SEC Filing | Xeris Biopharma Holdings, Inc.

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xers-20230630

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2023
or
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number: 001-40880

XERIS BIOPHARMA HOLDINGS, INC.

(Exact name of the registrant as specified in its charter)

Delaware

87-1082097

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer Identification No.)

1375 West Fulton Street, Suite 1300

Chicago, Illinois

60607

(Address of principal executive offices)

(Zip Code)

(844) 445-5704

(Registrant's telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.0001 par value per share

XERS

The 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 July 31, 2023, 138,065,993 shares, par value $0.0001 per share, of common stock were outstanding.

Table of Contents

Summary of the Material Risks Associated with Our Business

Our business is subject to numerous risks and uncertainties that you should be aware of in evaluating our business. These risks include, but are not limited to, the following:


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

The summary risk factors described above should be read together with the text of the full risk factors below in the section entitled "Risk Factors" and the other information set forth in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and the related notes, as well as in other documents that we file with the United States Securities and Exchange Commission. The risks summarized above or described in full below are not the only risks that we face. Additional risks and uncertainties not precisely known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition, results of operations and future growth prospects.

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XERIS BIOPHARMA HOLDINGS, INC.

Index to Quarterly Report on Form 10-Q


			Page
Part I. Financial Information
	Item 1. Financial Statements
		Condensed Consolidated Balance Sheets as of June 3 0 , 2023 and December 31, 2022	4
		Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and s ix months ended June 3 0 , 2023 and 2022	5
		Condensed Consolidated Statements of Stockholders’ Equity for the three an d six months ended June 3 0 , 2023 and 2022	6
		Condensed Consolidated Statements of Cash Flow for the six months ended June 3 0 , 2023 and 2022	7
		Notes to Condensed Consolidated Financial Statements	9
	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		24
	Item 3. Quantitative and Qualitative Disclosures About Market Risk		31
	Item 4. Controls and Procedures		32
Part II. Other Information
	Item 1. Legal Proceedings		32
	Item 1A. Risk Factors		33
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		67
	Item 3. Defaults Upon Senior Securities		67
	Item 4. Mine Safety Disclosures		67
	Item 5. Other Information		67
	Item 6. Exhibits		67
	Signatures		69

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.

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

XERIS BIOPHARMA HOLDINGS, INC.

Condensed Consolidated Balance Sheets

(in thousands, except share and par value)


	June 30, 2023		December 31, 2022
Assets	(unaudited)
Current assets:
Cash and cash equivalents	$	46,170	$	121,966
Short-term investments	34,498		—
Trade accounts receivable, net	30,225		30,830
Inventory	36,538		24,735
Prepaid expenses and other current assets	8,310		9,287
Total current assets	155,741		186,818
Property and equipment, net	6,552		5,516
Operating lease right-of-use assets	23,632		3,992
Goodwill	22,859		22,859
Intangible assets, net	115,186		120,607
Other assets	4,808		4,730
Total assets	$	328,778	$	344,522
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	11,621	$	4,606
Current operating lease liabilities	1,935		1,580
Other accrued liabilities	19,413		36,786
Accrued trade discounts and rebates	17,034		16,818
Accrued returns reserve	11,320		11,173
Current portion of contingent value rights	16,637		—
Other current liabilities	1,718		2,658
Total current liabilities	79,678		73,621
Long-term debt, net of unamortized debt issuance costs	188,182		187,075
Non-current operating lease liabilities	34,871		9,402
Non-current contingent value rights	6,911		25,688


Deferred tax liabilities	2,843		3,518
Other liabilities	2,652		31
Total liabilities	315,137		299,335
Commitments and contingencies (Note 15)





Stockholders’ equity:
Preferred stock—par value $0.0001, 25,000,000 shares and 25,000,000 shares authorized and no shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively	—		—
Common stock—par value $0.0001, 350,000,000 shares and 350,000,000 shares authorized as of June 30, 2023 and December 31, 2022, respectively; 138,012,130 and 136,273,090 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively	14		14
Additional paid in capital	605,151		599,966
Accumulated deficit	(591,446)		(554,770)
Accumulated other comprehensive loss	(78)		(23)
Total stockholders’ equity	13,641		45,187
Total liabilities and stockholders’ equity	$	328,778	$	344,522

See accompanying notes to condensed consolidated financial statements.

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XERIS BIOPHARMA HOLDINGS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share data, unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Product revenue, net	$	36,893	$	25,260	$	69,158	$	47,170
Royalty, contract and other revenue	1,115		46		2,046		209
Total revenue	38,008		25,306		71,204		47,379
Costs and expenses:
Cost of goods sold	7,555		4,810		12,874		11,083
Research and development	6,087		3,718		10,925		9,968
Selling, general and administrative	37,635		32,984		71,240		68,897
Amortization of intangible assets	2,710		2,710		5,421		5,421
Total costs and expenses	53,987		44,222		100,460		95,369
Loss from operations	(15,979)		(18,916)		(29,256)		(47,990)
Other income (expense):
Interest and other income	1,223		195		2,523		263
Interest expense	(6,528)		(3,448)		(12,744)		(6,969)
Change in fair value of warrants	(14)		516		(14)		1,737
Change in fair value of contingent value rights	781		(4,871)		2,140		(7,687)
Total other expense	(4,538)		(7,608)		(8,095)		(12,656)
Net loss before benefit from income taxes	(20,517)		(26,524)		(37,351)		(60,646)
Benefit from income taxes	675		339		675		747
Net loss	$	(19,842)	$	(26,185)	$	(36,676)	$	(59,899)

Other comprehensive loss, net of tax:
Unrealized gains (losses) on investments	(49)		14		(55)		(21)

Comprehensive loss	$	(19,891)	$	(26,171)	$	(36,731)	$	(59,920)

Net loss per common share - basic and diluted	$	(0.14)	$	(0.19)	$	(0.27)	$	(0.44)

Weighted average common shares outstanding - basic and diluted	137,338,071		135,529,968		137,250,465		135,282,749

See accompanying notes to condensed consolidated financial statements.

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XERIS BIOPHARMA HOLDINGS, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share data, unaudited)


	Common Stock			Additional Paid In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
Balance, December 31, 2021	124,873,316	$	13	$	555,359	$	(31)	$	(460,110)	$	95,231
Net loss	—	—		—		—		(33,714)		(33,714)
Issuance of common stock related to Armistice equity offering	10,238,908	1		29,999		—		—		30,000
Issuance of warrants related to loan agreement	—	—		2,080		—		—		2,080
Exercise of stock options	11,228	—		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, 2022	135,528,195	$	14	$	590,331	$	(66)	$	(493,824)	$	96,455
Net loss	—	—		—		—		(26,185)		(26,185)




Exercise of stock options	2,561	—		(3)		—				(3)
Vesting of restricted stock units (net of 1,317 shares withheld for tax)	—	—		—		—		—		—
Stock-based compensation	—	—		3,152		—		—		3,152
Issuance of common stock through employee stock purchase plan	389,987	—		510		—		—		510
Other comprehensive loss	—	—		—		14		—		14
Balance, June 30, 2022	135,920,743	$	14	$	593,990	$	(52)	$	(520,009)	$	73,943


	Common Stock			Additional Paid In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
Balance, December 31, 2022	136,273,090	$	14	$	599,966	$	(23)	$	(554,770)	$	45,187
Net loss	—	—		—		—		(16,834)		(16,834)




Vesting of restricted stock units (net of 743,677 shares withheld for tax)	1,018,187	—		(863)		—		—		(863)
Stock-based compensation	—	—		2,564		—		—		2,564

Other comprehensive loss	—	—		—		(6)		—		(6)
Balance, March 31, 2023	137,291,277	$	14	$	601,667	$	(29)	$	(571,604)	$	30,048
Net loss	—	—		—		—		(19,842)		(19,842)




Exercise of stock options	14,036	—		32		—		—		32
Vesting of restricted stock units (net of 13,525 shares withheld for tax)	129,033	—		(25)		—		—		(25)
Stock-based compensation	—	—		2,928		—		—		2,928
Issuance of common stock through employee stock purchase plan	577,784	—		549		—		—		549
Other comprehensive loss	—	—		—		(49)		—		(49)
Balance, June 30, 2023	138,012,130	$	14	$	605,151	$	(78)	$	(591,446)	$	13,641

See accompanying notes to condensed consolidated financial statements.

XERIS BIOPHARMA HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands, unaudited)


	Six Months Ended June 30,
		2023		2022
Cash flows from operating activities:
Net loss		$	(36,676)	$	(59,899)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		750		673
Amortization of intangible assets		5,421		5,421
Amortization of premium/discount on investments		(812)		129
Amortization of debt discount and debt issuance costs		1,107		673
Amortization of operating right-of-use assets		373		—

Stock-based compensation		5,492		6,453

Loss on extinguishment of debt		—		1,223


Change in fair value of warrants		14		(1,737)
Change in fair value of contingent value rights		(2,140)		7,687

Changes in operating assets and liabilities:
Trade accounts receivable		605		(8,300)
Prepaid expenses and other current assets		827		(921)
Inventory		(11,250)		(305)
Accounts payable		7,015		(2,293)
Other accrued liabilities		(11,206)		(12,478)
Accrued trade discounts and rebates		216		(198)
Accrued returns reserve		147		1,210
Supply agreement liabilities		(6,720)		(5,280)
Operating lease liabilities		5,961		—
Other		992		(1,076)
Net cash used in operating activities		(39,884)		(69,018)
Cash flows from investing activities:
Capital expenditures		(1,786)		(216)
Purchases of investments		(43,741)		—
Sales and maturities of investments		10,000		18,800

Net cash (used in) provided by investing activities		(35,527)		18,584
Cash flows from financing activities:
Proceeds from equity offerings		—		30,000

Proceeds from issuance of debt		—		97,295
Repayment of debt		—		(43,496)
Payments of debt issuance costs		—		(4,657)
Payments for loss on extinguishment of debt		—		(737)
Proceeds from issuance of employee stock purchase plan shares		549		510
Proceeds from exercise of stock awards		32		8
Repurchase of common stock withheld for taxes		(888)		(419)
Net cash (used in) provided by financing activities		(307)		78,504
Effect of exchange rate changes on cash, cash equivalents and restricted cash		—		(1)
Increase in cash, cash equivalents and restricted cash		(75,718)		28,069
Cash, cash equivalents and restricted cash, beginning of year		126,314		67,271
Cash, cash equivalents and restricted cash, end of year		$	50,596	$	95,340

XERIS BIOPHARMA HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands, unaudited)


	Six Months Ended June 30,
		2023		2022
Supplemental schedule of cash flow information:
Cash paid for interest		$	15,206	$	4,767
Supplemental schedule of non-cash activities:
Issuance of warrants related to loan agreement		$	—	$	2,080
Initial operating lease right-of-use assets for adoption of ASU 2016-02		$	—	$	(6,277)
Initial current and non-current operating lease liabilities for adoption of ASU 2016-02		$	—	$	14,013

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that agrees to the same amounts shown in the condensed consolidated statements of cash flows (in thousands):


	As of June 30,
		2023		2022
Cash flows from operating activities:
Cash and cash equivalents		$	46,170	$	95,340
Restricted cash included in Other assets (1)		4,426		—
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows		$	50,596	$	95,340

(1) These restricted cash items are primarily security deposit in the form of letters of credit for the Company to secure lease.

See accompanying notes to condensed consolidated financial statements.

XERIS BIOPHARMA HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Note 1. Organization and nature of the business

Nature of business

Xeris Biopharma Holdings, Inc. ("Xeris Biopharma" or the "Company") is a growth-oriented biopharmaceutical company committed to improving patients' lives by developing and commercializing clinically meaningful products across a range of therapies. The Company currently has three commercially available products: Gvoke, a ready-to-use, liquid-stable glucagon for the treatment of severe hypoglycemia; Keveyis, the first therapy approved in the United States to treat hyperkalemic, hypokalemic, and related variants of Primary Periodic Paralysis ("PPP"); and Recorlev, a cortisol synthesis inhibitor for the treatment of endogenous hypercortisolemia in adult patients with Cushing’s syndrome approved by the Food and Drug Administration ("FDA") in December 2021. The Company also has a pipeline of development programs to bring new products forward using its proprietary formulation science, XeriSol and XeriJect.

