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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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 October 31, 2022, 135,985,090 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:
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Our business may be adversely affected by the ongoing COVID-19 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, and Recorlev, 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 continue to commercialize Gvoke, Keveyis, Recorlev or any product candidates that are approved.
<
Reimbursement decisions by third-party payors and consolidation within the healthcare industry and among competitors 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.
<
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

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)
September 30, 2022December 31, 2021
Assets(unaudited)
Current assets:
Cash and cash equivalents$84,109$67,271
Short-term investments9,32435,162
Trade accounts receivable, net27,51817,456
Inventory20,12118,118
Prepaid expenses and other current assets7,8474,589
Total current assets148,919142,596
Property and equipment, net5,7516,627
Goodwill22,85922,859
Intangible assets, net123,318131,450
Other assets2,170829
Total assets$303,017$304,361
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$3,916$8,924
Other accrued liabilities37,70749,088
Accrued trade discounts and rebates19,32115,041
Accrued returns reserve7,2774,000
Other current liabilities3371,987
Total current liabilities68,55879,040
Long-term debt, net of unamortized debt issuance costs138,50788,067
Contingent value rights30,10022,531
Supply agreement liability, less current portion5,991
Deferred rent6,6456,883
Deferred tax liabilities3,8564,942
Other liabilities3111,676
Total liabilities247,977209,130
Commitments and contingencies (Note 16)


Stockholders’ equity:
Preferred stock—par value $0.0001, 25,000,000 shares and 25,000,000 shares authorized and no shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively
Common stock—par value $0.0001, 350,000,000 shares and 350,000,000 shares authorized as of September 30, 2022 and December 31, 2021, respectively; 135,961,552 and 124,873,316 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively
1413
Additional paid in capital 596,903555,359
Accumulated deficit (541,840)(460,110)
Accumulated other comprehensive loss(37)(31)
Total stockholders’ equity55,04095,231
Total liabilities and stockholders’ equity$303,017$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 September 30,Nine Months Ended September 30,
2022202120222021
Product revenue, net$29,554 $11,035 $76,724 $27,921 
Royalty, contract and other revenue171 25 380 240 
Total revenue29,725 11,060 77,104 28,161 
Costs and expenses:
Cost of goods sold, excluding amortization of intangible assets5,260 3,220 16,343 8,429 
   Research and development6,043 5,663 16,011 15,078 
   Selling, general and administrative34,491 26,535 103,388 71,539 
   Amortization of intangible assets 2,711  8,132  
      Total costs and expenses48,505 35,418 143,874 95,046 
Loss from operations (18,780)(24,358)(66,770)(66,885)
Other income (expense):
   Interest and other income 472 66 735 243 
   Interest expense (3,989)(1,798)(10,958)(5,384)
   Change in fair value of warrants 9 81 1,746 91 
   Change in fair value of contingent value rights 118  (7,569) 
      Total other expense (3,390)(1,651)(16,046)(5,050)
      Net loss before benefit from income taxes(22,170)(26,009)(82,816)(71,935)
Benefit from income taxes339  1,086  
      Net loss$(21,831)$(26,009)$(81,730)$(71,935)
Other comprehensive loss, net of tax:
   Unrealized gains (losses) on investments16 (5)(5)(34)
   Foreign currency translation adjustments(1)(1)(1)2 
      Comprehensive loss $(21,816)$(26,015)$(81,736)$(71,967)
Net loss per common share - basic and diluted$(0.16)$(0.39)$(0.60)$(1.11)
Weighted average common shares outstanding - basic and diluted 135,951,761 66,497,593 135,508,203 64,722,552 
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 (net of 71,782 shares withheld for tax)
148,643 — (365)— — (365)
Stock-based compensation— — 2,461 — — 2,461 
Other comprehensive loss— — — (16)— (16)
Balance, March 31, 202166,333,456 $7 $400,186 $(10)$(355,796)$44,387 
Net loss— — — — (27,515)(27,515)
Exercise of stock options55,818 — 140 — — 140 
Stock-based compensation— — 2,512 — — 2,512 
Issuance of common stock through employee stock purchase plan108,096 — 374 — — 374 
Other comprehensive loss— — — (10)— (10)
Balance, June 30, 202166,497,370 $7 $403,212 $(20)$(383,311)19,888 
Net loss— — — — (26,009)(26,009)
Exercise of stock options525 — 1 — — 1 
Stock-based compensation— — 3,665 — — 3,665 
Other comprehensive loss— — — (6)— (6)
Balance, September 30, 202166,497,895 $7 $406,878 $(26)$(409,320)(2,461)
 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 (net of 197,257 shares withheld for tax)
404,743 — (416)— — (416)
Stock-based compensation— — 3,301 — — 3,301 
Other comprehensive loss— — — (35)— (35)
Balance, March 31, 2022135,528,195 $14 $590,331 $(66)$(493,824)$96,455 
Net loss— — — — (26,185)(26,185)
Vesting of restricted stock units (net of 1,317 shares withheld for tax)
2,561 — (3)— — (3)
Stock-based compensation— — 3,152 — — 3,152 
Issuance of common stock through employee stock purchase plan389,987 — 510 — — 510 
Other comprehensive loss— — — 14 — 14 
Balance, June 30, 2022135,920,743 $14 $593,990 $(52)$(520,009)$73,943 
Net loss— — — — (21,831)(21,831)
Vesting of restricted stock units (net of 19,007 shares withheld for tax)
40,809 — (28)— — (28)
Stock-based compensation— — 2,941 — — 2,941 
Other comprehensive loss— — — 15 — 15 
Balance, September 30, 2022135,961,552 $14 $596,903 $(37)$(541,840)$55,040 
See accompanying notes to condensed consolidated financial statements.

