# Xeris Biopharma Holdings, Inc.: Form 10-Q for the period ended Sep 30, 2024

- Company: [Xeris Biopharma Holdings, Inc.](/companies/xers.md) (CIK 1867096)
- Form: 10-Q
- Filed: 2024-11-08
- Accepted by EDGAR: Nov 8, 2024, 16:02 ET
- Period: 2024-09-30
- Accession: 0001867096-24-000187
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1867096/000186709624000187/xers-20240930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1867096/000186709624000187/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $54.3m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $143.0m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Research and development | 3 months, 2024-07-01 to 2024-09-30 | $5.9m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2024-01-01 to 2024-09-30 | $19.5m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2024-07-01 to 2024-09-30 | $45.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2024-01-01 to 2024-09-30 | $123.3m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | −$12.9m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-30 | −$35.3m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-07-01 to 2024-09-30 | $7.8m | us-gaap:InterestExpenseNonoperating |
| Interest expense | 9 months, 2024-01-01 to 2024-09-30 | $22.8m | us-gaap:InterestExpenseNonoperating |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | −$3.3m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-30 | −$2.3m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | −$15.7m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | −$49.7m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | −$0.11 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | −$0.34 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | −$0.11 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | −$0.34 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 148,993,823 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 145,962,198 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | −$39.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2024-09-30 | $59.2m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-09-30 | $162.8m | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $321.1m | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $91.0m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-09-30 | $349.4m | us-gaap:Liabilities |
| Long-term debt | at 2024-09-30 | $216.2m | us-gaap:LongTermDebt |
| Current portion of debt | at 2024-09-30 | $15.1m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2024-09-30 | −$28.3m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 36,836 characters.

### 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 6, 2024 with the U.S. Securities and Exchange Commission. In addition to financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. All statements in this document other than statements of historical fact are, or could be, "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "will," "would," "may," "should," "expects," "focus," "goal," "intends," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue," and terms of similar meaning are also generally intended to identify forward-looking statements. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including without limitation, the regulatory approval of our product candidates, our ability to market and sell our products and product candidates if approved, and factors discussed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2023 and in our other subsequent filings with the U.S. Securities and Exchange Commission, including elsewhere in 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.

### 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 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.

### 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.
- *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.
- *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.

### 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.

### Development of product candidates

### Once Weekly Subcutaneous Injection of Levothyroxine (XP-8121)

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, ("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.

#### 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.

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 generally 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. The data established an average once-weekly SC dose of XP-8121 and confirmed our previous Phase 1 study of a four-time target dose conversion factor when switching from once-daily oral administration of levothyroxine. Participants who completed the study rated higher treatment satisfaction with XP-8121 compared to oral levothyroxine and a majority (72%) indicated a strong preference for the subcutaneous route of administration. An FDA End-of-Phase 2 interaction to facilitate a Phase 3 pivotal study program is expected by year-end.

### Patents

We currently own 179 patents issued globally, including composition of matter patents covering our ready-to-use glucagon formulation that expire in 2036. Included in the total patents, we have 64 granted patents globally related to our platform technologies and 8 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, 11,278,547 and 11,903,940, which were granted on June 1, 2021, March 22, 2022, and February 20, 2024, 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.

For the nine months ended September 30, 2024 and September 30, 2023, we reported net losses of $49.7 million and $48.9 million, respectively. We have not been profitable since inception, and, as of September 30, 2024, our accumulated deficit was $666.7 million. In the near term, we expect to continue to incur significant expenses, operating losses and net losses as we, among other things:

|  |  |
| --- | --- |
| \< | continue our marketing and selling efforts related to the commercialization of Gvoke, Recorlev and Keveyis; |
| \< | continue our research and development efforts; |
| \< | continue to operate as a public company; and |
| \< | continue to fund our operations with an increased cost of borrowing due to a high interest rate environment and tighter lending requirements. |

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.

### Components of our Results of Operations

The following discussion sets forth certain components of the statement of operations of Xeris for the three and nine months ended September 30, 2024 and 2023 as well as factors that impact those items.

### Product revenue, net

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

### Royalty, contract and other revenue

Royalty and contract revenue is recognized as earned in accordance with contract terms when it can be reasonably estimated and collectability is reasonably assured. Revenue generated from various collaboration and technology partnerships are included in this line item.