As used herein, the "Company" or "Xeris" refers to Xeris Pharmaceuticals, Inc. ("Xeris Pharma") when referring to periods prior to the acquisition of Strongbridge Biopharma plc ("Strongbridge") on October 5, 2021 and to Xeris Biopharma when referring to periods on or subsequent to October 5, 2021.

Throughout this document, unless otherwise noted, references to Gvoke include Gvoke PFS, Gvoke HypoPen, Gvoke Kit and Ogluo (glucagon).

Liquidity and capital resources

The Company has incurred operating losses since inception and has an accumulated deficit of $591.4 million as of June 30, 2023. The Company expects to continue to incur net losses for at least the next 12 months beyond the issuance date of these condensed consolidated financial statements. Based on the Company’s current operating plans, existing working capital at June 30, 2023, the Company believes that its cash resources are sufficient to sustain operations and capital expenditure requirements for at least the next 12 months from the issuance date of these condensed consolidated financial statements.

If needed, the Company may elect to finance its operations through equity or debt financing along with revenues. There can be no assurance that such funding may be available to the Company on acceptable terms, or at all, or that the Company will be able to successfully market and sell Gvoke, Keveyis and Recorlev. Market volatility resulting from geopolitical instability resulting from the ongoing military conflict between Russia and Ukraine, rising interest rates, inflationary pressures, the tightening of lending standards, any further deterioration in the macroeconomic economy or financial services industry resulting from actual or potential bank failures, or other factors could also adversely impact the Company's ability to access capital as and when needed. The issuance of equity securities may result in dilution to stockholders. If the Company raises additional funds through the issuance of additional debt, which may have rights, preferences and privileges senior to those of the Company's common stockholders, the terms of the debt could impose significant restrictions on the Company's operations. The failure to raise funds as and when needed could have a negative impact on the Company's financial condition and ability to pursue its business strategies. If additional funding is not secured when required, the Company may need to delay or curtail its operations until such funding is received, which would have a material adverse impact on the business prospects and results of operations.

Note 2. Basis of presentation and summary of significant accounting policies and estimates

Basis of presentation

The condensed consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"), including those for interim financial information, and with the instructions for Quarterly Reports on Form 10-Q and Article 10 of Regulation S-X issued by the U.S. Securities and Exchange Commission (the "SEC").

In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the periods presented. The results of operations for such periods are not necessarily indicative of the results that may be expected for any future period. The accompanying financial statements should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2022 included in the Company's Annual Report on Form 10-K filed with the SEC on March 8, 2023.

Certain information and disclosures normally included in the annual financial statements prepared in accordance with GAAP, but that is not required for interim reporting purposes, have been condensed or omitted.

Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification ("ASC") and Accounting Standards Update ("ASU") issued by the Financial Accounting Standards Board ("FASB").

XERIS BIOPHARMA HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Basis of consolidation

These condensed consolidated financial statements include the financial statements of Xeris Biopharma Holdings, Inc. and subsidiaries. All intercompany transactions have been eliminated.

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses included in the financial statements and accompanying notes. Actual results could differ from those estimates.

Revenue recognition

The Company applies the guidance in ASC 606, Revenue Recognition, to all contracts with customers within the scope of the standard.

The Company sells product primarily to wholesalers or a specialty pharmacy that subsequently resell to retail pharmacies or patients. The Company enters into arrangements with payors, group purchasing organizations, and healthcare providers that provide for government-mandated or privately-negotiated rebates, chargebacks and discounts related to the Company’s products. The Company currently sells Gvoke, Keveyis and Recorlev in the United States only.

Revenue is recognized when the Company's customer (e.g., a wholesaler or specialty pharmacy) obtains control of promised goods or services, which is when the Company's obligations under the terms of the contract with the customer are satisfied, based on the consideration the Company expects to receive in exchange for those goods or services.

Revenues are recorded at the net product sales price, which includes estimated allowances for patient copay assistance programs, prompt payment discounts, payor rebates, chargebacks, service fees, and product returns, all of which are recorded at the time of sale to the pharmaceutical wholesaler or specialty pharmacy. The Company applies significant judgments and estimates in determining some of these allowances. If actual results differ from its estimates, adjustments are made to these allowances in the period in which the actual results or updates to estimates become known.

Such revenue is reported as product revenue, net in the condensed consolidated statements of operations and comprehensive loss.

Additionally, the Company earns revenue from research collaborations for the use of Xeris’ proprietary formulation technology platforms and royalties from branded products. Such revenue is recognized as earned in accordance with contract terms when it can be reasonably estimated and collectability is reasonably assured. This revenue is reported as royalty, contract and other revenue in the condensed consolidated statements of operations and comprehensive loss.

Concentration of credit risk

For the three and six months ended June 30, 2023, four customers accounted for 97% and 96% of the Company’s gross product revenue, respectively. For the three and six months ended June 30, 2022, the same four customers accounted for 98% and 96% of the Company’s gross product revenue, respectively. At June 30, 2023 and December 31, 2022, the same four customers accounted for 97% and 99% of the trade accounts receivable, net, respectively.

New accounting pronouncements

Adopted accounting standards

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This standard requires entities to estimate an expected lifetime credit loss on financial assets ranging from short-term trade accounts receivable to long-term financings and report credit losses using an expected losses model rather than the incurred losses model that was previously used and establishes additional disclosures related to credit risks. For available-for-sale debt securities with unrealized losses, the standard requires allowances to be recorded instead of reducing the amortized cost of the investment. This standard limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and requires the reversal of previously recognized credit losses if the fair value increases. This standard would have been effective for the Company for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. The effective date of ASC Topic 326 was then delayed until fiscal years beginning after December 15, 2022 for SEC filers that are eligible to be smaller reporting companies under the SEC’s definition, as well as private companies and not-for-profit entities. The Company adopted this standard beginning on January 1, 2023, and it did not have a material impact on the financial statements.

Pending accounting standards

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This standard eliminates certain accounting models to simplify the accounting for convertible instruments,

XERIS BIOPHARMA HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

expands the disclosure requirements related to the terms and features of convertible instruments, and amends the guidance for the derivatives scope exception for contracts settled in an entity’s own equity. This standard enhances the consistency of earnings-per-share ("EPS") calculations by requiring that an entity use the if-converted method and that the effect of potential share settlement be included in diluted EPS calculations and disclosures. This standard is effective for the Company for fiscal years beginning after December 15, 2023. Early adoption is permitted but not earlier than periods beginning after December 15, 2020. The Company is currently evaluating the impact the adoption of this new standard will have on the financial statements and disclosures.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This standard provides optional expedients for the application of GAAP, if certain criteria are met, to contracts and other transactions that reference London Inter-bank Offered Rate ("LIBOR") or other reference rates that are expected to be discontinued because of reference rate reform. This standard is effective for all entities as of March 12, 2020 through December 31, 2022. On December 21, 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, which extends the period of time entities can utilize the reference rate reform relief guidance under ASU 2020-04 from December 31, 2022 to December 31, 2024. The Company is currently evaluating the impact the adoption of this standard will have on the financial statements and disclosures.

Note 3. Disaggregated revenue

Disaggregated revenue by product is as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Product revenue (in thousands):
Gvoke	$	15,638	$	11,479	$	30,671	$	23,932
Keveyis	14,088		12,812		26,843		22,136
Recorlev	7,167		969		11,644		1,102
Product revenue, net	36,893		25,260		69,158		47,170
Royalty, contract and other revenue	1,115		46		2,046		209
Total revenue	$	38,008	$	25,306	$	71,204	$	47,379

XERIS BIOPHARMA HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Note 4. Short-term investments

The Company classifies investments in debt securities as available-for-sale. Debt securities are comprised of liquid investments that are highly rated securities and, as of June 30, 2023, consist of U.S. government securities, all with remaining maturities of less than one year. Debt securities as of June 30, 2023 had an average remaining maturity of 0.3 years. The debt securities are reported at fair value with unrealized gains or losses recorded in accumulated other comprehensive income (loss) in the condensed consolidated balance sheets. The cost of short-term investments is adjusted for amortization of premiums or accretion of discounts to maturity, and such amortization or accretion, as well as interest income, are included in interest and other income in the condensed consolidated statements of operations and comprehensive loss. Refer to "Note 12 - Fair Value Measurements", for information related to the fair value measurements and valuation methods utilized.

There were no short-term investments as of December 31, 2022. The following table represents the Company’s short-term investments by major security type as of June 30, 2023 (in thousands):


	June 30, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Total Fair Value

Investments:
U.S. government securities	$	34,553	$	—	$	(55)	$	34,498


Total available-for-sale investments	$	34,553	$	—	$	(55)	$	34,498

Allowance for Credit Losses

For available-for-sale securities in an unrealized loss position, the Company first assesses whether they are intended to be sold, or if it is more likely than not that the Company will be required to sell, the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through earnings. For available-for-sale securities that do not meet the above criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the severity of the impairment, any changes in interest rates, market conditions, changes to the underlying credit ratings and forecasted recovery, among other factors. The credit-related portion of unrealized losses, and any subsequent improvements, are recorded in interest income through an allowance account. Any impairment that has not been recorded through an allowance for credit losses is included in other comprehensive loss on the statements of operations and comprehensive loss. No credit loss allowance was recorded in the three and six months ended June 30, 2023.

Note 5. Inventory

The components of inventory consist of the following (in thousands):


	June 30, 2023		December 31, 2022

Raw materials	$	13,439	$	7,410
Work in process	6,418		11,367
Finished goods	16,681		5,958
Inventory	$	36,538	$	24,735

Inventory reserves were $0.7 million and $1.3 million at June 30, 2023 and December 31, 2022, respectively.

XERIS BIOPHARMA HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Note 6. Property and equipment

Property and equipment consist of the following (in thousands):


	June 30, 2023		December 31, 2022

Lab equipment	$	3,968	$	3,841
Furniture and fixtures	1,626		1,355
Computer equipment	781		474
Office equipment	70		8
Software	353		307
Leasehold improvements	6,038		5,065
Total property and equipment	12,836		11,050
Less: accumulated depreciation and amortization	(6,284)		(5,534)
Property and equipment, net	$	6,552	$	5,516

Depreciation and amortization expense relating to property and equipment was $0.4 million and $0.4 million for the three months ended June 30, 2023 and 2022, respectively. Depreciation and amortization expense relating to property and equipment was $0.8 million and $0.7 million for the six months ended June 30, 2023 and 2022, respectively.

Note 7. Intangible assets

Identified intangible assets consist of the following (in thousands):


	Life (Years)	June 30, 2023						December 31, 2022
	Life (Years)	Gross assets		Accumulated amortization		Net		Gross assets		Accumulated amortization		Net
Definite-lived intangible asset - Keveyis	5	$	11,000	$	(3,850)	$	7,150	$	11,000	$	(2,750)	$	8,250
Definite-lived intangible asset - Recorlev	14	121,000		(12,964)		108,036		121,000		(8,643)		112,357
Total intangible assets		$	132,000	$	(16,814)	$	115,186	$	132,000	$	(11,393)	$	120,607

As of June 30, 2023, expected amortization expense for intangible assets subject to amortization for the next five years is as follows (in thousands):


2023 remaining	5,422
2024	10,843
2025	10,843
2026	10,293
2027	8,643

Thereafter	69,142
Total	$	115,186

XERIS BIOPHARMA HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Note 8. Other accrued liabilities

Other accrued liabilities consist of the following (in thousands):


	June 30, 2023		December 31, 2022
Accrued employee costs	$	10,968	$	13,400
Supply agreement - current portion	—		6,720
Accrued supply chain costs	190		562
Accrued marketing costs	1,977		2,593
Accrued research and development costs	455		1,411
Accrued restructuring charges	802		2,799
Accrued interest expense	1,088		4,656

Accrued other costs	3,933		4,645
Other accrued liabilities	$	19,413	$	36,786

Note 9. Restructuring costs

After the completion of the acquisition of Strongbridge on October 5, 2021, the Company undertook a restructuring plan to streamline the organization and realize operating expense synergies. The Company incurred total restructuring costs of approximately $11.1 million, which primarily related to employee termination costs. These costs were fully recognized and recorded by 2022 in selling, general and administrative expenses in the condensed consolidated statements of operations and comprehensive loss. The Company anticipates the plan will be paid out by the fourth quarter of 2023. The restructuring reserve is included in other accrued liabilities in the condensed consolidated balance sheets.

