods utilized.

14


XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The following table represents the Company’s available-for-sale investments by major security type as of March 31, 2022 and December 31, 2021 (in thousands):
March 31, 2022
Amortized
Cost
Gross Unrealized
Gains
Gross Unrealized LossesTotal
Fair Value
Investments:
     Commercial paper$17,684 $ $(32)$17,652 
     Corporate securities9,409   9,409 
     Foreign government securities1,326  (10)1,316 
        Total available-for-sale investments$28,419 $ $(42)$28,377 
December 31, 2021
Amortized
Cost
Gross Unrealized
Gains
Gross Unrealized LossesTotal
Fair Value
Investments:
     Commercial paper$21,773 $ $ $21,773 
     Corporate securities12,072 2 (7)12,067 
     Foreign government securities1,324  (2)1,322 
        Total available-for-sale investments$35,169 $2 $(9)$35,162 
The Company reviews available-for-sale investments for other-than-temporary impairment loss periodically. The Company considers factors such as the duration, severity of and reason for the decline in value, the potential recovery period and our intent to sell. For debt securities, the Company also consider whether (i) it is more likely than not that the Company will be required to sell the debt securities before recovery of their amortized cost basis and (ii) the amortized cost basis cannot be recovered as a result of credit losses. During three months ended March 31, 2022 and 2021, the Company did not recognize any other-than-temporary impairment losses. All marketable securities with unrealized losses have been in a loss position for less than twelve months.
Note 5. Inventory
The components of inventories consisted of the following (in thousands):  
March 31, 2022December 31, 2021
Raw materials$5,018 $5,181 
Work in process7,068 7,442 
Finished goods4,786 5,495 
Inventory$16,872 $18,118 
Inventory reserves were $0.8 million and $1.0 million at March 31, 2022 and December 31, 2021, respectively.
15


XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Note 6. Property and equipment
Property and equipment consisted of the following (in thousands):
March 31, 2022December 31, 2021
Lab equipment
$3,759 $3,739 
Furniture and fixtures
1,355 1,355 
Computer equipment
314 307 
Office equipment8 28 
Software
307 307 
Leasehold improvements
5,004 5,026 
Total property and equipment10,747 10,762 
Less: accumulated depreciation and amortization(4,456)(4,135)
     Property and equipment, net$6,291 $6,627 
Depreciation and amortization expense relating to property and equipment was $0.3 million and $0.3 million for the three months ended March 31, 2022 and March 31, 2021, respectively.
16


XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Note 7. Intangible assets
Identified intangible assets consisted of the following (in thousands):
March 31, 2022
Life (Years)Gross assetsAccumulated amortizationNet
Definite-lived intangible asset - Keveyis5$11,000 $(1,100)$9,900 
Definite-lived intangible asset - Recorlev14121,000 (2,161)118,839 
Total intangible assets$132,000 $(3,261)$128,739 
Keveyis is the developed product rights obtained from Strongbridge's acquisition of U.S. marketing rights to Keveyis (dichlorphenamide) from Taro Pharmaceuticals U.S.A., Inc. ("Taro").
The IPR&D product Recorlev acquired from the Acquisition was approved by the FDA on December 30, 2021. The IPR&D asset was reclassified as a definite-lived intangible asset in 2021 and began being amortized on a straight-line basis over an estimated useful life of 14 years assigned based on the economic life and remaining patent life.
As of March 31, 2022, expected amortization expense for intangible assets subject to amortization for the next five years is as follows (in thousands):
2022 remaining
$8,132 
202310,843 
202410,843 
202510,843 
202610,293 
Thereafter77,785 
     Total$128,739 
17


XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Note 8. Other accrued liabilities
Other accrued liabilities consisted of the following (in thousands):
March 31, 2022December 31, 2021
Accrued employee costs$9,558 $19,638 
Supply agreement - current portion6,276 6,009 
Accrued supply chain costs1,360 595 
Accrued marketing and selling costs2,262 3,237 
Accrued research and development costs
1,572 1,998 
Accrued restructuring charges6,941 6,715 
Accrued interest expense
1,165 1,413 
Accrued Strongbridge transaction costs112 1,839 
Accrued Debt341  
Accrued other costs
4,771 7,644 
Other accrued liabilities
$34,358 $49,088 
Note 9. Restructuring costs
After the completion of the Acquisition on October 5, 2021, the Company undertook a strategic restructuring to streamline the organization and realize operating expense synergies. The costs associated with the restructuring include employee termination costs. The Company expects to incur total restructuring cost of approximately $11.1 million related to this plan. Costs of $1.4 million were incurred in the three months ended March 31, 2022, the majority of which is included in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and Comprehensive Loss. The Company anticipates the restructuring related to the Strongbridge acquisition to be substantially complete by the fourth quarter of 2023. The restructuring reserve is included in other accrued liabilities in the condensed consolidated balance sheet.
The following table summarizes the initial restructuring reserve in connection with the Strongbridge acquisition and the payments made during the three months ended March 31, 2022 (in thousands):
Restructuring Costs
Balance accrued at December 31, 2021
$6,713 
   Restructuring costs1,413 
   Payments(1,185)
Balance accrued at March 31, 2022
$6,941 
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 "Convertible Notes"), including $11.3 million pursuant to the underwriters' option to purchase additional notes which was exercised in full in July 2020. Xeris Pharma incurred debt issuance costs of $5.1 million in connection with the issuance of the Convertible Notes. Xeris Pharma used $20.0 million and $4.2 million of the net proceeds from the sale to prepay a portion of the principal amount on the Term A Loan (as defined below) and the remaining amount of borrowings outstanding under the PPP Loan (as defined below), respectively.
The Convertible Notes are governed by the terms of a base indenture for senior debt securities dated June 30, 2020 (the “Base Indenture”), between Xeris Pharma and U.S. Bank National Association, as trustee, as supplemented by the first supplemental indenture thereto dated June 30, 2020, between U.S. Bank National Association, as trustee, and the second supplemental indenture thereto dated October 5, 2021 ("the Supplemental Indentures" and together with the Base Indenture, the "Indenture"), among the Company, Xeris Pharma and U.S. Bank National Association, as trustee. The 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, beginning on January 15, 2021, to holders of record at the close of business on the preceding January 1 and July 1, respectively. The Convertible Notes will mature on July 15, 2025, unless earlier converted or redeemed or repurchased by the Company.
18


XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
At any time before the close of business on the second scheduled trading day immediately before the maturity date, holders of Convertible Notes may convert their 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 the then-applicable conversion rate. The conversion rate for the Convertible Notes will initially be 326.7974 shares of the Company’s common stock per $1,000 principal amount of Convertible Notes, which represents an initial conversion price of approximately $3.06 per share of common stock, and is subject to adjustment under the terms of the Convertible Notes. In the event of certain circumstances, the Company will increase the conversion rate, provided that the conversion rate will not exceed 367.6470 shares of the Company's common stock per $1,000 principal amount of Convertible Notes.
In the second half of 2020, $8.4 million in principal amount of Convertible Notes were converted into 2,736,591 shares of Xeris Pharma’s common stock at the conversion rate of 326.7974 shares per $1,000 principal amount of Convertible Notes. Additionally, in the fourth quarter of 2020, Xeris Pharma entered into separate, privately negotiated exchange agreements with certain holders of Convertible Notes to exchange $30.7 million in principal amount of Convertible Notes for 10,435,200 shares of Xeris Pharma’s common stock. Xeris Pharma recognized a $2.6 million loss related to the convertible note exchange transactions.
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, and pursuant to the Second Supplemental Indenture, the Convertible Notes are no longer convertible into shares of common stock of Xeris Pharma common stock. Instead, subject to the terms and conditions of the Indenture, the 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, and the “Reference Property” provisions in the Indenture.
Pursuant to the Second Supplemental Indenture, the Company agreed to guarantee (a) the full and punctual payment when due of all monetary obligations of Xeris Pharma under the Indenture and (b) the full and punctual performance within applicable grace periods of all other obligations of Xeris Pharma under the Indenture.
Prior Loan Facility
In February 2018, Xeris Pharma entered into the Loan and Security Agreement, dated as of February 28, 2018 (as amended, the “Original Loan Agreement”), with Oxford Finance LLC (“Oxford”), as the collateral agent (in such capacity, the “Collateral Agent”) and a lender, and Silicon Valley Bank, as a lender (“SVB”, and together with Oxford, the “Lenders”), which provided for a senior secured loan facility of up to an aggregate principal amount of $45.0 million. The first tranche of $20.0 million was drawn down in February 2018 (the "2018 Term A Loan"). The second tranche of $15.0 million was drawn down in September 2018 (the "2018 Term B Loan"). Xeris Pharma also issued warrants to the Lenders to purchase common stock, which is further discussed in "Note 11 - Warrants".
In September 2019, Xeris Pharma entered into an Amended and Restated Loan and Security Agreement (the "Loan Agreement") with the Lenders which amended and restated the Original Loan Agreement in its entirety. The Loan Agreement provided for the Lenders to extend up to $85.0 million in term loans to Xeris Pharma in three tranches. The initial tranche of $60.0 million (the “Term A Loan”) was drawn down in September 2019. Additional tranches of $15.0 million (the “Term B Loan”) and $10.0 million (the “Term C Loan”) were contingent on achievement of certain revenue targets which were not achieved. In conjunction with the execution of the Loan Agreement, the 2018 Term A Loan and 2018 Term B Loan were repaid and the final payment fee of $2.3 million was paid.
Effective April 21, 2020, Xeris Pharma entered into that certain First Amendment to Amended and Restated Loan and Security Agreement with the Lenders (the “First Amendment”) to amend the Loan Agreement to allow Xeris Pharma to incur indebtedness under the U.S. Small Business Administration (the “SBA”) the Paycheck Protection Program enabled by the Coronavirus Aid, Relief and Economic Security Act of 2020 (the “CARES Act”) in the amount of $5.1 million (the “PPP Loan”).
On June 30, 2020, Xeris Pharma entered into that certain Second Amendment to Amended and Restated Loan and Security Agreement with the Lenders (the "Second Amendment") to amend the Loan Agreement to provide for the Lenders’ consent to and allow for Xeris Pharma's underwritten public offering of Xeris Pharma's 5.00% Convertible Senior Notes due 2025 and permit the Company to prepay the PPP Loan in full. The Second Amendment also provided for the extension of the interest-only payment period, certain revenue milestones and extensions of the maturity date.
Pursuant to the Second Amendment, Xeris Pharma prepaid a portion of the Term A Loan equal to the sum of (i) $20.0 million, plus all accrued and unpaid interest as of the date of the Second Amendment, (ii) the applicable final payment fee of $0.6 million, (iii) the applicable prepayment fee of $0.3 million and (iv) all outstanding Lenders’ expenses as of the date of the Second Amendment.
19


XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
On August 5, 2020, Xeris Pharma entered into that certain Third Amendment to Amended and Restated Loan and Security Agreement with the Lenders (the “Third Amendment”) to amend the Loan Agreement to (i) amend the definition of “Permitted Indebtedness” to include a new standby letter of credit in an amount not to exceed $0.4 million issued to the landlord for Xeris Pharma’s new leased laboratory space and (ii) permit the sale of certain equipment related to the relocation of Xeris Pharma’s research and development laboratory from San Diego to Chicago.
On October 23, 2020, Xeris Pharma entered into that certain Fourth Amendment to Amended and Restated Loan and Security Agreement with the Lenders (the "Fourth Amendment") to amend the Loan Agreement to provide an additional tranche of $3.5 million (the “Term D Loan”, and, together with the Term A Loan, Term B Loan, and Term C Loan, the "Term Loan"), available upon execution. The Term D Loan of $3.5 million was drawn in November 2020 and will be payable under the same payment terms as the term loans. After repayment, the loan may not be re-borrowed.
On May 3, 2021, Xeris Pharma entered into that certain Fifth Amendment to Amended and Restated Loan and Security Agreement with the Lenders (the “Fifth Amendment”) to amend the Loan Agreement to provide for revenue milestone triggering interest-only payment periods. The Company achieved all revenue milestones and therefore classified the amounts due under the Amended Loan Agreement as non-current on the balance sheet as of March 31, 2022.
On May 24, 2021, Xeris Pharma entered into that certain Consent Under Amended and Restated Loan and Security Agreement (the “Consent”) with the Lenders to permit the Company to execute, deliver and perform (a) the Transaction Agreement with Strongbridge and (b) that certain Expenses Reimbursement Agreement dated as of May 24, 2021 by and between Xeris Pharma and Strongbridge pursuant to which Xeris Pharma and Strongbridge agreed to certain reimbursement obligations related to the transactions contemplated by the Transaction Agreement.
In connection with the completion of the Transactions, on October 5, 2021, the Company entered into that certain Joinder and Sixth Amendment to Amended and Restated Loan and Security Agreement (the “Sixth Amendment”) with Xeris Pharma, the Lenders and Strongbridge US, Inc. (“Strongbridge US”) (each of Strongbridge US and the Company, a “New Borrower”) to amend the Loan Agreement. The Sixth Amendment adds the New Borrowers as borrowers under the Loan Agreement and provides for the grant by the New Borrowers to the Collateral Agent, for the ratable benefits of the Lenders, a first priority security interest on substantially all of their assets, including intellectual property, subject to certain exceptions. The Sixth Amendment also updates certain negative covenants and definitions to among, other things, permit certain intercompany arrangements and restructuring activities, as well as modifies the revenue milestones to address both Gvoke and non-Gvoke revenues.
All of the loans incur interest at a floating per annum rate in an amount equal to the sum of 6.25% plus the greater of (a) 2.43% and (b) the thirty-day U.S. Dollar LIBOR rate (or, the LIBOR replacement rate as applicable). For the period from the funding date of the Term A Loan through and including March 31, 2022, the interest rate was 8.68%. The Company has incurred total debt issuance costs of $2.0 million related to the Original Loan Agreement and the Amended 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 Amended Loan Agreement allows the Company to voluntarily prepay the outstanding amounts thereunder, but not less than $2.0 million of the outstanding principal at any time. The Company is subject to a prepayment fee equal to 1.50% of the principal amount being prepaid. Also, a final payment fee of 3.0% multiplied by the amount to be repaid is due upon the earliest to occur of the maturity date of the Amended Loan Agreement, the acceleration of the amounts outstanding under the Amended Loan Agreement or prepayment of such borrowings and is recorded in other liabilities on the condensed consolidated balance sheets.
The Amended Loan Agreement contains customary representations and warranties, events of default (including an event of default upon a material adverse change of the Company) and affirmative and negative covenants, including, among others, covenants that limit or restrict the Company’s ability to incur additional indebtedness, grant liens, merge or consolidate, make acquisitions, pay dividends or other distributions or repurchase equity, make investments, dispose of assets and enter into certain transactions with affiliates, in each case subject to certain exceptions.
20


XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Hayfin Loan Agreement
In March 2022, the Company, Xeris Pharma and certain subsidiary guarantors of the Company entered into a Credit Agreement and Guaranty (the "Hayfin Loan Agreement") with the lenders from time to time parties thereto (the “New Lenders”) and Hayfin Services LLP, as administrative agent for the New Lenders, 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 New Lenders to extend $100.0 million in term loans (the “Initial Loan”) 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 (the “Delayed Draw Term Loan” and, together with the Initial Loan, the “Loans”) in no more than three drawings of no less than $10.0 million per drawing, subject to the Company being in pro forma compliance with the financial covenants and other conditions set forth therein. In conjunction with the execution of the Hayfin Loan Agreement, the Amended Loan Agreement balance of $43.5 million was repaid in full 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 Amended Loan Agreement in full, the proceeds will otherwise be used for general corporate purposes. After repayment, the Loans may not be re-borrowed.
All of 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 $3.5 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 12.1%, maturing March 2027.
The Loans will mature on March 8, 2027; provided, however, that the Loans will mature on January 15, 2025 if the Convertible Notes are still outstanding as of such date and either (i) the maturity date thereof has not been extended to a date on or after September 4, 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 $15.0 million of cash on hand, is sufficient to redeem and discharge the Convertible Notes in full.
The Hayfin Loan Agreement allows the Company to voluntarily prepay the outstanding amounts thereunder. The Company is subject to an early prepayment fee equal to (i) for any prepayment that occurs prior to the second anniversary of the closing date, the applicable make-whole amount, (ii) for any prepayment that occurs after the second anniversary of the closing date but on or prior to the fourth anniversary of the closing date: (x) the amount of any principal so prepaid, multiplied by (y) for any prepayment that occurs (A) after the second anniversary of the closing date and on or prior to the third anniversary of the closing date, five percent (5.0%), (B) after the third anniversary of the closing date and on or prior to the fourth anniversary of the closing date, three percent (3.0%), and (C) after the fourth anniversary of the closing date, zero percent (0.0%).
The Hayfin Loan Agreement contains customary representations and warranties, events of default and affirmative and negative covenants, including, among others, covenants that limit or restrict the Company’s ability to incur additional indebtedness, grant liens, merge or consolidate, make acquisitions, pay dividends or other distributions or repurchase equity, make investments, dispose of assets and enter into certain transactions with affiliates, in each case subject to certain exceptions. Associated with the Hayfin Loan Agreement, the New 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. Please refer to "Note 11 - Warrants" for further details.


21


XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The components of debt are as follows (in thousands):
March 31, 2022December 31, 2021
Convertible Notes$47,175 $47,175 
Loan facility95,820 43,500 
Less: unamortized debt issuance costs(5,356)(2,608)
     Long-term debt, net of unamortized debt issuance costs$137,639 $88,067 
The following table sets forth the Company’s future minimum principal payments on the Convertible Note and the loan facility (in thousands):
2022$ 
2023 
2024 
202547,175 
2026 
Thereafter100,000 
$147,175 
For the three months ended March 31, 2022 and 2021, the Company recognized interest expense of $3.5 million and $1.8 million, respectively, of which $0.2 million and $0.3 million, respectively, related to the amortization of debt issuance costs. Included in the interest expense for the three months ended March 31, 2022 was also a $1.3 million loss on extinguishment of debt related to the Senior Secured Loan Facility with SVB which ceased in March 2022.
22


XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Note 11. Warrants
Associated with the Armistice securities purchase agreement disclosed in "Note 13 - Stockholders' equity", the Company also issued warrants (the "Armistice 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 and 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 New 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 the seventh (7th) anniversary of the closing date; (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 March 31, 2022, the following warrants were outstanding:
Warrants classified as liabilities:
Outstanding Warrants
Exercise Price per Warrant
Expiration
Date
Assumed Strongbridge private placement warrants4,446,425$3.005June 2022
2018 Term A Warrants
53,720$11.169February 2025
2018 Term B Warrants
40,292$11.169
September 2025
4,540,437
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 $1.2 million, $12,000 and $8,000 upon the change in fair value of the warrants during the three months ended March 31, 2022 related to the assumed Strongbridge private placement warrants, the 2018 Term A Warrants and the 2018 Term B Warrants, respectively. The Company recognized gains of $11,000 and $9,000 upon the change in fair value of the warrants during the three months ended March 31, 2021 related to the 2018 Term A Warrants and the 2018 Term B Warrants, respectively.
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;
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; and
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).
23


XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
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 takes into account 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 March 31, 2022 and December 31, 2021 (in thousands):
Total as of
March 31, 2022
Level 1Level 2Level 3
Assets
Cash and cash equivalents:
     Cash and money market funds$103,771 $103,771 $ $ 
Investments:
     Corporate securities9,377  9,377  
     Commercial paper17,684  17,684  
     Foreign government1,316  1,316  
        Total investments$28,377 $ $28,377 $ 
Liabilities
Contingent value rights$25,347 $ $ $25,347 
Warrant liabilities$548 $ $ $548 
Total as of December 31, 2021
Level 1Level 2Level 3
Assets
Cash and cash equivalents:
     Cash and money market funds$67,271 $67,271 $ $ 
Investments:
     U.S. government securities    
     Corporate securities12,067  12,067  
     Commercial paper21,773  21,773  
     Foreign government1,322 $ $1,322 $ 
        Total investments$35,162 $ $35,162 $ 
Liabilities
Contingent value rights$22,531 $ $ $22,531 
Warrant liabilities$1,769 $ $ $1,769 
24


XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Contingent Value Rights
The fair value of the CVRs is calculated by using a discounted cash flow method for the Keveyis patent milestone and an option pricing method for the Recorlev and Keveyis sales milestones. In the case of Keveyis milestones, the Company applies a scenario-based method and weighted them based on the possible achievement of the milestone. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement as defined in ASC 820, Fair Value Measurement. The key assumptions used include the discount rate and sales growth. The estimated value of the CVR consideration is preliminary only and is based upon available information and certain assumptions which the Company's management believes are reasonable under the circumstances. The ultimate payout under the CVRs may differ materially from the assumptions used in determining the fair value of the CVR consideration.
Contingent consideration obligations are recorded at their estimated fair values and these obligations are revalued each reporting period until the related contingencies are resolved. The contingent value rights 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.
As of March 31, 2022, the CVRs were revalued at $25.3 million using the same methods described above. During the first quarter of 2022, a loss of $2.8 million was recognized in the condensed consolidated statements of operations from changes in the fair values of the CVRs. See "Note 15 – Commitments and contingencies" for a discussion of the CVRs.
Warrant liability
The fair value of the Company’s warrant liabilities is based on a Black-Scholes valuation which considers the expected term of the warrants as well as the risk-free interest rate and expected volatility of the Company's common stock. The uncertainty of the fair value measurement due to the use of unobservable inputs and interrelationships between these unobservable inputs could resulted in higher or lower fair value measurement.
The Company has determined that the warrant liabilities' fair values are Level 3 items within the fair value hierarchy. The following table presents the change in the warrant liabilities (in thousands):
Balance at December 31, 2021
$1,769 
Change in fair value of warrants
(1,221)
Balance at March 31, 2022
$548 
There were no transfers between any of the levels of the fair value hierarchy during the three months ended March 31, 2022.
Note 13. Stockholders' equity
The Company’s 375.0 million authorized shares of stock are divided into 350.0 million shares of common stock, par value $0.0001 per share, and 25.0 million shares of undesignated preferred stock, par value $0.0001 per share. At March 31, 2022 none of the 25.0 million shares of preferred stock were outstanding, and the Company has no present plans to issue any shares of preferred stock. The Company’s board of directors has the authority, without action by the Company’s stockholders, to designate and issue the preferred stock in one or more series and to designate the rights, preferences, limitations and privileges of each series of preferred stock, which may be greater than the rights of the Company’s common stock.
The Company has not paid any cash dividends on the common stock during the periods presented.
As of October 5, 2021, when the Company completed the acquisition of Strongbridge, Xeris Pharma sold an aggregate of 204,427 shares of common stock in at-the-market offerings under the shelf registration statement on Form S-3, which was filed on August 6, 2019 and declared effective by the SEC on August 21, 2019, for gross proceeds of $1.8 million. The shelf ceased to be available to the Company upon the consummation of the Transactions. The Company filed a shelf registration statement on Form S-3 with the SEC on January 28, 2022, which was declared effective on February 27, 2022 and which covers the offering, issuance and sale by the Company of up to an aggregate of $250.0 million of our common stock, preferred stock, debt securities, warrants and/or units.
In March 2021, the Company completed a registered direct offering of 6,553,398 shares of the common stock at a price of $4.12 per share. Net proceeds from the equity offering were approximately $26.9 million after deducting offering expenses.
On October 5, 2021, the Company completed the acquisition of Strongbridge. Upon completion of the Merger, (a) each share of Xeris Pharma common stock was assumed by the Company and converted into the right to receive one Company Share and any cash in lieu of fractional entitlements due to a Xeris Pharma shareholder and (b) each Xeris Pharma option, stock appreciation right, restricted share award and other Xeris Pharma share based award that was outstanding was assumed by the Company and converted into an
25


XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
equivalent equity award of the Company, which award was subject to the same number of shares and the same terms and conditions as were applicable to the Xeris Pharma award in respect of which it was issued.
Upon completion of the Merger, the Company acquired all of the outstanding Strongbridge Shares in exchange for (i) 0.7840 of a share of the Company Shares and cash in lieu of fractions of Company Shares in exchange for each Strongbridge Share held by such Strongbridge Shareholders and (ii) one CVR. Strongbridge’s outstanding equity awards were treated as set forth in the Transaction Agreement, such that (i) each Strongbridge Share Award was vested and settled for Strongbridge Shares immediately prior to the effective time of the Scheme, (ii) each Strongbridge Option became fully vested and exercisable immediately prior to the effective time of the Scheme, (iii) each unexercised Strongbridge Option was assumed by the Company and converted into an option to purchase Company Shares.
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 and 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.
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. The Company then pays the minimum statutory withholding taxes in cash. During the three months ended March 31, 2022, 602,000 RSUs vested for which 197,257 shares were withheld to cover the minimum statutory withholding taxes of $0.4 million. During the three months ended March 31, 2021, 220,425 RSUs vested for which 71,782 shares were withheld to cover the minimum statutory withholding taxes of $0.4 million.
Note 14. 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. This plan became effective on the date immediately prior to the effectiveness of the Company's IPO registration statement. 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.
The 2018 Plan provides that the number of shares reserved and available for issuance under the plan will automatically increase each January 1, beginning on January 1, 2019, and each January 1 thereafter, by 4% of the outstanding number of shares of our common stock on the immediately preceding December 31, or such lesser number of shares as determined by the compensation committee. This number is subject to adjustment in the event of a stock split, stock dividend or other change affecting the Company's common stock. On January 1, 2022 and 2021, the number of shares of common stock available for issuance under the 2018 Plan was automatically increased by 4,994,933 shares and 2,384,448 shares, respectively. As of March 31, 2022, there were 3,308,937 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 with a purchase date of the last business day of June and December each year.
26


XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
This plan became effective on the date immediately prior to the effectiveness of the Company's IPO registration statement. The ESPP provides that the number of shares reserved and available for issuance will automatically increase each January 1, beginning on January 1, 2019 and each January 1 thereafter through January 1, 2028, by the least of (i) 1% of the outstanding number of shares of our common stock on the immediately preceding December 31; (ii) 386,000 shares or (iii) such lesser number of shares as determined by the ESPP administrator. On January 1, 2022 and 2021, the number of shares of common stock available for issuance under the ESPP increased by 386,000 shares and 386,000 shares, respectively. The number of shares reserved under the ESPP is subject to adjustment in the event of a stock split, stock dividend or other change affecting the Company's common stock. As of March 31, 2022, there were 863,727 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 was adopted without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Listing Rules. 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 commercial launch of Gvoke and the expansion of the Company generally. The Company initially reserved 750,000 shares of common stock for the issuance of awards under the Inducement Plan. This number is subject to adjustment in the event of a stock split, stock dividend or other change affecting the Company's common stock. As of March 31, 2022, there were 221,674 shares of common stock available for future issuance under the Inducement Plan.
On October 8, 2020, the Company's stockholders, upon recommendation of the Board of Directors, approved an amendment to the Company's 2011 Plan and 2018 Plan to allow the Company to permit certain employee option holders, subject to specified conditions, to exchange some or all of their outstanding options to purchase shares of the Company's common stock for a lesser number of new options to purchase shares of the Company’s common stock (the “Option Exchange”).
On November 10, 2020, the Company filed with the SEC a Tender Offer Statement on Schedule TO defining the terms and conditions of the Option Exchange. The total number of shares of common stock underlying a new option with respect to an exchanged eligible option was determined by dividing the number of shares of common stock underlying the exchanged eligible option by the applicable exchange ratio and rounding to the nearest whole number, subject to the terms and conditions described in the Exchange Offer. On December 10, 2020, the completion date of the Option Exchange, the Company canceled the options accepted for exchange and granted 832,907 new options to purchase shares of common stock in exchange for 1,127,906 options issued under the 2011 Plan and 2018 Plan. The exercise price per share of the options granted pursuant to the Exchange Offer was $4.09 per share, which was the closing price per share of common stock on The Nasdaq Global Select Market on the grant date of such new options. The new options will vest and become exercisable in two equal installments following the grant date, subject to an option holder's continuous service, and expire seven years from the grant date. On the grant date, the fair values of the options exchanged were similar to the fair values of the new options granted and, as such, the incremental compensation cost related to the Option Exchange was not material.
Assumed Plans
At the effective time of the Scheme, Strongbridge’s outstanding equity awards were treated as set forth in the Transaction Agreement, such that (i) each Strongbridge Share Award was vested and settled for Strongbridge Shares immediately prior to the effective time of the Scheme, (ii) each Strongbridge Option became fully vested and exercisable immediately prior to the effective time of the Scheme, (iii) each unexercised Strongbridge Option was assumed by the Company and converted into an option to purchase Company Shares (each, a “Strongbridge Rollover Option”), with the exercise price per Company Share and the number of Company Shares underlying the Strongbridge Rollover Option adjusted to reflect the conversion from Strongbridge Shares into Company Shares, provided that each Strongbridge Rollover Option will continue to have, and be subject to, the same terms and conditions that applied to the corresponding Strongbridge Rollover Option (except for terms rendered inoperative by reason of the Acquisition or for immaterial administrative or ministerial changes that are not adverse to any holder other than in any de minimis respect), provided that the terms of each Strongbridge Rollover Option with an exercise price of $4.50 or less (prior to the adjustment described above) were amended to provide that it shall remain exercisable for a period of time following the effective time of the Scheme equal to the lesser of (A) the maximum remaining term of such corresponding Strongbridge Option and (B) the fourth anniversary of the effective date of the Merger, in each case regardless of whether the holder of such Strongbridge Rollover Option experiences a termination of employment or service on or following the effective time of the Scheme.
On the acquisition closing date, 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 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
27


XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
options outstanding under all Strongbridge legacy equity incentive plans are included in the tables below. As of March 31, 2022, there were 3.2 million shares reserved for future grants under the Assumed Plans.
CVRs were also issued to the holders of Strongbridge vested and unexercised options that were outstanding and assumed by the Company at the acquisition date.
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