### 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.

### Research and development expenses

Research and development expenses consist of expenses incurred in connection with the discovery and development of our products and product candidates. We recognize research and development expenses as incurred. Expenses that are paid in advance of performance are capitalized until services are provided or goods are delivered. We track external research and development costs by project, however, personnel related expenses related to research and development are not allocated by project. Research and development expenses primarily 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, senior secured credit facility, interest income earned on deposits and investments, debt refinancing costs and gains and losses on the change in fair value of the CVRs.

### Results of Operations

The following table summarizes our results of operations for the three and nine months ended September 30, 2024 and 2023 (in thousands):

| Product revenue, net: | Three Months Ended September 30, 2024 | 2023 | Change $% |  | Nine Months Ended September 30, 2024 | 2023 | Change $% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Gvoke | $22,942 | $17,735 | $5,207 | 29.4 | $59,567 | $48,406 | $11,161 | 23.1 |
| Recorlev | 17,726 | 8,097 | 9,629 | 118.9 | 41,663 | 19,741 | 21,922 | 111.0 |
| Keveyis | 12,193 | 15,865 | (3,672) | (23.1) | 38,406 | 42,708 | (4,302) | (10.1) |
| Product revenue, net | 52,861 | 41,697 | 11,164 | 26.8 | 139,636 | 110,855 | 28,781 | 26.0 |
| Royalty, contract and other revenue | 1,407 | 6,623 | (5,216) | (78.8) | 3,335 | 8,669 | (5,334) | (61.5) |
| Total revenue | 54,268 | 48,320 | 5,948 | 12.3 | 142,971 | 119,524 | 23,447 | 19.6 |
| Cost and expenses: |  |  |  |  |  |  |  |  |
| Cost of goods sold, excluding amortization of intangible assets | 13,593 | 8,201 | 5,392 | 65.7 | 27,354 | 21,075 | 6,279 | 29.8 |
| Research and development | 5,888 | 5,034 | 854 | 17.0 | 19,468 | 15,959 | 3,509 | 22.0 |
| Selling, general and administrative | 44,969 | 37,287 | 7,682 | 20.6 | 123,342 | 108,527 | 14,815 | 13.7 |
| Amortization of intangible assets | 2,711 | 2,711 | — | — | 8,132 | 8,132 | — | — |
| Total cost and expenses | 67,161 | 53,233 | 13,928 | 26.2 | 178,296 | 153,693 | 24,603 | 16.0 |
| Loss from operations | (12,893) | (4,913) | (7,980) | 162.4 | (35,325) | (34,169) | (1,156) | 3.4 |
| Other income (expense): |  |  |  |  |  |  |  |  |
| Interest and other income | 1,197 | 1,121 | 76 | 6.8 | 4,411 | 3,644 | 767 | 21.0 |
| Loss on debt extinguishment | — | (2,837) | 2,837 | (100.0) | — | (2,837) | 2,837 | (100.0) |
| Debt refinancing costs | — | — | — | — | (2,690) | — | (2,690) | 100.0 |
| Interest expense | (7,786) | (6,847) | (939) | 13.7 | (22,782) | (19,591) | (3,191) | 16.3 |
| Change in fair value of warrants | — | 17 | (17) | (100.0) | 7 | 3 | 4 | 133.3 |
| Change in fair value of contingent value rights | 420 | 932 | (512) | (54.9) | 4,388 | 3,072 | 1,316 | 42.8 |
| Total other expense | (6,169) | (7,614) | 1,445 | (19.0) | (16,666) | (15,709) | (957) | 6.1 |
| Net loss before benefit from income taxes | (19,062) | (12,527) | (6,535) | 52.2 | (51,991) | (49,878) | (2,113) | 4.2 |
| Income tax benefit | 3,324 | 338 | 2,986 | 883.4 | 2,268 | 1,013 | 1,255 | 123.9 |
| Net loss | $(15,738) | $(12,189) | $(3,549) | 29.1 | $(49,723) | $(48,865) | $(858) | 1.8 |

### Product revenue, net

#### Gvoke

Net revenue increased by $5.2 million or 29.4% for the three months ended September 30, 2024 compared to the same period ended September 30, 2023. The increase was due to higher volume ($3.8 million or 21.5%), primarily driven by prescription growth, and favorable net pricing ($1.4 million or 7.9%).