The following table summarizes the restructuring reserve for the six months ended June 30, 2023 (in thousands):


	Restructuring Costs



Balance accrued at December 31, 2022	2,799

Payments	(1,997)
Balance accrued at June 30, 2023	$	802

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. Since January 15, 2021, 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.

Xeris Pharma incurred debt issuance costs of $5.1 million in connection with the issuance of the Convertible Notes. 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 a conversion rate of 326.7974 shares of the Company's common stock per $1,000 principal amount of Convertible Notes. In the second half of 2020, $39.1 million in principal amount of Convertible Notes were converted into 13,171,791 shares of Xeris Pharma’s common stock.

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 (the "Trustee"), as supplemented by the first supplemental indenture dated June 30, 2020 (the "First Supplemental Indenture"), and the second supplemental indenture dated October 5, 2021 (the "Supplemental Indenture" and together with the Base Indenture and First Supplemental Indenture, the "Indenture"), among the Company, Xeris Pharma and the Trustee. The Convertible Notes will mature on July 15, 2025, unless earlier converted or redeemed or repurchased by the Company.

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

XERIS BIOPHARMA HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

collateral securing that indebtedness. The Convertible Notes are structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, and (to the extent Xeris Pharma is not a holder thereof) preferred equity, if any, of the Company’s other direct and indirect subsidiaries.

As a result of the transactions associated with the acquisition of Strongbridge, and pursuant to the Second Supplemental Indenture, the Convertible Notes are no longer convertible into shares of common stock of Xeris Pharma. 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 for the acquisition of Strongbridge, and the "Reference Property" provisions in the Indenture.

The fair value of the convertible senior notes is determined from using current interest rates based on credit ratings and the remaining term of maturity. As of June 30, 2023, the fair value of the convertible senior notes was approximately $41.7 million. The fair value of the convertible debt was estimated using inputs for volatility, the Company’s stock price, time to maturity, the risk-free rate and the Company’s credit spread, some of which are considered Level 3 inputs in the fair value hierarchy disclosed in "Note 12 - Fair value measurement".

Loan Agreement

In September 2019, Xeris Pharma entered into an Amended and Restated Loan and Security Agreement (the "Oxford Loan Agreement") with Oxford Finance LLC ("Oxford"), as the collateral agent and a lender, and Silicon Valley Bank, as a lender ("SVB", and together with Oxford, the "Prior Lenders"). The Oxford Loan Agreement provided for the Prior Lenders to extend up to $85.0 million in term loans to Xeris Pharma in three tranches, of which $60.0 million was drawn down in September 2019.

In June 2020, Xeris Pharma paid a portion of the term loan equal to the sum of $20.0 million, plus all accrued and unpaid interest. In November 2020, an additional $3.5 million was drawn from the term loan.

In March 2022, the Company, Xeris Pharma and certain subsidiary guarantors of the Company entered into a Credit Agreement and Guaranty (as amended, modified or amended and restated from time to time, the "Hayfin Loan Agreement") with the lenders from time to time parties thereto (the "Lenders") and Hayfin Services LLP, as administrative agent for the Lenders (in such capacity, together with its successors and assigns, the "Agent"), pursuant to which the Company and its subsidiaries party thereto granted a first priority security interest on substantially all of their assets, including intellectual property, subject to certain exceptions. The Hayfin Loan Agreement provided for the Lenders to extend $100.0 million in term loans to the Company on the closing date and up to an additional $50.0 million in delayed draw term loans during the one year period immediately following the closing date (collectively, the "Loans"). On December 28, 2022, the Company borrowed the full amount of such $50.0 million delayed draw term loan under the Hayfin Loan Agreement. In conjunction with the execution of the Hayfin Loan Agreement, the Oxford Loan Agreement remaining balance of $43.5 million and fees of $2.1 million in connection with the loan repayment were paid. In addition to utilizing the proceeds to repay the obligations under the Oxford Loan Agreement in full, the proceeds will otherwise be used for general corporate purposes.

The Loans incur interest at a floating per annum rate in an amount equal to the sum of (i) 9.0% (or 8.0% per annum if the replacement rate in effect is the Wall Street Journal Prime Rate) plus (ii) the greater of (x) (1) CME Group Benchmark Administration Limited (CBA) Term SOFR (or the replacement rate, if applicable) if CBA Term SOFR is greater than 1.00% plus 0.26161% or (2) 1.00% if CME Term SOFR is less than 1.00% and (y) one percent (1.00%) per annum (or 2.0% per annum if the replacement rate in effect is the Wall Street Journal Prime Rate). The Company has incurred total debt issuance costs of approximately $3.6 million related to the Hayfin Loan Agreement, which are being amortized to interest expense over the life of the loan using the effective interest method. The remaining balance of unamortized debt issuance costs have been reflected as a direct reduction to the loan balance. The effective interest rate, including the amortization of debt discount and debt issuance costs, amounts to 11.8%. The debt outstanding under the Hayfin Loan Agreement approximates fair value due to the variable interest rate on the debt.

The Loans will mature on March 8, 2027; provided, however, the Loans will mature on January 15, 2025 if the Convertible Notes are outstanding as of such date and either (i) the maturity date thereof has not been extended to a date on or after September 4, 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 components of debt are as follows (in thousands):


	June 30, 2023		December 31, 2022

Convertible Notes	$	47,175	$	47,175
Loan facility	145,012		144,487
Less: unamortized debt issuance costs	(4,005)		(4,587)
Long-term debt, net of unamortized debt issuance costs	$	188,182	$	187,075

XERIS BIOPHARMA HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

The following table sets forth the Company’s future minimum principal payments on the Convertible Note and the loan facility (in thousands):


2023 remaining	$	—
2024	—
2025	47,175
2026	—
2027	150,000

	$	197,175

For the three and six months ended June 30, 2023, the Company recognized interest expense of $6.5 million and $12.7 million, respectively, of which $0.6 million and $1.1 million, respectively, related to the amortization of debt discount and issuance costs. For the three and six months ended June 30, 2022, the Company recognized interest expense of $3.4 million and $7.0 million, respectively, of which $0.5 million and $0.7 million, respectively, related to the amortization of debt discount and issuance costs. Interest expense in the six months ended June 30, 2022 also included a $1.2 million loss on extinguishment of debt in both periods related to the Oxford Loan Agreement with the Prior Lenders, which ceased in March 2022.

XERIS BIOPHARMA HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Note 11. Warrants

On January 3, 2022, the Company entered into a securities purchase agreement in connection with a private placement with an affiliate of Armistice Capital, LLC ("Armistice") for aggregate gross proceeds of approximately $30.0 million. In accordance with the purchase agreement, the Company issued to Armistice an aggregate of (i) 10,238,908 shares of the Company’s common stock, par value $0.0001 per share at a purchase price of $2.93 per share, and (ii) warrants to purchase an aggregate of 5,119,454 shares of the Company's common stock at an exercise price of $3.223 per share. The warrants became exercisable immediately upon the closing of the transaction and have a term of five years from the earliest of the date (a) of effectiveness of the resale registration statement, which was February 7, 2022, (b) all of the shares of the Company’s common stock issued or issuable to Armistice under the securities purchase agreement and all shares of the Company's common stock issuable upon exercise of the warrants (the "Warrant Shares") have been sold pursuant to Rule 144 or may be sold pursuant to Rule 144 without the requirement for the Company to be in compliance with the current public information required under Rule 144 and without volume or manner-of-sale restrictions, (c) following the one-year anniversary of the date of closing provided that the holder of Shares or Warrant Shares is not an affiliate of the Company, or (d) all of the shares and Warrant Shares may be sold pursuant to an exemption from registration under Section 4(a)(1) of the Securities Act without volume or manner-of-sale restrictions.

Associated with the Hayfin Loan Agreement disclosed in "Note 10 - Long-term debt", the Lenders also received warrants to purchase 1,315,789 shares of the common stock of the Company at a price of $2.28 per share. The warrants are (i) exercisable until March 8, 2029; (ii) freely transferable and detachable from the Loans; and (iii) subject to customary warrant holder rights and protections, including structural-based anti-dilution protection and adjustments for stock dividends, splits, combinations, reclassifications and the like.

As of June 30, 2023, the following warrants were outstanding:


Warrants classified as liabilities:	Outstanding Warrants	Exercise Price per Warrant	Expiration Date
2018 Term A Warrants	53,720	$11.169	February 2025
2018 Term B Warrants	40,292	$11.169	September 2025
	94,012
Warrants classified as equities:
Warrants in connection with CRG loan agreement	309,122	$9.410	July 2024
Warrants in connection with CRG loan amendment in January 2018	978,628	$12.760	January 2025
Warrants in connection with Avenue Capital loan agreement	209,633	$2.390	May 2025
Warrants in connection with Avenue Capital loan agreement	209,633	$2.390	December 2025
Warrants in connection with Horizon and Oxford loan agreement	125,999	$3.130	December 2026
Warrants in connection with Armistice securities purchase agreement	5,119,454	$3.223	February 2027
Warrants in connection with Hayfin Loan Agreement	1,315,789	$2.280	March 2029
	8,268,258

The Company recognized losses of $7,000 and $7,000 upon the change in fair value of the warrants during the three months ended June 30, 2023 related to the 2018 Term A Warrants and the 2018 Term B Warrants, respectively. The Company recognized losses of $8,000 and $6,000 upon the change in fair value of the warrants during the six months ended June 30, 2023 related to the 2018 Term A Warrants and the 2018 Term B Warrants, respectively.

The Company recognized gains of $23,000 and $18,000 upon the change in fair value of the warrants during the three months ended June 30, 2022 related to the 2018 Term A Warrants and the 2018 Term B Warrants, respectively. The Company recognized gains of $0.5 million related to the expiration of the assumed Strongbridge private placement warrants in June 2022. The Company recognized gains of $35,000 and $26,000 upon the change in fair value of the warrants during the six months ended June 30, 2022 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.

XERIS BIOPHARMA HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Level 2: Measured using quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs, other than quoted prices in active markets, that are observable either directly or indirectly.

Level 3: Measured based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable from objective sources (i.e., supported by little or no market activity).