6


XERIS BIOPHARMA HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands; unaudited)
Nine Months Ended September 30,
20222021
Cash flows from operating activities:
     Net loss $(81,730)$(71,935)
     Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation 1,033 980 
Amortization of intangible assets8,132  
Amortization of investments 148 353 
Amortization of debt issuance costs 1,111 727 
Stock-based compensation 9,394 8,638 
Loss on extinguishment of debt1,223  
Loss on disposal of property and equipment236  
Change in fair value of warrants (1,746)(91)
Change in fair value of contingent value rights7,569  
Changes in operating assets and liabilities:
Trade accounts receivable
(10,062)(6,686)
Prepaid expenses and other current assets
(2,758)(386)
Inventory
(1,960)(5,144)
Accounts payable
(5,008)1,173 
Other accrued liabilities
(12,135)4,650 
Accrued trade discounts and rebates
4,280 798 
Accrued returns reserve
3,277 272 
Deferred rent(238) 
Supply agreement liabilities(5,280) 
Other(2,258)62 
Net cash used in operating activities(86,772)(66,589)
Cash flows from investing activities:
Capital expenditures(392)(954)
Purchases of investments (30,784)
Sales and maturities of investments25,685 93,100 
Net cash provided by investing activities 25,293 61,362 
Cash flows from financing activities:
     Proceeds from equity offerings30,000 27,000 
     Payments of equity offering costs (54)
     Proceeds from issuance of debt97,295  
Repayment of debt(43,496) 
     Payments of debt issuance costs(4,816) 
Payments for loss on extinguishment of debt(737) 
     Proceeds from issuance of employee stock purchase plan shares510 374 
     Proceeds from exercise of stock awards8 167 
     Repurchase of common stock withheld for taxes(447)(365)
Net cash provided by financing activities
78,317 27,122 
Effect of exchange rate changes on cash and cash equivalents
 (1)
Increase in cash and cash equivalents 16,838 21,894 
Cash and cash equivalents, beginning of period
67,271 37,598 
Cash and cash equivalents, end of period
$84,109 $59,492 
Supplemental schedule of cash flow information:
            Cash paid for interest
$7,689 $5,350 
Supplemental schedule of non-cash investing and financing activities:
Issuance of warrants related to loan agreement$2,080 $ 