Net revenue increased by $11.2 million or 23.1% for the nine months ended September 30, 2024 compared to the same period ended September 30, 2023. The increase was due to higher volume ($8.9 million or 18.4%), primarily driven by prescription growth and favorable net pricing ($2.3 million or 4.7%).

#### Recorlev

Net revenue increased by $9.6 million or 118.9% for the three months ended September 30, 2024 compared to the same period ended September 30, 2023. The increase was due to higher volume ($9.0 million or 111.6%) and favorable net pricing ($0.6 million or 7.3%).

Net revenue increased by $21.9 million or 111.0% for the nine months ended September 30, 2024 compared to the same period ended September 30, 2023. The increase was due to higher volume ($18.8 million or 95.2%) and favorable net pricing ($3.1 million or 15.8%).

#### Keveyis

Net revenue decreased by $3.7 million or 23.1% for the three months ended September 30, 2024 compared to the same period ended September 30, 2023. The decrease was due to lower volume ($2.9 million or 18.0%) and unfavorable net pricing ($0.8 million or 5.1%).

Net revenue decreased by $4.3 million or 10.1% for the nine months ended September 30, 2024 compared to the same period ended September 30, 2023. The decrease was due to lower volume ($5.4 million or 12.6%) partially offset by favorable net pricing ($1.1 million or 2.5%).

### Cost of goods sold

Cost of goods sold increased by $5.4 million or 65.7% and $6.3 million or 29.8% for the three and nine months ended September 30, 2024 compared to the same periods ended September 30, 2023, respectively.

Cost of goods sold as a percent of total product revenue increased by 6.0%, to 25.7% for the three months ended September 30, 2024 compared to 19.7% for the same period ended September 30, 2023, primarily due to the write-off of Gvoke components as a result of manufacturing process changes required to support Gvoke capacity expansion efforts ($3.6 million or 6.8%), offset by higher sales of products with a lower cost of goods sold (0.8%).

Cost of goods sold as a percent of total product revenue increased by 0.6%, to 19.6% for the nine months ended September 30, 2024 compared to 19.0% for the same period ended September 30, 2023, due to the write-off of Gvoke components as a result of manufacturing process changes required to support Gvoke capacity expansion efforts ($4.4 million or 3.2%), offset by higher sales of products with a lower cost of goods sold (2.6%).

### Research and development expenses

Research and development expenses increased by $0.9 million or 17.0% for the three months ended September 30, 2024 compared to the same period ended September 30, 2023, primarily driven by higher spending for our pipeline ($0.6 million), primarily XP-8121 ($0.4 million), and personnel related expenses ($0.5 million), offset by lower spending on our technology development ($0.3 million).

Research and development expenses increased by $3.5 million or 22.0% for the nine months ended September 30, 2024 compared to the same period ended September 30, 2023, primarily driven by higher spending for our pipeline ($1.9 million) and personnel related expenses ($1.5 million).

The following table summarizes our research and development expenses by type for the three and nine months ended September 30, 2024 and 2023:

| Project specific expenses: | Three Months Ended September 30, 2024 | 2023 | Change $% |  | Nine Months Ended September 30, 2024 | 2023 | Change $% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Pipeline | $1,539 | $951 | $588 | 61.8% | $5,610 | $3,734 | $1,876 | 50.2% |
| Technology development (1) | 235 | 500 | (265) | (53.0)% | 1,074 | 1,508 | (434) | (28.8)% |
| Personnel related expenses | 3,280 | 2,829 | 451 | 15.9% | 10,288 | 8,755 | 1,533 | 17.5% |
| Lab supplies and equipment depreciation | 442 | 481 | (39) | (8.1)% | 1,206 | 1,094 | 112 | 10.2% |
| Other | 392 | 273 | 119 | 43.6% | 1,290 | 868 | 422 | 48.6% |
| Total | $5,888 | $5,034 | $854 | 17.0% | $19,468 | $15,959 | $3,509 | 22.0% |

(1) Technology Development represents any investment in our proprietary technology platforms, XeriSol and XeriJect.