Fair value measurements are classified based on the lowest level of input that is significant to the measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, which may affect the valuation of the assets and liabilities and their placement within the fair value hierarchy levels. The determination of the fair values stated below considers the market for the financial assets and liabilities, the associated credit risk and other factors as required. The Company considers active markets as those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

The following tables present the Company’s fair value hierarchy for those assets and liabilities measured at fair value as of June 30, 2023 and December 31, 2022 (in thousands):


	Total as of June 30, 2023		Level 1		Level 2		Level 3

Assets
Cash and cash equivalents:
Cash and money market funds	$	46,170	$	46,170	$	—	$	—

Investments:
U.S. government securities	$	34,498	$	34,498	$	—	$	—





Other assets:
Restricted cash	$	4,426	$	4,426	$	—	$	—

Liabilities
Current portion of contingent value rights	$	16,637	$	—	$	—	$	16,637
Non-current contingent value rights	$	6,911	$	—	$	—	$	6,911
Warrant liabilities	$	23	$	—	$	—	$	23


	Total as of December 31, 2022		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents:
Cash and money market funds	$	121,966	$	121,966	$	—	$	—








Other assets:
Restricted cash	$	4,348	$	4,348	$	—	$	—

Liabilities
Contingent value rights	$	25,688	$	—	$	—	$	25,688
Warrant liabilities	$	9	$	—	$	—	$	9

Contingent Value Rights

As part of the 2021 acquisition of Strongbridge, the Company issued contingent value rights ("CVRs") representing additional contingent consideration of up to $1.00 for each CVR upon the achievement of the following:

•Keveyis Milestone: $0.25 per CVR, upon the earlier of the first listing of any patent in the FDA's Orange Book for Keveyis by the end of 2023 or the first achievement of at least $40 million in net revenue of Keveyis in 2023;

XERIS BIOPHARMA HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

•2023 Recorlev Milestone: $0.25 per CVR, upon the first achievement of at least $40 million in net revenue of Recorlev in 2023; and

•2024 Recorlev Milestone: $0.50 per CVR, upon the first achievement of at least $80 million in net revenue of Recorlev in 2024.

There are approximately 74.1 million CVRs. Up to 10.5 million CVRs may be issued to holders of Strongbridge rollover options and assumed warrants upon the exercise thereof. CVRs are settleable in cash, common stock, or a combination of cash and common stock, at the Company's sole election.

Contingent consideration obligations are recorded at their estimated fair values and these obligations are revalued at each reporting period until the related contingencies are resolved. The CVRs are adjusted to fair value using the methods described above at the end of each reporting period. Significant changes which increase or decrease the probabilities of achieving the related milestones or shorten or lengthen the time required to achieve such events would result in corresponding increases or decreases in the fair values of these obligations.

The Company has determined that the CVR liabilities' fair values are Level 3 items within the fair value hierarchy. The following table presents the change in the CVR liabilities (in thousands):




Balance at December 31, 2022	$	25,688
Change in fair value of CVRs	(2,140)
Balance at June 30, 2023	$	23,548

Balance at Current portion of contingent value rights	$	16,637
Balance at Non-current contingent value rights	6,911
Balance at June 30, 2023	$	23,548

Note 13. Stock compensation plan

In 2011, the Company adopted the 2011 Stock Option Issuance Plan (the "2011 Plan") and subsequently amended it to authorize the Board of Directors to issue up to 4,714,982 incentive stock option and non-qualified stock option awards.

The 2018 Stock Option and Incentive Plan (the "2018 Plan") was adopted by the Board of Directors in April 2018 and approved by the Company's stockholders in June 2018 to award up to 1,822,000 shares of common stock. The 2018 Plan replaced the 2011 Plan as the Board of Directors decided not to make additional awards under the 2011 Plan following the closing of the IPO, which occurred in June 2018. The 2018 Plan allows the compensation committee to make equity-based and cash-based incentive awards to the Company's officers, employees, directors and other key persons (including consultants). No grants of stock options or other awards may be made under the 2018 Plan after the tenth anniversary of the effective date.

As of June 30, 2023, there were 3,856,319 shares of common stock available for future issuance under the 2018 Plan.

The 2018 Employee Stock Purchase Plan (the "ESPP") was adopted by the Board of Directors in April 2018 and approved by the Company's stockholders in June 2018 to issue up to 193,000 shares of common stock to participating employees. Through the ESPP, eligible employees may authorize payroll deductions of up to 15% of their compensation to purchase up to the number of shares of common stock determined by dividing $25,000 by the closing market price of Xeris common stock on the offering date. The purchase price per share at each purchase date is equal to 85% of the lower of (i) the closing market price per share of Xeris common stock on the employee’s offering date or (ii) the closing market price per share of Xeris common stock on the purchase date. Each offering period has a six-month duration and purchase interval. As of June 30, 2023, there were 76 shares available for issuance under the ESPP.

The Equity Inducement Plan (the "Inducement Plan") was adopted by the Board of Directors in February 2019. The Inducement Plan allows the Company to make stock option or restricted stock unit awards to prospective employees of the Company as an inducement to such individuals to commence employment with the Company. The Company uses this Inducement Plan to help it attract and retain prospective employees who are necessary to support the commercialization of products and the expansion of the Company generally. As of June 30, 2023, there were 351,404 shares of common stock available for future issuance under the Inducement Plan.

Assumed Plans

On the acquisition date of Strongbridge, the Company assumed all then-outstanding stock options and shares available and reserved for issuance under some legacy equity incentive plans of Strongbridge, including the Strongbridge 2015 equity compensation plan and Strongbridge 2017 inducement plan (collectively, the "Assumed Plans"). Shares reserved under the Assumed Plans will be available

XERIS BIOPHARMA HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

for future grants. The Company also assumed all then-outstanding stock options from the rest of the legacy equity incentive plans of Strongbridge without assuming the shares available and reserved for issuance under these plans. The number of shares subject to stock options outstanding under all Strongbridge legacy equity incentive plans are included in the tables below. As of June 30, 2023, there were 2,442,730 shares reserved for future grants under the Assumed Plans.

Stock options

Stock options are granted with an exercise price equal to the market price of the Company’s stock at the date of grant. Stock option awards typically vest over either two, three or four years after the grant date and expire seven to ten years from the grant date.

The fair value of each option is estimated on the date of grant using a Black-Scholes option valuation model that uses the assumptions noted in the following table. The expected term of options represents the period of time that options granted are expected to be outstanding. The risk-free interest rate for periods during the contractual life of the option is based on the United States Treasury yield curve in effect at the time of grant. The expected stock price volatility assumption is based on the historical volatilities of a peer group of publicly traded companies as well as the historical volatility of the Company's common stock since the Company began trading subsequent to the IPO in June 2018 over the period corresponding to the expected life as of the grant date. The expected dividend yield is based on the expected annual dividend as a percentage of the market value of the Company’s ordinary shares as of the grant date.

Stock option activity under the 2011 Plan, 2018 Plan, Inducement Plan and Assumed Plans for the six months ended June 30, 2023 was as follows:


	Number of Options	Weighted Average Exercise Price Per Share		Weighted Average Contractual Life (Years)
Outstanding - December 31, 2022	9,700,161	$	5.37	4.76
Granted	—	—


Exercised	(14,036)	2.33
Forfeited	(11,846)	5.49
Expired	(366,433)	9.08
Outstanding - June 30, 2023	9,307,846	$	5.23	4.40
Vested and expected to vest at June 30, 2023	9,307,846	$	5.23	4.40
Exercisable - June 30, 2023	8,968,523	$	5.24	4.28

At June 30, 2023, there was a total of $1.0 million of unrecognized stock-based compensation expense related to stock options that is expected to be recognized over a weighted average period of 1.3 years.

XERIS BIOPHARMA HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Restricted Stock Units

The Company grants Restricted Stock Units ("RSUs") to employees. RSUs that are granted vest over either three or four years in equal annual installments beginning on the one-year anniversary of the date of grant, provided that the employee is employed by the Company on such vesting date. If and when the RSUs vest, the Company will issue one share of common stock for each whole RSU that has vested, subject to satisfaction of the employee’s tax withholding obligations. Upon vesting and settlement of RSUs or exercise of stock options, at the election of the grantee, the Company does not collect withholding taxes in cash from employees. Instead, the Company withholds upon settlement as RSUs vest, or as stock options are exercised, the portion of those shares with a fair market value equal to the amount of the minimum statutory withholding taxes due. The withheld shares are accounted for as repurchases of common stock. Stock-based compensation expense related to RSUs is recognized on a straight-line basis over the employee’s requisite service period.

A summary of outstanding RSU awards and the activity for the six months ended June 30, 2023 was as follows:


	Number of Units	Weighted Average Grant Date Fair Value Per Share
Unvested balance - December 31, 2022	5,255,560	$	3.25
Granted	7,499,400	1.31
Vested	(1,904,422)	3.69
Forfeited	(247,767)	1.75
Unvested balance - June 30, 2023	10,602,771	$	1.83

As of June 30, 2023, there was $15.4 million of unrecognized stock-based compensation expense related to RSUs, which is expected to be recognized over the weighted-average remaining vesting period of 2.2 years.

The following table summarizes the reporting of total stock-based compensation expense resulting from stock options, RSUs and the ESPP (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

Research and development	632		416		$	954	$	963
Selling, general and administrative	2,296		2,736		4,538		5,490
Total stock-based compensation expense	$	2,928	$	3,152	$	5,492	$	6,453

Note 14. Leases

The Company has non-cancellable operating leases for office and laboratory space, which expire at various times in 2031 and 2037. The non-cancellable lease agreements provide for monthly lease payments, which increase during the term of each lease agreement.

On September 29, 2022, Xeris Pharma amended and restated its existing lease with Fulton Ogden Venture, LLC to expand the leased premises to accommodate the Company’s relocation of its headquarters to such premises. The term of the space existing prior to the amendment and restatement commenced on January 1, 2021 and the lease for the combined expanded space commenced on April 1, 2023. The term of the amended and restated lease will expire on March 31, 2036, unless extended or earlier terminated pursuant to the terms of the lease.

All of the Company's leases are classified as operating leases, which are included as operating lease right-of-use assets and current and non-current operating lease liabilities in the condensed consolidated balance sheets. The Company’s operating lease costs are included in operating expenses in the accompanying condensed consolidated statements of operations and comprehensive loss. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

A majority of the Company's lease agreements include fixed rental payments. Certain lease agreements include fixed rental payments that are adjusted periodically by a fixed rate. The fixed payments, including the effects of changes in the fixed rate or amount, and renewal options reasonably certain to be exercised, are included in the measurement of the related lease liability. The exercise of lease renewal options is at the Company's sole discretion. The depreciable life of assets and leasehold improvements are limited by the expected lease term, which includes renewal options reasonably certain to be exercised. The majority of the Company's real estate leases require that the Company pay maintenance, real estate taxes and insurance in addition to rent. These payments are generally

XERIS BIOPHARMA HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

variable and based on actual costs incurred by the lessor. Therefore, these amounts are not included in the consideration of the contract when determining the right-of-use asset and lease liability but are reflected as variable lease expenses.

As the interest rate implicit in the lease is not readily determinable, the Company uses the incremental borrowing rate as the discount rate. The Company considers observable inputs as of the effective date of the ASC 842 adoption including the credit rating, existing borrowings and other relevant borrowing rates, such as risk-free rates like the United States Treasury rate, and then adjusting as necessary for the appropriate lease term. The incremental borrowing rate is reassessed if there is a change to the lease term or if a modification occurs and it is not accounted for as a separate contract. As of June 30, 2023, the Company’s operating leases had a weighted-average remaining lease term of 12.1 years and a weighted-average discount rate of 11.9%.

Supplemental cash flow information related to the Company’s operating and finance leases was as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	440	$	613	$	918	$	1,058
Right of use assets obtained in exchange for new lease obligations:
Operating leases	$	20,043	$	—	$	20,043	$	—

The Company reports the amortization of operating lease right-of-use assets and the change in operating lease liabilities on a net basis in other in the operating activities of the accompanying condensed consolidated statements of cash flows.

