Xeris Biopharma: Third Quarter Earnings Show Strong Growth, On Track To Breakeven

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jonathan cooks

Xeris Biopharmacy (NASDAQ: XERS) recently reported their Third Quarter Earnings with a pace in EPS and income. Earnings revealed strong growth with record net product revenue up 17% from the prior quarter and 31% from the third quarter of 2021. Xeris featured to be on track to hit its cash flow breakeven target by the end of 2023. Despite the progress and upside potential, XERS is still trading around $1.50 a share and is down about 25% over the past twelve months. I think XERS offers a great speculative opportunity at these prices. As a result, I am looking to make XERS a “Top Idea” in my Healthcare Composites Market Service.

I intend to review the company’s third quarter earnings and give my opinion on the quarter. Also, I discuss why I am promoting XERS as a “leading idea” in composite health care. Finally, I update my strategy to take advantage of these current prices.

Third quarter performance

company third quarter Total net product revenue was a record $29.6 million, up 31% compared to the third quarter of last year. Xeris reported that it saw growth from the company’s three products with Gvoke earning $13.7 million for the quarter, up 24% from the third quarter of last year. Gvoke’s net income for the first three quarters was $37.6 million, up 35% from the same period last year. The company attributes this increase to the growth in prescriptions, which reached 38K in the third quarter.

Keveyis had $13.4 million in net income for the quarter, up 17% from the third quarter of last year on a pro forma basis. So far this year, Keveyis has raised $35.5 million, up 19% from the same period last year. Xeris reported that they are seeing an increase in the number of patients with Keveyis, in addition, the company had a net price increase, which caused an increase in revenue growth.

Recorelev made $2.5 million in net income, which was more than double what it made in the second quarter of 2022. Xeris is seeing “Weekly growth in new patient referrals and new patients entering therapy.”

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In the end, the company still reported a net loss of $21.8 million, or $0.16 per share for the third quarter. For the first three quarters of the year, the company posted a net loss of $81.7 million, or $0.60 per share.

In terms of cash, Xeris ended the third quarter with $93.4 million in total cash, cash equivalents and short-term investments, down from $111.6 million at the end of the second quarter. Additionally, the company plans to draw down the additional $50 million from Hayfin’s credit facility by the end of this year. As a result, the company updated its year-end 2022 cash guidance to a new range of $110M-$120M. Xeris believes that their balance sheet and revenue growth will help them break even on cash flow by the end of next year.

My thoughts on the third trimester

Overall, I’m incredibly happy with the company’s progress so far in 2022. Xeris saw significant year-over-year growth across the board and market share gains. What’s more, Xeris still believes they are on track to break even on cash flow by the end of next year. Assuming the company leaves 2022 with $110 million to $120 million in cash, I believe Xeris could achieve profitability without the need for additional dilutive financing.

A new “higher idea”

I have a “top ideas” list on my Compounding Healthcare Seeking Alpha Marketplace service comprising around sixteen tickers from my three portfolios (Bio Boom, Bioreactor and Healthy Dividends). These tickers offer a strong value proposition and have an actionable trading/investment opportunity.

Xeris is a “Bio Boom” ticker I am deciding to make XERS a main idea for several reasons. First, Xeris has a diversified revenue base from its three commercial products in large accessible markets.

Xeris Biopharma Products and Markets

Xeris Biopharma Products and Markets (Xeris Biopharma)

Second, the company has unique platform technology that can develop advanced shelf-stable formulations. Third, Xeris has a strong portfolio with a number of development programs that have the potential to extend the company’s current products into new indications as well as new product candidates.

Xeris Biopharmaceutical Pipeline

Xeris Biopharma pipeline (Xeris Biopharma)

Fourth, Xeris is currently in a strong financial position that will allow the company to continue to drive its three commercial products while keeping the portfolio going. Finally, the company’s management team has shown that it is capable of doing business and building a company to generate long-term value.

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In fact, the characteristics listed above are not unique to Xeris, but you’d be hard-pressed to find a small-cap biotech with these traits, valuation, and so close to cash flow break-even.

Xeris is projected to earn more than $100 million in revenue for this year and is expected to report strong double-digit growth for years to come. Taking into account the company’s third quarter total revenue and growth trends, I believe Xeris will be able to meet Street’s 2020 revenue estimates of ~$108M, which would represent a forward price-to-sales ratio of 1.89x .

Xeris Annual Revenue Estimates

Xeris Annual Revenue Estimates (Alpha Search)

Considering that the industry average selling price is around 4x-5x, we can say that XERS is undervalued for its 2022 estimates and heavily discounted for its future projections. In fact, Street estimates that Xeris will make around $250M in 2025, which would be less than 1x forward selling price…meaning the company’s current market cap (~$200M) is less than the 2025 revenue estimate. In fact, these are just estimates, but they illustrate how discounted XERS is right now for its current and future revenue estimates. If the market were to price XERS in line with its peers, XERS would be trading around $4 a share right now and over $9 in the next few years. XERS is currently trading around $1.50 per share, so we can say that there is significant upside potential in the ticker.

One might find it hard to believe that the company is going to more than double its revenue in the next few years, but keep in mind that all three of the company’s commercial products have just hit the market. Therefore, the estimated growth of Street for Xeris is not unjustified. I believe this potential has gone unnoticed by the market and provided me with the opportunity to invest in a promising company with a potential multi-bagger result.

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some risks

Although I am looking to elevate XERS to a “main idea”, it is still a “Bio Boom” ticker, so it is still a risky speculative ticker. First, Xeris is still burning through cash, so investors need to accept that the market will continue to punish XERS until cash flow breakeven is almost guaranteed.

Another risk to consider is that XERS is a followed ticker with little to no hype around it. Xeris is not a gene therapy or cell therapy company that focuses on rare genetic diseases or oncology. Therefore, investors should not expect XERS to command a high premium compared to other highly publicized fintech companies. XERS may be slow work for several years and driven by fundamentals rather than prospects.

Indeed, these risks are extremely concerning, but they can nonetheless drive down the stock price until they are addressed. Therefore, I give XERS a conviction level of 3 out of 5.

My plan

In my previous article on XERS, I discussed that I was waiting for XERS to drop below my buy threshold of $2.74 and was looking to accumulate around $1.50 per share through a series of buy orders. Since then, my XERS has been sitting idle as I waited for the broader market to start responding appropriately to positive news.

XERS daily chart

XERS daily chart (Trendspider)

Well the market had a positive response to the latest CPI data so I am looking to dust off my XERS position and restart my accumulation. I plan to make a small addition soon. After that, I will wait for the stock price to break through the nearest downtrend ray before clicking the buy button, as long as the stock price is below my buy threshold of $2.74. I intend to make several more small additions before the end of 2023 in anticipation of the company reaching its cash flow breakeven target.

I am still planning to book profit and have set sell orders around $5/share and $7/share to move my XERS position back into a “house money” status.

In the long term, I have decided to make XERS a larger position in the Bio Boom portfolio for at least 5 more years, anticipating that XERS will break even in late 2023 and ultimately graduate into my portfolio. growth “bioreactor”.

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