### Selling, general and administrative expenses

Selling, general and administrative expenses increased by $7.7 million or 20.6% for the three months ended September 30, 2024 compared to the same period ended September 30, 2023, primarily due to the CEO succession plan and restructuring ($6.1 million) and higher expenses for Recorlev expansion ($3.7 million), partially offset by lower external spending ($2.1 million).

Selling, general and administrative expenses increased by $14.8 million or 13.7% for the nine months ended September 30, 2024 compared to the same period ended September 30, 2023, primarily due to the CEO succession plan and restructuring ($6.1 million), higher expenses for Recorlev expansion ($10.7 million), and higher rent ($1.0 million), partially offset by lower external spending ($3.0 million).

### Amortization of intangible assets

For the three and nine months ended September 30, 2024 and September 30, 2023, amortization of intangible assets were both $2.7 million and $8.1 million, respectively.

### Other income (expense)

For the three and nine months ended September 30, 2024, interest expense increased $0.9 million or 13.7% and $3.2 million or 16.3% compared to the same periods ended September 30, 2023, respectively. The increases in both periods were primarily due to a higher principal amount and increased interest rates.

For the three and nine months ended September 30, 2024, change in fair value of contingent value rights was a gain of $0.4 million and $4.4 million, respectively, compared to $0.9 million and $3.1 million for the three and nine months ended September 30, 2023, respectively. The gains were primarily due to the remeasurement of the CVR liability as a result of changes in our stock price prior to issuance of the common stock issued in settlement of the CVR in the first quarter 2024 and the revaluation of the CVR liability related to the Recorlev 2024 sales milestone.

For the nine months ended September 30, 2024, deferred refinancing costs were $2.7 million related to the third party debt arrangements for advisory and legal fees.

### 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 the issuance of debt.

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 were otherwise used for general corporate purposes. After repayment, the Loans may not be re-borrowed.

In September 2023, we completed the exchange of $32.0 million in aggregate principal amount of the 2025 Convertible Notes for $33.6 million in aggregate principal amount of the 2028 Convertible Notes. As of September 30, 2024, the outstanding balance of the 2025 Convertible Notes was $15.2 million and the outstanding balance of the 2028 Convertible Notes was $33.6 million.

In March 2024, we, Xeris Pharma and certain subsidiary guarantors, entered into an Amended and Restated Credit Agreement and Guaranty (the "Amended and Restated Credit Agreement") with the lenders from time to time parties thereto (the "New Lenders") and Hayfin Services LLP, as administrative agent for the New Lenders, pursuant to which the Company and its subsidiaries party thereto granted a first priority security interest on substantially all of their assets, including intellectual property, subject to certain exceptions. The Amended and Restated Credit Agreement amended and restated the Hayfin Loan Agreement in its entirety. The Amended and Restated Credit Agreement provided for the New Lenders to extend $200.0 million in term loans to the Company on the closing date and up to an additional $15.2 million in additional term loans, which additional term loans are available only to redeem the Company's existing 2025 Convertible Notes.

### Capital Resources and Funding Requirements

We have incurred operating losses since inception, and we have an accumulated deficit of $666.7 million at September 30, 2024. Based on our current operating plans and existing working capital at September 30, 2024, 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, Recorlev and Keveyis 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 the marketing and selling of Gvoke, Recorlev and Keveyis, 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, but not limited to:

|  |  |
| --- | --- |
| \< | our degree of success in commercializing Gvoke, Recorlev and Keveyis; |
| \< | 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, Recorlev and Keveyis, 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, Recorlev and Keveyis.

### Cash Flows

*(in thousands)*

|  | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: |
| Net cash used in operating activities | $(38,956) | $(54,494) |
| Net cash used in investing activities | $(5,133) | $(20,872) |
| Net cash provided by/(used in) financing activities | $35,770 | $(379) |

#### Operating activities

Net cash used in operating activities was $39.0 million for the nine months ended September 30, 2024, compared to $54.5 million for the nine months ended September 30, 2023. The decrease in net cash used in operating activities was primarily driven by reduced working capital usage. For a discussion regarding product revenue, net and increases in spending, refer to "Results of Operations" included in this "Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations" of Part I of this Quarterly Report on Form 10-Q.