The components of lease expense were as follows (in thousand):


	Three Months Ended June 30,				Six Months Ended June 30,
Lease cost	2023		2022		2023		2022
Operating lease expense	$	1,350	$	533	$	1,763	$	1,000
Variable lease cost	302		215		652		440
Sublease income	(54)		(52)		(108)		(104)
Total lease cost	$	1,598	$	696	$	2,307	$	1,336

As of June 30, 2023, maturities of lease liabilities are summarized as follows (in thousands):


2023 remaining	$	730
2024	3,495
2025	6,080
2026	6,232
2027	6,389
Thereafter	51,990
Total lease payments	74,916
Less: Effect of discounting to net present value	(38,110)
Present value of lease liabilities	$	36,806

Operating lease liabilities, current	1,935
Operating lease liabilities, non-current	34,871
Total operating lease liabilities	$	36,806

XERIS BIOPHARMA HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Note 15. Commitments and contingencies

Commitments

Commitments to Taro

The Company has a supply agreement with Taro Pharmaceuticals North America, Inc. ("Taro") to produce Keveyis. In 2023, the Company amended the agreement to extend the initial term until March 2027. As part of the agreement as amended, the Company has agreed to certain annual minimum marketing spend requirements and minimum purchase order quantities for each year, which in the case of the minimum purchase order quantities, is based on the previous year's purchases.

Leases

As of June 30, 2023, the Company had unused letters of credit of $4.4 million, which were issued primarily to secure leases. These letters of credit are collateralized by $4.4 million of restricted cash, which is recorded in other assets in the condensed consolidated balance sheets.

Contingencies

Litigation

From time to time, the Company may become involved in various legal actions arising in the ordinary course of business. As of June 30, 2023, management was not aware of any existing, pending or threatened legal actions that would have a material impact on the financial position or results of operations of the Company.

Long Term Debt

In the event the Convertible Notes are still outstanding as of January 15, 2025 and the maturity date thereof has not been extended to a date on or after September 4, 2027, then unless the Company has received net cash proceeds from one or more permitted equity raises or permitted raises of convertible debt which, together with no more than $15.0 million of cash on hand, is sufficient to redeem and discharge the Convertible Notes in full, the loans outstanding under the Hayfin Loan Agreement will mature on January 15, 2025.

Note 16. Net loss per common share

Basic and diluted net loss per common share are determined by dividing net loss applicable to common stockholders by the weighted average common shares outstanding during the period. For all periods presented, the shares issuable upon conversion, exercise or vesting of Convertible Notes, warrants, stock option awards and RSUs have been excluded from the calculation because their effects would be anti-dilutive. Therefore, the weighted average common shares outstanding used to calculate both basic and diluted net loss per common share are the same.

The following potentially dilutive securities were excluded from the computation of diluted weighted average common shares outstanding due to their anti-dilutive effect:


	As of June 30,
	2023	2022
Shares to be issued upon conversion of Convertible Notes	15,416,667	15,416,667
Vested and unvested stock options	9,307,846	10,009,493
Restricted stock units	10,602,771	5,381,154
Warrants	8,362,270	8,362,270
Total anti-dilutive securities excluded from EPS computation 1	43,689,554	39,169,584

1 Total anti-dilutive securities exclude CVRs which are settleable in cash, additional Xeris Biopharma shares, or a combination, at the election of the Company.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary statements for forward-looking information

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and notes to those financial statements appearing elsewhere in this Quarterly Report on Form 10-Q and with the audited financial statements and the notes to those financial statements included in the Annual Report on Form 10-K filed on March 8, 2023 with the U.S. Securities and Exchange Commission. In addition to financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. All statements in this document other than statements of historical fact are, or could be, "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "will," "would," "may," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue," and terms of similar meaning are also generally intended to identify forward-looking statements. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including without limitation, the regulatory approval of our product candidates, our ability to market and sell our products and product candidates if approved, and factors discussed in Item 1A of Part II of this Quarterly Report on Form 10-Q. Any forward-looking statements contained herein speak only as of the date hereof, and Xeris expressly disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

Unless otherwise indicated, references to "Xeris," the "Company," "we," "our" and "us" in this Quarterly Report on Form 10-Q refer to Xeris Biopharma Holdings, Inc. Throughout this document, unless otherwise noted, references to Gvoke include Gvoke PFS, Gvoke HypoPen, Gvoke Kit and Ogluo (glucagon).

We are focused on building an innovative, self-sustaining, growth-oriented biopharmaceutical company committed to improving patients’ lives by developing and commercializing clinically meaningful products across a range of therapies. We are uniquely positioned to achieve this through our three commercial products and our proprietary formulation science (XeriSol and XeriJect), which generates partnerships and enhances our product candidates.

Commercial Products

Our top priority is maximizing the potential of our three commercial products:

•Gvoke is a ready-to-use, liquid-stable glucagon for the treatment of severe hypoglycemia. The product is indicated for use in pediatric and adult patients with diabetes age 2 years and above and can be administered in 2 simple steps. The estimated total addressable market for this drug is approximately $5.0 billion in the United States.

•Keveyis is the first therapy approved in the United States to treat hyperkalemic, hypokalemic, and related variants of Primary Periodic Paralysis ("PPP"). PPP is a rare genetic, neuromuscular disorder that can cause extreme muscle weakness and/or paralysis; some forms are also commonly associated with myotonia or muscle stiffness. The estimated total addressable market for this therapy is greater than $0.5 billion in the United States.

•Recorlev is a cortisol synthesis inhibitor approved for the treatment of endogenous hypercortisolemia in adult patients with Cushing’s syndrome for whom surgery is not an option or has not been curative. Endogenous Cushing’s syndrome is a rare but serious and potentially fatal endocrine disease caused by chronic elevated cortisol exposure. The estimated total addressable market for this therapy is approximately $3.0 billion in the United States.

Our proprietary formulation capabilities

Our company name, Xeris, is derived from the ancient Greek word xērós meaning 'dry' or 'without water/non-aqueous'. Our proprietary, non-aqueous formulation capabilities are designed to enable the convenient injection of medicines previously uninjectable or poorly injectable when utilizing aqueous approaches. Both XeriSol and XeriJect offer the opportunity to create ready-to-use, room-temperature stable, highly concentrated, injectable formulations of both small and large molecules. These proprietary formulation capabilities can enable subcutaneous (SC) or intramuscular (IM) administration in lieu of intravenous (IV) infusion, allow for convenient, cost-effective storage, and provide an improved patient, caregiver, and healthcare provider experience. XeriSol and XeriJect have broad applications and enable us to develop our own internal product development candidates in endocrinology, neurology and other therapeutic areas. They also enable us to pursue formulation and development partnerships pursuant to which our proprietary formulation science is applied with the goal of enhancing the product formulation, delivery and clinical profile of other companies’ proprietary drugs and biologics.

Patents

We currently own 171 patents issued globally, including a composition of matter patent covering our ready-to-use glucagon formulation that expires in 2036. Included in the total patents, we have 60 granted patents globally related to our platform technologies and 7 patents granted in the United States and listed in the United States FDA Orange Book covering proprietary formulations of levoketoconazole (the active pharmaceutical ingredient in Recorlev) and the uses of such formulations in treating certain endocrine-related diseases and syndromes. The latter includes United States Patent Nos. 11,020,393 and 11,278,547, which were granted on June

1, 2021 and March 22, 2022, respectively, and which provide patent protection through 2040 for the use of Recorlev in the treatment of certain patients with persistent or recurrent Cushing’s syndrome.

Financing

We have funded our operations to date primarily with proceeds from the sale of our preferred and common stock and debt financing. We have received gross proceeds of $253.0 million from public equity offerings of our common stock (including Xeris Pharma’s June 2018 initial public offering ("IPO") and our February 2019, February 2020, June 2020 and March 2021 offerings), $30.0 million from a private placement of our common stock in January 2022, $104.9 million from sales of our preferred stock, $86.3 million from our June 2020 Convertible Notes offering, $63.5 million from the Amended and Restated Loan and Security Agreement (as amended, the "Oxford Loan Agreement") with Oxford Finance LLC and Silicon Valley Bank, which was fully repaid in March 2022, and $150.0 million from the Hayfin Loan Agreement in 2022.

For the six months ended June 30, 2023 and June 30, 2022, we reported net losses of $36.7 million and $59.9 million, respectively. We have not been profitable since inception, and, as of June 30, 2023, our accumulated deficit was $591.4 million. In the near term, we expect to continue to incur significant expenses, operating losses and net losses as we:


			<						continue our marketing and selling efforts related to commercialization of Gvoke, Keveyis and Recorlev;
			<						continue our research and development efforts; and
			<						continue to operate as a public company.

We may continue to seek public equity and debt financing to meet our capital requirements. There can be no assurance that such funding may be available to us on acceptable terms, or at all, or that we will be able to commercialize our product candidates, if approved. In addition, we may not be profitable even if we commercialize any of our product candidates.

Outlook and strategies

Our goal is to build an innovative, self-sustaining, growth-oriented biopharmaceutical company committed to improving patients’ lives by developing and commercializing clinically meaningful products across a range of therapies. To achieve our goal, we are pursuing the following strategies:


			<						Drive growth through effective commercial execution of our innovative products. We have three innovative commercial products (Gvoke, Keveyis, and Recorlev) all of which fill unique, unmet needs. Additionally, Gvoke and Recorlev are in the very early stages of their product lifecycles and both leverage our experienced and growing leadership presence in the endocrinology community. We are focused on executing against the opportunities made possible by Gvoke, Recorlev, and Keveyis in order to maintain our momentum of growth and enable the financial self-sufficiency of our Company.
			<						Continue to leverage our proprietary formulation science and expertise to develop our internal new product candidates. We have established a proven capability to bring new and innovative products through the development and regulatory process to successful commercialization. XeriSol and XeriJect have broad application and have the potential to be utilized across a range of potential product candidates in multiple therapeutic areas. Our immediate focus is on developing XP-8121, a once weekly subcutaneous injection of levothyroxine, and eventually generating significant benefits for patients and value for our company.
			<						Collaborate with pharmaceutical and biotechnology companies to apply our formulation science to enhance the formulations of their proprietary products and candidates. We are pursuing formulation and development partnerships to apply our XeriSol and XeriJect formulation platforms to enhance the drug delivery and clinical profile of other companies’ proprietary drugs and biologics. We currently are collaborating with several major pharmaceutical companies on the development of formulations of their proprietary therapeutics with XeriSol or XeriJect. Our strategic goal is to ultimately enter into commercial licensing agreements with these partners upon successful completion of formulation development.

We believe these three distinct pillars of our strategy can bring new products to market and transform the lives of patients with life-impacting diseases and ultimately drive value for Xeris’ shareholders. Pursuing these strategies provides Xeris with a range of value driving opportunities that are incremental to the value already realized by the Xeris enterprise.

Development of product candidates

Once Weekly Subcutaneous Injection of Levothyroxine (XP-8121)

We conducted a Phase 1 clinical study with product candidate Levothyroxine XP-8121, an early-stage program designed to address maintenance therapy in patients with congenital or acquired hypothyroidism who require continuous thyroid hormone replacement. We commenced a Phase 2 dose-finding study of XP-8121 in April 2023. The study is designed to assess XP-8121 in patients receiving oral thyroid replacement therapy to establish the average once-weekly dose, accrue chronic safety data, and facilitate a future Phase 3 program in consultation with the FDA.

Levothyroxine and Hypothyroidism

The thyroid gland is responsible for the synthesis, storage, and release of metabolic hormones including thyroxine (T4) and triiodothyronine (T3). These hormones are crucial in the regulation of critical metabolic processes and are vital for normal growth and development during fetal life, infancy, and childhood.

Therapeutically, levothyroxine is administered as a replacement for deficient thyroid hormones. The goal of the therapy is restoration of the euthyroid state which can reverse the clinical manifestations of hypothyroidism and significantly improve quality of life. The treatment of choice for correction of hypothyroidism is currently continuous daily oral administration of levothyroxine. It is one of the most widely prescribed drug products in the United States, but the complexity of maintaining biochemical and clinical euthyroidism in patients undergoing treatment with oral levothyroxine is challenging. It has been reported that nearly 40% of patients undergoing treatment with oral levothyroxine are either over-or under-treated due to factors that include, but are not limited to, drug formulation, use of the drug with food, adherence to the drug, use of concomitant medications, and pre-existing medical conditions. Many patients failing to reach target thyroid stimulating hormone ("TSH") levels are managed by simply increasing their levothyroxine daily dose. However, levothyroxine is a drug with a narrow therapeutic index, meaning that relatively small deviations from the proper dose can cause a clinically meaningful shift in pharmacological effects when administered to a patient; thus, the titration of levothyroxine oral drug may be a tailored and incremental process.