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 growth-oriented biopharmaceutical company committed to improving patients' lives by developing and commercializing innovative products across a range of therapies. 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 bring new products forward using its 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 4). 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 4 – 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 on October 5, 2021 and to Xeris Biopharma when referring to periods on or subsequent to October 5, 2021. Throughout this document, unless otherwise noted, references to Gvoke include Gvoke PFS, Gvoke HypoPen, Gvoke Kit and Ogluo (glucagon).
Liquidity and capital resources
The Company has incurred operating losses since inception and has an accumulated deficit of $541.8 million as of September 30, 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 September 30, 2022, capital raised in the first quarter and access to the additional $50.0 million remaining from the Credit Agreement and Guaranty with Hayfin Services LLP, the Company believes that its cash resources are sufficient to sustain operations and capital expenditure requirements for at least the next 12 months from the issuance date of these condensed consolidated financial statements. If needed, the Company may elect to finance its operations through equity or debt financing along with revenues.
There can be no assurance that such funding may be available to the Company on acceptable terms, or at all, or that the Company will be able to successfully market and sell Gvoke, Keveyis and Recorlev. Market volatility resulting from the COVID-19 pandemic, and geopolitical instability resulting from the ongoing military conflict between Russia and Ukraine, rising interest rates, inflationary pressures, 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 Company's operations. The failure to raise funds as and when needed could have a negative impact on the Company's financial condition and ability to pursue its business strategies. If additional funding is not secured when required, the Company may need to delay or curtail its operations until such funding is received, which would have a material adverse impact on the business prospects and results of operations.
Note 2. Basis of presentation and summary of significant accounting policies and estimates
Basis of presentation
The condensed consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"), including those for interim financial information, and with the instructions for Quarterly Reports on Form 10-Q and Article 10 of Regulation S-X issued by the U.S. Securities and Exchange Commission (the "SEC").
In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the periods presented. The results of operations for such periods are not necessarily indicative of the results that may be expected for any future period. The accompanying financial statements should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 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 (the brand name in the European Union and United Kingdom for the Company's ready-to-use liquid glucagon product) 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.
Concentration of credit risk
For the three and nine months ended September 30, 2022, four customers accounted for 97% and 96% of the Company’s gross product revenues, respectively. For the three and nine months ended September 30, 2021, three customers accounted for 94% and 94% of the Company’s gross product revenues, respectively. At both September 30, 2022 and December 31, 2021, the same four customers accounted for 99% of the trade accounts receivable, net.
New accounting pronouncements
Adopted accounting standards
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 issuers' 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. The Company adopted this standard in first quarter 2022 and it did not have a material impact on the financial statements.
Pending accounting standards
In October 2020, the FASB issued ASU 2020-10, Codification Improvements, to make incremental improvements to GAAP and address stakeholder suggestions, including, among other things, clarifying that the requirement to provide comparative information in the financial statements extends to the corresponding disclosures section. 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 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 derivatives scope exception for contracts settled in an entity’s own equity. This standard enhances the consistency of earnings-per-
9


XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
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 is 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 requires allowances to be recorded instead of reducing the amortized cost of the investment. This standard limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and requires the reversal of previously recognized credit losses if the fair value increases. This standard would have been effective for the Company for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. The effective date of ASC Topic 326 was then delayed until fiscal years beginning after December 15, 2022 for SEC filers that are eligible to be smaller reporting companies under the SEC’s definition, as well as private companies and not-for-profit entities. The Company 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 will adopt the new standard using the modified retrospective approach by recognizing and measuring leases without revising comparative period information or disclosures. The Company will also elect the transition package of three practical expedients permitted within the standard, which among other things, allows for the carryforward of historical lease classifications.
The Company is still evaluating the impact of this new standard on the financial statements and related disclosures. The current estimated impact of the adoption of this new standard is the recognition of a right of use ("ROU") asset within the range of $5.0 million to $7.0 million and a lease liability within the range of $12.0 million to $14.0 million to be recorded as of January 1, 2022, but not reflected until we officially adopted the standard in the fourth quarter of 2022. The Company does not anticipate that the adoption of this standard will have a significant impact on the consolidated statements of operations and comprehensive loss or the consolidated statements of cash flows.
Note 3. Disaggregated revenue
The Company’s revenue is comprised primarily of sales of products and royalty revenue. Depending on the type of contract, the method of accounting and timing of revenue recognition may differ. Below is a description of the Company’s different types of revenue.
Product revenue - 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. Revenue is recognized at the point in time when the Company's customer (e.g., a
10


XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
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.
Royalty, contract and other revenue - Royalty and contract revenue is recognized as earned in accordance with contract terms when it can be reasonably estimated and collectability is reasonably assured.
The disaggregated revenue by primary products is as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Product revenue (in thousands):
Gvoke
$13,663 $11,035 $37,595 $27,921 
Keveyis
13,371  35,506  
Recorlev 2,520  3,623  
Product revenue, net29,554 11,035 76,724 27,921 
Royalty, contract and other revenue171 25 380 240 
Total revenue$29,725 $11,060 $77,104 $28,161 
Note 4. Business combination
On October 5, 2021 (the "acquisition closing date"), pursuant to the Transaction Agreement, dated as of May 24, 2021 (the "Transaction Agreement"), among Xeris Pharma, Strongbridge, Xeris Biopharma and Wells MergerSub, Inc., Xeris Pharma completed the acquisition of Strongbridge (the "Acquisition"). 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 Contingent Value Right ("CVR"), worth up to a maximum of $1.00 per Strongbridge Share settleable in cash, additional Company Shares, or a 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".
See "Note 15 – Stock compensation plans" for a more detailed description of the equity award plans assumed in the Transactions. See "Note 12 – Warrants" for a more detailed description of the warrants assumed in the Transactions.
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 has and will continue to 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 reducing headcount, most notably within the commercial, executive and general and administrative functions.
11


XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
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 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. There were no changes to the purchase price allocation in 2022 and the measurement period closed on June 30, 2022.

The fair value of the equity accounting warrants, which were assumed by the Company in connection with the Transactions, was determined using the Black-Scholes valuation model, which considers the expected terms of the warrants from the acquisition closing date as well as the risk-free interest rate, new exercise price after the 0.7840 conversion rate multiplied by and a volatility of 89.63% (a weighting of 60% of Xeris volatility and 40% of Strongbridge volatility is used).

The fair value of the private placement warrants which were assumed by the Company in connection with the Transactions, 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 revenue of Keveyis in 2023;
2023 Recorlev Milestone: $0.25 per CVR, upon the first achievement of at least $40 million in net revenue of Recorlev in 2023; and
2024 Recorlev Milestone: $0.50 per CVR, upon the first achievement of at least $80 million in net revenue of Recorlev in 2024.
Refer to "Note 13 - 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 issuances of up to 10.5 million CVRs to holders of Strongbridge rollover options and assumed warrants upon exercise.
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.
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 
There were no changes to the purchase price allocation in 2022 and the measurement period closed on June 30, 2022.
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. 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 2021, including transaction costs (e.g., bankers' fees, legal fees, consultant fees, etc.). Such transaction costs totaled $8.6 million and were recorded in the selling, general and administrative expenses in third quarter 2021 through second quarter 2022. No additional transaction costs were incurred in third quarter 2022.
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
13


XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
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 September 30,Nine Months Ended September 30,
2022202120222021
Revenue
$29,725 $22,556 $77,104 $58,081 
Net loss
$(21,831)$(28,566)$(81,730)$(96,544)
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 5. 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 September 30, 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 September 30, 2022 had an average remaining maturity of 0.1 years. The debt securities are reported at fair value with unrealized gains or losses recorded in accumulated other comprehensive income (loss) in the Condensed Consolidated Balance Sheets. Refer to "Note 13 - Fair Value Measurements", for information related to the fair value measurements and valuation methods utilized.
The following table represents the Company’s available-for-sale investments by major security type as of September 30, 2022 and December 31, 2021 (in thousands):
September 30, 2022
Amortized
Cost
Gross Unrealized
Gains
Gross Unrealized LossesTotal
Fair Value
Investments:
     Commercial paper$5,399 $ $ $5,399 
     Corporate securities2,624  (7)2,617 
     Foreign government securities1,313  (5)1,308 
        Total available-for-sale investments$9,336 $ $(12)$9,324 
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
14


XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
debt securities, the Company also considers 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 the nine months ended September 30, 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 6. Inventory
The components of inventories consisted of the following (in thousands):  
September 30, 2022December 31, 2021
Raw materials$6,047 $5,181 
Work in process9,380 7,442 
Finished goods4,694 5,495 
Inventory$20,121 $18,118 
Inventory reserves were $1.2 million and $1.0 million at September 30, 2022 and December 31, 2021, respectively.
Note 7. Property and equipment
Property and equipment consisted of the following (in thousands):
September 30, 2022December 31, 2021
Lab equipment
$3,710 $3,739 
Furniture and fixtures
1,355 1,355 
Computer equipment
473 307 
Office equipment8 28 
Software
307 307 
Leasehold improvements
5,066 5,026 
Total property and equipment10,919 10,762 
Less: accumulated depreciation and amortization(5,168)(4,135)
     Property and equipment, net$5,751 $6,627 
Depreciation and amortization expense relating to property and equipment was $0.4 million and $0.3 million for the three months ended September 30, 2022 and September 30, 2021, respectively. Depreciation and amortization expense relating to property and equipment was $1.0 million and $1.0 million for the nine months ended September 30, 2022 and September 30, 2021, respectively.
15


XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Note 8. Intangible assets
Identified intangible assets consisted of the following (in thousands):
Life (Years)September 30, 2022December 31, 2021
Gross assetsAccumulated amortizationNetGross assetsAccumulated amortizationNet
Definite-lived intangible asset - Keveyis5$11,000 $(2,200)$8,800 $11,000 $(550)$10,450 
Definite-lived intangible asset - Recorlev14121,000 (6,482)114,518 121,000  121,000 
Total intangible assets$132,000 $(8,682)$123,318 $132,000 $(550)$131,450 
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").
Recorlev was acquired as a result of the Acquisition and 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 September 30, 2022, expected amortization expense for intangible assets subject to amortization for the next five years is as follows (in thousands):
2022 remaining
$2,711 
202310,843 
202410,843 
202510,843 
202610,293 
Thereafter77,785 
     Total$123,318 
16


XERIS BIOPHARMA HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Note 9. Other accrued liabilities
Other accrued liabilities consisted of the following (in thousands):
September 30, 2022December 31, 2021
Accrued employee costs$10,792 $19,638 
Supply agreement - current portion6,720 6,009 
Accrued supply chain costs1,287 595 
Accrued marketing costs3,714 3,237 
Accrued research and development costs
1,417 1,998 
Accrued restructuring charges3,854 6,715 
Accrued interest expense
3,459 1,413 
Accrued Strongbridge transaction costs 1,839 
Accrued other costs
6,464 7,644 
Other accrued liabilities
$37,707 $49,088 
Note 10. 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, which has been fully recorded as of September 30, 2022. Costs of $1.5 million were incurred in the nine months ended September 30, 2022, with the majority incurred in first quarter 2022. The majority of the restructuring costs are 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 fourth quarter 2023. The restructuring reserve is included in other accrued liabilities and other liabilities in the Condensed Consolidated Balance Sheets.
The following table summarizes the initial restructuring reserve in connection with the Strongbridge acquisition and the payments made during the nine months ended September 30, 2022 (in thousands):
Restructuring Costs
Balance accrued at December 31, 2021
$6,713 
   Restructuring costs1,488 
   Payments(4,068)
Balance accrued at September 30, 2022 1
$4,133 
1 Approximately $279,000 of the restructuring cost was included in the other long-term liabilities as of September 30, 2022.
Note 11. Long-term debt
Convertible Senior Notes
In June 2020, Xeris Pharma completed a public offering of $86.3 million aggregate