#### Investing activities

Net cash used in investing activities was $5.1 million for the nine months ended September 30, 2024, compared to $20.9 million for the nine months ended September 30, 2023. Cash used in investing activities in 2024 was primarily due to net purchases of short-term investments.

#### Financing activities

Net cash provided by financing activities was $35.8 million for the nine months ended September 30, 2024, compared to net cash used in financing activities of $0.4 million for the nine months ended September 30, 2023. The cash provided by financing activities in 2024 was primarily due to the net proceeds of $38.2 million from the term loan made to the Company on the closing date of the Amended and Restated Credit Agreement.

### CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES AND ASSUMPTIONS

Our Annual Report on Form 10-K for the year ended December 31, 2023 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, 2023.

### NEW ACCOUNTING STANDARDS

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

## Market risk

As filed, 2,077 characters.

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 September 30, 2024 would increase or decrease interest income by approximately $0.7 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 Amended and Restated Credit Agreement, interest is incurred at a floating per annum rate in an amount equal to the sum of (i) 6.95% (or 5.95% if the replacement rate is in effect) plus (ii) the greater of (x) the forward-looking term rate based on SOFR for a three month tenor (or the replacement rate, if applicable), and (y) 2.00% per annum. The remaining balance of unamortized debt issuance costs have been reflected as a direct reduction to the loan balance. Interest on the 2025 Convertible Notes is assessed at a fixed rate of 5.0% annually and interest on the 2028 Convertible Notes is assessed at a fixed rate of 8.0% annually and therefore do 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. Net foreign currency gains and losses did not have a material effect on our results of operations for the three and nine months ended September 30, 2024.

## Controls and procedures

As filed, 1,616 characters.

### 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 September 30, 2024 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 U.S. 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 September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 21,347 characters.

In addition to the information set forth in this report, you should carefully consider the risks discussed under the heading "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2023 and subsequent filings with the U.S. Securities and Exchange Commission, which could have a material adverse effect on our business or consolidated financial statements, results of operations, and cash flows. Additional risks not currently known, or risks that are currently believed to be not material, may also impair business operations. The material changes to our risk factors since the filing of our Annual Report on Form 10-K for the year ended December 31, 2023 and subsequent Quarterly Reports on Form 10-Q, are presented below.

#### Risks Related to Third-Parties Actions and Market Acceptance

***Our reliance on third-party suppliers, including single-source suppliers, together with a limited number of possible suppliers and long development lead times to establish alternative sources for our products, product candidates, components and other key materials has in the past and may in the future impact our ability to develop our product candidates or to continue to commercialize Gvoke, Recorlev, Keveyis, or any product candidates that are approved.***

We do not currently own or operate any manufacturing facilities for the production of Gvoke, Recorlev, or Keveyis for commercial supply or our product candidates for use in clinical trials. We rely on third-party suppliers to manufacture and supply our products and our product candidates. For Gvoke, we currently rely on a number of single-source suppliers, such as Bachem Americas, Inc. and certain of its affiliates ("Bachem") for active pharmaceutical ingredient ("API"), Pyramid Laboratories Inc. ("Pyramid") for drug product, and SHL Pharma, LLC ("SHL Pharma") for auto-injector and final product assembly, and we have entered into several supply agreements including with Bachem, Pyramid and SHL Pharma.

Taro produces all of our requirements for Keveyis pursuant to a supply agreement. If the agreement were to be terminated by Taro prior to the next renewal in March of 2027, we will need to find a new third party to manufacture Keveyis or manufacture the product ourselves. Similarly, for Recorlev, we rely on a number of single-source suppliers, such as Regis Technologies, Inc. for API and Xcelience, LLC ("Lonza") for finished drug product. In addition, we rely on other third parties to manufacture our product candidates for use in clinical trials. If any of these vendors are unable or unwilling to meet our future requirements, we may not be able to manufacture and/or supply our products in a timely manner.