XP-8121 Overview

XP-8121 is a novel formulation for subcutaneous administration that could potentially mitigate many of the challenges associated with oral formulations, such as identification of an ideal dose due to absorption variation and medication adherence for patients who have difficulty maintaining a stable, therapeutic serum level. Preclinical studies of XP-8121 showed a sustained plasma exposure profile and similar highest concentration of a drug in the blood, or Cmax, when compared with equivalent doses of the oral formulation. We conducted a Phase 1 study of XP-8121 to evaluate the pharmacokinetics, safety and tolerability, and potential for weekly dosing in the treatment of hypothyroidism.

The Phase 1 clinical study was a single ascending dose crossover design in 30 healthy participants to compare matching doses of oral levothyroxine (Synthroid) and subcutaneous XP-8121. The primary endpoints of the study were to characterize the absorption and elimination kinetics of XP-8121 and compare bioavailability of XP-8121 to oral levothyroxine. Secondary endpoints were safety and tolerability of XP-8121.

In October 2022, we reported positive topline Phase 1 data of XP-8121. The data showed that subjects receiving XP-8121 subcutaneous had slower absorption, lower peak plasma, and higher extended exposure compared to Synthroid PO at the comparable dose of 600 μg. In addition, exposure was proportional over the range of ascending XP-8121 doses studied. Simulations based on a population pharmacokinetic model indicated that exposure from weekly XP-8121 1200 μg SC doses overlapped daily Synthroid PO 300 μg suggesting a dose conversion factor of 4x. Importantly, single SC doses of XP-8121 at all doses were well-tolerated and the XP-8121 doses studied were generally comparable to Synthroid 600 μg PO with respect to the safety findings. In June 2023, we initiated a non-randomized, open-label, single arm, self-controlled Phase 2 study to determine a target dose conversion factor from stably dosed oral levothyroxine to XP-8121 in patients with hypothyroidism and also assess the safety and tolerability after once-weekly subcutaneous injections.

Components of our Results of Operations

The following discussion sets forth certain components of the statement of operations of Xeris for the three and six months ended June 30, 2023 and 2022 as well as factors that impact those items.

Product revenue, net

Product revenue, net, represents gross product sales less estimated allowances for patient copay assistance programs, prompt payment discounts, payor rebates, chargebacks, service fees, and product returns, all of which are recorded at the time of sale to the pharmaceutical wholesaler or other customer. We apply significant judgment and estimates in determining some of these allowances. If actual results differ from our estimates, we make adjustments to these allowances in the period in which the actual results or updates to estimates become known.

Cost of goods sold

Cost of goods sold primarily includes product costs, which include all costs directly related to the purchase of raw materials, charges from our contract manufacturing organizations, and manufacturing overhead costs, as well as shipping and distribution charges. Cost of goods sold also includes losses from excess, slow-moving or obsolete inventory and inventory purchase commitments, if any. Manufacturing costs for Gvoke and Recorlev incurred prior to approval and initial commercialization were expensed as research and development expenses.

Research and development expenses

Research and development expenses consist of expenses incurred in connection with the discovery and development of our product candidates. We recognize research and development expenses as incurred. Research and development expenses that are paid in

advance of performance are capitalized until services are provided or goods are delivered. Research and development expenses include:


			<						the cost of acquiring and manufacturing preclinical study and clinical trial materials and manufacturing costs related to commercial production and scale-up until a product is approved and initially available for commercial sale;
			<						expenses incurred under agreements with contract research organizations ("CROs") as well as investigative sites and consultants that conduct our preclinical studies and clinical trials;
			<						personnel-related expenses, which include salaries, benefits and stock-based compensation;
			<						laboratory materials and supplies used to support our research activities;
			<						outsourced product development services;
			<						expenses relating to regulatory activities, including filing fees paid to regulatory agencies; and
			<						allocated expenses for facility-related costs.

Research and development activities are central to our business model. We expect to continue to incur significant research and development expenses as we advance our pipeline candidates and in particular plan and conduct clinical trials, prepare regulatory filings for our product candidates, and utilize internal resources to support these efforts. Our research and development costs have declined as compared to previous levels as a result of directing significant funding to our commercial activities.

Our research and development expenses may vary significantly over time due to uncertainties relating to the timing and results of our clinical trials, feedback received from interactions with the FDA and the timing of regulatory approvals.

Selling, general and administrative expenses

Selling, general and administrative expenses consist primarily of compensation and related personnel costs, marketing and selling expenses, professional fees and facility costs not otherwise included in research and development expenses.

Amortization of intangible assets

Amortization of intangible assets relates to the amortization of our products: Keveyis and Recorlev. These two intangible assets are being amortized over a five-year and fourteen-year period, respectively, using the straight-line method.

Other income (expense)

Other income (expense) consists primarily of interest expense related to our convertible debt, Hayfin Loan Agreement, Oxford Loan Agreement, interest income earned on deposits and investments, gains and losses on extinguishment of debt and lease remeasurement, and the change in fair value of our warrants and CVRs.

Results of Operations

The following table summarizes our results of operations for the three and six months ended June 30, 2023 and 2022 (in thousands):


	Three Months Ended June 30,				Change			Six Months Ended June 30,				Change
	2023		2022		$		%	2023		2022		$		%
Product revenue:
Gvoke	$	15,638	$	11,479	$	4,159	36.2	$	30,671	$	23,932	$	6,739	28.2
Keveyis	14,088		12,812		1,276		10.0	26,843		22,136		4,707		21.3
Recorlev	7,167		969		6,198		nm	11,644		1,102		10,542		nm
Product revenue, net	36,893		25,260		11,633		46.1	69,158		47,170		21,988		46.6
Royalty, contract and other revenue	1,115		46		1,069		nm	2,046		209		1,837		nm
Total revenue	38,008		25,306		12,702		50.2	71,204		47,379		23,825		50.3

Cost and expenses:
Cost of goods sold, excluding amortization of intangible assets	7,555		4,810		2,745		57.1	12,874		11,083		1,791		16.2
Research and development	6,087		3,718		2,369		63.7	10,925		9,968		957		9.6
Selling, general and administrative	37,635		32,984		4,651		14.1	71,240		68,897		2,343		3.4
Amortization of intangible assets	2,710		2,710		—		—	5,421		5,421		—		—
Total cost and expenses	53,987		44,222		9,765		22.1	100,460		95,369		5,091		5.3
Loss from operations	(15,979)		(18,916)		2,937		(15.5)	(29,256)		(47,990)		18,734		(39.0)
Other income (expense):
Interest and other income	1,223		195		1,028		nm	2,523		263		2,260		nm
Interest expense	(6,528)		(3,448)		(3,080)		89.3	(12,744)		(6,969)		(5,775)		82.9
Change in fair value of warrants	(14)		516		(530)		(102.7)	(14)		1,737		(1,751)		nm
Change in fair value of contingent considerations	781		(4,871)		5,652		nm	2,140		(7,687)		9,827		nm
Total other expense	(4,538)		(7,608)		3,070		(40.4)	(8,095)		(12,656)		4,561		(36.0)
Net loss before benefit from income taxes	(20,517)		(26,524)		6,007		(22.6)	(37,351)		(60,646)		23,295		(38.4)
Benefit from income taxes	675		339		336		99.1	675		747		(72)		(9.6)
Net loss	$	(19,842)	$	(26,185)	$	6,343	(24.2)	$	(36,676)	$	(59,899)	$	23,223	(38.8)

nm: not meaningful

Product revenue, net

Gvoke net revenue increased by $4.2 million or 36.2% and $6.7 million or 28.2% for the three and six months ended June 30, 2023 compared to the same periods ended June 30, 2022, respectively. Gvoke prescriptions grew approximately 49.7% during both the three and six months ended June 30, 2023 compared to the same periods of 2022. The growth in product demand was partially offset by a decrease in net pricing.

Keveyis net revenue increased by $1.3 million or 10.0% and $4.7 million or 21.3% for the three and six months ended June 30, 2023 compared to the same periods ended June 30, 2022, respectively. This increases in both periods were mainly driven by higher patient demand coupled with an increase in net pricing.

Recorlev, commercially launched in the first quarter of 2022, had net revenue of $7.2 million and $11.6 million for the three and six months ended June 30, 2023, respectively, driven primarily by increases in the number of patients on therapy.

Cost of goods sold

Cost of goods sold increased by $2.7 million or 57.1% for the three months ended June 30, 2023 compared to the same period ended June 30, 2022. The increase was attributable to higher product sales and product mix. Cost of goods sold increased by $1.8 million or

16.2% for the six months ended June 30, 2023 compared to the same period ended June 30, 2022. The increase was attributable to higher product sales and product mix, partially offset by a one-time contract credit in the first quarter of 2023.

Research and development expenses

Research and development expenses increased by $2.4 million or 63.7% and $1.0 million or 9.6% for the three and six months ended June 30, 2023, respectively, compared to the same periods ended June 30, 2022. The increases in both periods were due to higher spending on the open-label treatment in Cushing's syndrome study for Recorlev and higher product development costs.

Selling, general and administrative expenses

Selling, general and administrative expenses increased by $4.7 million or 14.1% and $2.3 million or 3.4% for the three and six months ended 2023, respectively, compared to the same periods ended June 30, 2022, due to higher personnel costs, marketing expenses and rent expenses related to the new lease commenced in April 2023.

Amortization of intangible assets

For the three and six months ended June 30, 2023 and June 30, 2022, amortization of intangible assets were both $2.7 million and both $5.4 million, respectively.

Other income (expense)

For the three and six months ended June 30, 2023, interest expense increased $3.1 million or 89.3% and $5.8 million or 82.9% compared to the three and six months ended June 30, 2022, respectively. The increases in both periods were primarily due to a higher principal amount and increased interest rates related to the Hayfin loan.

For the three and six months ended June 30, 2023, change in fair value of contingent value rights was a gain of $0.8 million and $2.1 million, respectively, compared to a loss of $4.9 million and $7.7 million for the three and six months ended June 30, 2022, respectively. The gains in both periods in 2023 were primarily due to changes in revenue assumptions based on recent trends adjusted for management’s estimates of future sales.

Liquidity and Capital Resources

Our primary uses of cash are to fund costs related to the manufacturing, marketing and selling of products, the research and development of our product candidates, general and administrative expenses and working capital requirements. Historically, we have funded our operations primarily through private placements of convertible preferred stock, public equity offerings of common stock, and issuance of debt. In June 2018, we completed our IPO of 6,555,000 shares of our common stock at a price of $15.00 per share for aggregate net proceeds of $88.9 million after deducting underwriting discounts and commissions as well as other equity offering expenses. In February 2019, we completed an equity offering and sold an aggregate of 5,996,775 shares of common stock at a price of $10.00 per share. Net proceeds from this equity offering were $55.5 million after deducting underwriting discounts and commissions as well as other equity offering expenses. In September 2019, we entered into the Oxford Loan Agreement that provided for term loans of up to an aggregate of $85.0 million, of which $60.0 million was drawn in September 2019 and of which $20.0 million was repaid in June 2020. In August 2019, we filed a shelf registration statement on Form S-3 with the SEC, which covered the offering, issuance and sale by us of up to an aggregate of $250.0 million of our common stock, preferred stock, debt securities, warrants and/or units. We simultaneously entered into a Sales Agreement with Jefferies LLC, as sales agent, to provide for the offering, issuance and sale by us of up to $50.0 million of our common stock from time to time in "at-the-market" offerings under the shelf. We sold an aggregate of 204,427 shares of common stock in at-the-market offerings under the shelf for gross proceeds of $1.8 million.

In February 2020, we completed an equity offering and sold 10,299,769 shares of common stock. Net proceeds from this equity offering were $39.8 million after deducting underwriting discounts and commissions as well as other equity offering expenses. In June 2020, we completed a public notes offering and sold $86.3 million aggregate principal amount of 5.00% Convertible Senior Notes, including $11.3 million pursuant to the underwriters' option to purchase additional notes which was fully exercised in July 2020. Concurrently with the public notes offering, in June 2020, we completed an equity offering and sold 8,510,000 shares of common stock, including 1,110,000 shares pursuant to the underwriters’ option to purchase additional shares of common stock which was also fully exercised in July 2020. Net proceeds from both June 2020 offerings (including the net proceeds from the exercise of the underwriters' over-allotment options in July 2020) were $102.8 million after deducting underwriting discounts and commissions as well as other offering expenses. During the second half of 2020, $39.1 million in principal amount of Convertible Notes were converted into 13,171,791 shares of our common stock. In March 2021, we completed a registered direct offering of 6,553,398 shares of our common stock, the net proceeds of which were $26.9 million. As of June 30, 2023, the outstanding balance of Convertible Notes was $47.2 million. In October 2020, we entered into a fourth amendment to the Oxford Loan Agreement which provided for an additional $3.5 million term loan which was drawn in November 2020. On January 2, 2022, we entered into a securities purchase agreement in connection with the private placement of our common stock with Armistice for aggregate gross proceeds of approximately $30.0 million and completed the transaction on January 3, 2022. In January 2022, we filed a shelf registration statement on Form S-3 with the SEC, which was declared effective on February 7, 2022, and which covers the offering, issuance and sale by us of up to an aggregate of $250.0 million of our common stock, preferred stock, debt securities, warrants and/or units.

In March 2022, we, Xeris Pharma and certain subsidiary guarantors, entered into a Credit Agreement and Guaranty (the "Hayfin Loan Agreement") with the lenders from time to time parties thereto (the "Lenders") and Hayfin Services LLP, as administrative agent for the Lenders, pursuant to which we and our subsidiaries party thereto granted a first priority security interest on substantially all of our assets, including intellectual property, subject to certain exceptions. The Hayfin Loan Agreement provided for the Lenders to extend $100.0 million in term loans to us on the closing date and up to an additional $50.0 million in delayed draw term loan(s) during the one year period immediately following the closing date (collectively, the "Loans"). On December 28, 2022, we borrowed the full amount of such $50.0 million delayed draw term loan under the Hayfin Loan Agreement. In conjunction with the execution of the Hayfin Loan Agreement, the Oxford Loan Agreement 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 Oxford Loan Agreement in full, the proceeds will otherwise be used for general corporate purposes. After repayment, the Loans may not be re-borrowed. On September 29, 2022, the Company entered into Amendment No. 1 to Credit Agreement and Guaranty, which provides for the Lenders’ consent to and allows for the issuance of the letter of credit that was issued to the landlord under the Amended and Restated Lease dated September 29, 2022. On January 19, 2023, the Company entered into Amendment No. 2 to Credit Agreement and Guaranty, which provides for the Lenders’ consent to and allows for the execution and delivery of a letter of financial support to the Company’s Australian subsidiary. On April 21, 2023, the Company entered into Amendment No. 3, Waiver and Consent to Credit and Guaranty Agreement, which, amongst other things, permitted the Company to replace certain accounts and letters of credit previously maintained at or issued by, as applicable, Silicon Valley Bank with similar products maintained at or issued by Wells Fargo, N.A.

Capital Resources and Funding Requirements

We have incurred operating losses since inception, and we have an accumulated deficit of $591.4 million at June 30, 2023. Based on our current operating plans and existing working capital at June 30, 2023, we believe that our cash resources are sufficient to sustain operations and capital expenditure requirements for at least the next 12 months. We expect to incur substantial additional expenditures in the near term to support the marketing and selling of Gvoke, Keveyis and Recorlev as well as our ongoing research and development activities. We expect to continue to incur net losses for at least the next 12 months. Our ability to fund marketing and selling of Gvoke, Keveyis and Recorlev, as well as our product development and clinical operations, including completion of future clinical trials, will depend on the amount and timing of cash received from product revenue and potential future financings. Our future capital requirements will depend on many factors, including:


			<						our degree of success in commercializing Gvoke, Keveyis and Recorlev;
			<						the costs of commercialization activities, including product marketing, sales and distribution;
			<						the costs, timing and outcomes of clinical trials and regulatory reviews associated with our product candidates;
			<						the effect on our product development activities of actions taken by the FDA or other regulatory authorities;
			<						the number and types of future products we develop and commercialize;
			<						the emergence of competing technologies and products and other adverse market developments; and
			<						the costs of preparing, filing and prosecuting patent applications and maintaining, enforcing and defending intellectual property-related claims.

As we continue the marketing and selling of Gvoke, Keveyis and Recorlev, we may not generate a sufficient amount of product revenue to fund our cash requirements. Accordingly, we may need to obtain additional financing in the future which may include public or private debt and/or equity financings. As detailed in "Note 1 – Liquidity and capital resources" above, there can be no assurance that such funding may be available to us on acceptable terms, or at all, or that we will be able to successfully market and sell Gvoke, Keveyis and Recorlev.

Cash Flows


	Six Months Ended June 30,
(in thousands)	2023		2022

Net cash used in operating activities	$	(39,884)	$	(69,018)
Net cash (used in)/provided by investing activities	(35,527)		18,584
Net cash (used in)/provided by financing activities	(307)		78,504

Operating activities

Net cash used in operating activities was $39.9 million for the six months ended June 30, 2023, compared to $69.0 million for the six months ended June 30, 2022. The decrease in net cash used in operating activities was primarily driven by reduced working capital usage, partially offset by changes to the fair value of contingent value rights.

Investing activities

Net cash used in investing activities was $35.5 million for the six months ended June 30, 2023, compared to net cash provided by investing activities of $18.6 million for the six months ended June 30, 2022. Cash used in investing activities in 2023 was primarily due to the purchase of short-term investments. In the first six months of 2022, we used the majority of investments that matured to fund operations instead of re-investing.

Financing activities

Net cash used in financing activities was $0.3 million for the six months ended June 30, 2023, compared to net cash provided by financing activities of $78.5 million for the six months ended June 30, 2022. The cash provided by financing activities in six months ended June 30, 2022 was primarily due to the net proceeds of $30.0 million from the January 2022 private placement of our common stock with an affiliate of Armistice, proceeds net of debt issuance costs of $92.9 million from Hayfin Loan Agreement, partially offset by the payoff of the outstanding principal under the Oxford Loan Agreement of $43.5 million in March 2022.

CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES AND ASSUMPTIONS

Our Annual Report on Form 10-K for the year ended December 31, 2022 describes the critical accounting policies for which management uses significant judgments and estimates in the preparation of our consolidated financial statements. There have been no significant changes to our critical accounting policies since December 31, 2022.

NEW ACCOUNTING STANDARDS

Refer to "Note 2 - Basis of presentation and summary of significant accounting policies and estimates", a description of recent accounting pronouncements applicable to our financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to certain market risks arising from transactions in the normal course of business, principally risk associated with interest rate and foreign currency exchange rate fluctuations.

Interest Rate Risk

Cash, Cash Equivalents restricted cash and Investments—We are exposed to the risk of interest rate fluctuations on the interest income earned on our cash, cash equivalents, restricted cash and investments. A hypothetical one-percentage point increase or decrease in interest rates applicable to our cash, cash equivalents, restricted cash and investments outstanding at June 30, 2023 would increase or decrease interest income by approximately $0.8 million on an annual basis.

Long-term Debt—Our interest rate risk relates primarily to the United States dollar SOFR-indexed borrowings. Based on our outstanding borrowings pursuant to the Hayfin Loan Agreement, interest is incurred 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). Interest on the Convertible Notes is assessed at a fixed rate of 5.0% annually and therefore does not subject us to interest rate risk.

Foreign Exchange Risk

We contract with research organizations outside the United States at times. We may be subject to fluctuations in foreign currency exchange rates in connection with certain of these agreements. Transactions denominated in currencies other than the functional currency are recorded based on exchange rates at the time such transactions arise. As of June 30, 2023, we had immaterial liabilities denominated in the Australian Dollar. Net foreign currency gains and losses did not have a material effect on our results of operations for the six months ended June 30, 2023.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer (principal executive officer) and chief financial officer (principal financial officer), evaluated the effectiveness of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended ("Exchange Act"). Based on such evaluation, our chief executive officer and chief financial officer have concluded that the disclosure controls and procedures were effective as of June 30, 2023 to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time period specified in the United States Securities and Exchange Commission's ("SEC") rules and forms, and to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its chief executive and chief financial officers, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the three months ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are not currently subject to any material legal proceedings. From time to time, we may be subject to various legal proceedings and claims that arise in the ordinary course of our business activities. Although the results of litigation and claims cannot be predicted with certainty, as of the date of this report, we do not believe we are party to any claim or litigation the outcome of which, if determined adversely to us, would individually or in the aggregate be reasonably expected to have a material adverse effect on our business. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

ITEM 1A. RISK FACTORS

Investing in our common stock involves a high degree of risk. Careful consideration should be given to the following risk factors, in evaluating us and our business. If any of the following risks and uncertainties actually occurs, our business, prospects, financial condition and results of operations could be materially and adversely affected. The risks summarized and described below are not intended to be exhaustive and are not the only risks facing us. New risk factors can emerge from time to time, and it is not possible to predict the impact that any factor or combination of factors may have on our business, prospects, financial condition and results of operations.

Risks Related to our Financial Position and Need for Financing

Risks Related to Our Operating History

As a company, we have a limited operating history and limited experience commercializing pharmaceutical products and have incurred significant losses since inception. We may continue to incur losses over the next few years and may not be able to achieve or sustain revenues or profitability in the future.

Historically, we have funded our operations primarily through private placements of convertible preferred stock, public offerings of common stock and convertible notes, and debt issuances. We have five pharmaceutical products that were commercially launched in the past six years, i.e., Keveyis (2017), Gvoke PFS (2019), Gvoke HypoPen (2020), Recorlev (2022) and Gvoke Kit (2022). We are in the early stages of commercializing our biopharmaceutical products and have a limited operating history. Biopharmaceutical product development is a highly speculative undertaking and involves a substantial degree of risk. Accordingly, you should consider our prospects in light of the costs, uncertainties, delays and difficulties frequently encountered by companies prior to and at the early stages of commercialization of any product candidates, especially biopharmaceutical companies such as ours. Any predictions you make about our future success or viability may not be as accurate as they could be if we had a longer operating history or a history of successfully commercializing biopharmaceutical products. We may encounter unforeseen expenses, difficulties, complications, delays and other known or unknown factors in achieving our business objectives. We will need to successfully execute our commercialization strategy and may not be successful in doing so. We expect our financial condition and operating results to continue to fluctuate significantly from quarter to quarter and year to year due to a variety of factors, many of which are beyond our control. Accordingly, you should not rely upon the results of any quarterly or annual periods as indications of future operating performance.

We have incurred significant losses in every fiscal year since inception. For the six months ended June 30, 2023 and 2022, we reported a net loss of $36.7 million and $59.9 million, respectively. In addition, our accumulated deficit as of June 30, 2023 was $591.4 million.

We expect to continue to incur significant operating expenses as we continue the commercialization of Gvoke, Keveyis and Recorlev, develop, enhance and commercialize new products, and incur additional operational and reporting costs associated with being a public company. In particular, we anticipate that we will continue to incur significant expenses as we:


			<						execute our Gvoke, Keveyis and Recorlev commercial strategies in the United States;
			<						continue our research and development efforts;
			<						seek regulatory approval for new product candidates and product enhancements; and
			<						continue to operate as a public company.

Our ability to generate revenue to transition to profitability and generate positive cash flows is uncertain and depends on the successful commercialization of Gvoke, Keveyis and Recorlev and any of our product candidates for which we obtain marketing approval. Many of our product candidates are still in development. Successful development and commercialization will require achievement of key milestones, including completing clinical trials and obtaining marketing approval for our product candidates, manufacturing, marketing and selling those products for which we, or any of our future collaborators, may obtain marketing approval, satisfying any post-marketing requirements and obtaining reimbursement for our products from private insurance or government payors. Because of the uncertainties and risks associated with these activities, we are unable to accurately predict the timing and amount of revenues, and if or when we might achieve profitability. We and any future collaborators may never succeed in these activities and, even if we or any future collaborators do, we may never generate revenues that are sufficient enough for us to achieve profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis.

Our failure to become and remain profitable would depress the market price of our common stock and could impair our ability to raise capital, expand our business, diversify our product offerings or continue our operations. If we continue to suffer losses as we have in the past, investors may not receive any return on their investment and may lose their entire investment.

We may never be profitable and we may not be able to continue operations without additional fundings.

Our ability to generate revenue from Gvoke, Keveyis and Recorlev, and our product candidates, if successfully developed and approved, depends on a number of factors, including, but not limited to, our ability to:


			<						obtain commercial quantities of our products at acceptable cost levels;


			<						successfully manage inventory;
			<						sell and distribute our products on terms acceptable to us;
			<						achieve an adequate level of market acceptance of our products in the medical community and with third-party payors, including placement in accepted clinical guidelines for the conditions for which our product candidates are intended to target;
			<						obtain and maintain third-party coverage and adequate reimbursement for our products;
			<						compete effectively against our competitors; and
			<						launch and commercialize our products utilizing our own sales force or by entering into partnership or co-promotion arrangements with third parties.

We have incurred and expect to continue to incur significant sales and marketing costs as we commercialize Gvoke, Keveyis and Recorlev. Regardless of these expenditures, our products and our product candidates, if developed and approved, may not be commercially successful. Although we generate revenue from Gvoke, Keveyis and Recorlev, if we are unable to generate sufficient product revenue, we will not become profitable and may be unable to continue operations without additional funding.

Risks Related to Future Financial Condition

We may require additional capital to sustain our business, and this capital may cause dilution to our stockholders and might not be available on terms favorable to us, or at all, which could force us to delay, reduce or eliminate our product development programs or commercialization efforts.

Biopharmaceutical development is a time consuming, expensive and uncertain process that takes years to complete. We are incurring significant commercialization expenses related to product sales, marketing, manufacturing, packaging and distribution of Gvoke, Keveyis and Recorlev and expect to continue to incur such expenses for our products, as well as for any of our product candidates, if approved. We expect to require additional capital to complete the clinical trials associated with our product candidates and begin commercialization efforts, if approved. Accordingly, we may need additional funding in connection with our continuing operations. In the future, if we are unable to raise capital when needed or on attractive terms, we may be forced to delay, reduce or eliminate our research and development programs and/or sales and marketing activities. Market volatility, including due to geopolitical instability, rising interest rates, fluctuations in inflation rates, the tightening of lending standards, any further deterioration in the macroeconomic economy or financial services industry resulting from actual or potential bank failures, or other factors could also materially and adversely impact our ability to access capital as and when needed and increase our cost of capital even if available.

We may be required to or choose to obtain further funding through public equity offerings, debt financings, royalty-based financing arrangements, collaborations and licensing arrangements or other sources. If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Any debt financing obtained by us would be senior to our common stock, would likely cause us to incur interest expense, and could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may increase our expenses and make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions and in-licensing opportunities. Under our existing credit facility dated March 8, 2022, as amended, with the lenders from time to time parties thereto (the "Lenders"), Hayfin Services LLP, as administrative agent for the Lenders, Xeris Pharmaceuticals, Inc. and Xeris Biopharma Holdings, Inc., as amended (the "Hayfin Loan Agreement"), we are restricted in our ability to incur additional indebtedness and to pay dividends. Any additional debt financing that we may secure in the future could include similar or more restrictive covenants relating to our capital raising activities, buying or selling assets and other financial and operational matters, which may make it more difficult for us to obtain additional capital, manage our business and pursue business opportunities. We may also be required to secure any such debt obligations with some or all of our assets. For example, our Hayfin Loan Agreement is secured by substantially all of our property and assets, including our intellectual property assets, subject to certain exceptions.

If we raise additional funds through collaborations or marketing, distribution or licensing, or royalty-based financing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates or grant licenses on terms that may not be favorable to us. Securing financing could require a substantial amount of time and attention from our management and may divert a disproportionate amount of their attention away from day-to-day activities, which may adversely affect our management’s ability to oversee the commercialization of our products and development and commercialization, if approved, of our product candidates. It is also possible that we may allocate significant amounts of capital toward solutions or technologies for which market demand is lower than anticipated and, as a result, abandon such efforts. Any of these negative developments could have a material adverse effect on our business, operating results, financial condition and common stock price.

We may not have cash available to us in an amount sufficient to enable us to make interest or principal payments on our indebtedness when due, or to repurchase our Convertible Notes for cash following a fundamental change, if required, and our existing and future indebtedness may limit our ability to repurchase the Convertible Notes.

On June 30, 2020, we completed a public offering of $86.3 million aggregate principal amount of our 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 July 2020. A total principal amount of $39.1 million of Convertible Notes converted into equity in the second half of 2020. As of June 30, 2023, the outstanding balance of Convertible Notes was $47.2 million. The Convertible Notes are governed by

the terms of a base indenture for senior debt securities dated June 30, 2020 (the "Base Indenture"), as supplemented by the first supplemental indenture thereto dated June 30, 2020 and the second supplemental indenture thereto dated October 5, 2021 ("the Supplemental Indentures" and together with the Base Indenture, the "Indenture"), each between us and United States Bank National Association, as trustee. Failure to satisfy our current and future debt obligations under the Indenture could result in an event of default and, as a result, all of the amounts outstanding could immediately become due and payable. In the event of an acceleration of amounts due under the Indenture as a result of an event of default, we may not have sufficient funds or may be unable to arrange for additional financing to repay our indebtedness.

Noteholders may require us to repurchase their Convertible Notes following a fundamental change at a cash repurchase price generally equal to the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest, if any. A fundamental change includes certain acquisition transactions and the failure of our common stock to be listed on the Nasdaq Global Select Market or certain similar national securities exchanges. We may not have enough available cash or be able to obtain financing at the time we are required to repurchase the Convertible Notes. In addition, applicable law, regulatory authorities and the agreements governing our existing and future indebtedness may restrict our ability to repurchase the Convertible Notes. Our failure to repurchase the Convertible Notes when required will constitute a default under the Indenture that governs the Convertible Notes. A default under the Indenture or the fundamental change itself could also lead to a default under agreements governing our other existing or future indebtedness, which may result in that other indebtedness becoming immediately payable in full. For instance, a fundamental change without lender consent would constitute an event of default under our Hayfin Loan Agreement. We may not have sufficient funds to satisfy all amounts due under the other indebtedness and the Convertible Notes.

In addition, we have $150.0 million of term loans outstanding under our Hayfin Loan Agreement as of June 30, 2023. All obligations under our Hayfin Loan Agreement are secured by substantially all of our property and assets, including our intellectual property assets, subject to certain limited exceptions. The term loans and the Convertible Notes may create additional financial risk for us, particularly if our business or prevailing financial market conditions are not conducive to paying off or refinancing our outstanding debt obligations at maturity. Failure to satisfy our current and future debt obligations under our Hayfin Loan Agreement could result in an event of default thereunder and, as a result, our lenders could accelerate all amounts due. Events of default also include our failure to comply with customary affirmative and negative covenants as well as a default under any indenture or other agreement governing convertible indebtedness permitted by the Hayfin Loan Agreement, including the Indenture. 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 our 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. In the event of an acceleration of amounts due under our Hayfin Loan Agreement as a result of an event of default, we may not have sufficient funds or may be unable to arrange for additional financing to repay our indebtedness. In addition, our lenders could seek to enforce their security interests in any collateral securing such indebtedness.

Our PPP Loan, which we repaid in full in June 2020, was subject to the terms and conditions applicable to loans administered by the SBA under the CARES Act, and we may be subject to an audit or enforcement action related to the PPP Loan.

On April 21, 2020, we entered into the United States Small Business Administration (the "SBA") PPP Note (the "Note") with Silicon Valley Bank (the "PPP Lender") for a loan in the amount of $5.1 million (the "PPP Loan") enabled by the Coronavirus Aid, Relief and Economic Security Act of 2020 (the "CARES Act"). We received the full amount of the PPP Loan on April 22, 2020. On May 4, 2020, we repaid $0.9 million of the PPP Loan. In June 2020, we repaid the remaining amount outstanding under the PPP Loan in connection with the concurrent Convertible Notes and equity offerings.

We may be subject to CARES Act-specific lookbacks and audits until May of 2026 that may be conducted by other federal agencies, including several oversight bodies created under the CARES Act. These bodies have the ability to coordinate investigations and audits and refer matters to the Department of Justice for civil or criminal enforcement and other actions. Complying with such SBA audit could divert management resources and attention and require us to expend significant time and resources, which could have an adverse effect on our business, financial condition and results of operations.

Greater than expected product returns may exceed our reserve for returns.

We use various factors to estimate the provision for returns, including the launch date of products, historical customer return rates, third-party industry data for comparable products in the market and estimated channel inventory data. In a reporting period, we may decide to constrain revenue for product returns based on information from various sources, including channel inventory levels, inventory dating, prescription data, the expiration dates of product, price changes of competitive products and introductions of generic products. Any significant increase in returns that exceeds our reserves could adversely affect our revenue and operating results.

We use data from third parties as part of our return reserves calculation. We are reliant on these third parties to ensure that the data they provide is accurate. Inaccurate data could cause us to estimate our return reserves incorrectly and could have an adverse impact on our results of operations and financial condition.

Risks Related to the Commercialization and Marketing of our Products and Product Candidates

Risks Related to Commercialization and Marketing

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.

To date, we have expended significant time, resources, and effort on the development of our product candidates, and a substantial portion of our resources recently has been and will continue to be focused on marketing and commercializing our approved products, Gvoke, Keveyis and Recorlev, in the United States. Our business and future success are substantially dependent on our ability to generate and increase product revenue in the near term. Our estimates of the potential market opportunity for Gvoke, Keveyis, Recorlev and our product candidates include several key assumptions of the current market size and current pricing for commercially available products and are based on industry and market data obtained from industry publications, studies conducted by us, our industry knowledge, third-party research reports and other surveys. While we believe that our internal assumptions are reasonable, if any of these assumptions proves to be inaccurate, the actual market for our product and product candidates could be smaller than our estimates of our potential market opportunity. Our product candidates are in various stages of development and subject to the risks of failure inherent in developing drug products. Any delay or setback in the regulatory approval, product launch, commercialization or distribution of any of our product candidates will adversely affect our business. The infrastructure, systems, processes, policies, relationships and materials we have built for the commercialization of Gvoke, Keveyis and Recorlev may not be sufficient for us to achieve success at the levels we expect. Further, our products may contain undetected manufacturing defects, including mislabeling, which might require product replacement, re-labeling or product recalls, which could further harm our business. For more information, see the section entitled, "Business — Coverage and Reimbursement" in our Annual Report on Form 10-K for the year ended December 31, 2022.

Even if all regulatory approvals are obtained, the commercial success of our products and product candidates will depend on gaining and maintaining market acceptance among physicians, patients, patient advocacy groups, healthcare payors and the medical community. The degree of market acceptance of our products and product candidates will depend on many factors, including whether our products and product candidates are:


			<						a covered benefit under health plans;
			<						safe, effective and medically necessary;
			<						appropriate for the specific patient;
			<						cost-effective; and
			<						neither experimental nor investigational.

Additionally, if, after obtaining marketing approval of any of our products or product candidates, we or others later identify undesirable or unacce