Although we often have contracts with our third-party suppliers, our current arrangements with these manufacturers are terminable by such manufacturers, subject to certain notice provisions. In addition, Taro maintains certain reversion rights in the purchased assets, including the regulatory approval for Keveyis, enabling Taro to elect to have the purchased assets returned to it and to terminate its agreement with us should we be materially in non-compliance with any reversion condition such as breaching certain of the assignment restrictions or failing to meet our marketing commitments after receiving notice thereof and failing to cure such material non-compliance. In the event one of our third-party suppliers breaches, terminates or refuses to renew their agreement with us or otherwise refuses to supply us with product, product candidates, components or other key materials, we may be unable to find an adequate alternative vendor, or an affordable alternative or other acceptable solution in time and our product development and commercial activities could be harmed.

Our third-party suppliers may not be required to provide us with any guaranteed minimum production levels or have dedicated capacity for our products. As a result, we may not obtain sufficient quantities of products, product candidates, components or other key materials in the future, which could have a material adverse effect on our business as a whole. In addition, even if we have agreed with our third-party suppliers to receive certain quantities of products, product candidates, components or other key materials, our third-party suppliers have in the past and may in the future not produce sufficient inventory to meet commercial demand in a timely manner, or at all. We continue to experience long lead times for certain components and materials used in the production of our products and product candidates. In addition, we have experienced in the past and may experience in the future delays or supply constraints due to manufacturing defects by our third-party suppliers, a lack of raw materials supply and other risks that we have limited ability to prevent. A supply shortage or longer lead times for delivery than expected in the supply of products, product candidates, components or other key materials supplied to us by our third-party suppliers has in the past and could in the future impair our ability to generate revenues from the sale of our products. Growth in the costs and expenses of raw materials may also impair our ability to cost effectively manufacture our products.

Any disruption to the facilities or operations of our third-party suppliers resulting from weather-related events, epidemics, global health concerns, fire, acts of terrorism, political instability, war, labor or geopolitical issues, or any other cause could materially impair our ability to manufacture our products and to distribute our products to customers. We have a global supply chain and manufacture some components of our products outside the United States, including without limitation, in Taiwan and Israel. The current war between Israel and Hamas has in the past and could in the future directly and indirectly affect our operations. For example, the Israel-Hamas war could result in damage, destruction or disruptions to the facilities or operations of our third-party suppliers, including, but not limited to, our supplier of Keveyis, longer lead times for our products or product candidates, export delays or restrictions or other adverse events which adverse events we cannot predict with any certainty. Any interruption or other delay in the production or delivery of our supplies could reduce sales of our products and increase our costs and any negative impact of such matters on our third-party suppliers and manufacturers may also have an adverse impact on our results of operations or financial condition. In addition, further attacks by Hamas, Hezbollah or other groups on Israel could further impact our third-party supplier's operations in

Israel. Furthermore, a widening of the conflict in the Middle East or further escalation could lead to broader geopolitical destabilization and macro-economic impacts.

Gvoke and some of our product candidates are drug-device combination products that are regulated under the drug regulations of the Federal Food, Drug, & Cosmetic Act ("FDCA") based on their primary mode of action as a drug. Third-party manufacturers may fail to comply with the current Good Manufacturing Practice ("CGMP") regulatory requirements applicable to drug-device combination products, including applicable provisions of the FDA’s drug CGMP regulations, device CGMP requirements embodied in the Quality System Regulation (the "QSR") or similar regulatory requirements outside the United States. Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of our products and product candidates, re-labeling or re-packaging of our products, operating restrictions and criminal prosecutions, any of which could significantly affect the supply of our products and product candidates. The facilities used by our contract manufacturers to manufacture our products and product candidates must be registered with the FDA and are subject to inspections conducted by the FDA to ensure compliance with CGMPs. Other foreign regulatory authorities may also require manufacturers to register manufacturing facilities. We do not control the manufacturing process of, and are completely dependent on, our contract manufacturing partners for compliance with CGMPs and the QSR. Contract manufacturers have in the past and may in the future face manufacturing or quality control problems causing drug substance or device component production and shipment delays, supply shortages or circumstances where the contractor may not be able to maintain compliance with the applicable CGMP or the QSR. If our contract manufacturers cannot successfully manufacture material that conforms to our specifications, CGMP and/or the QSR and the strict regulatory requirements of the FDA or others, they will not be able to secure and/or maintain regulatory approval for their manufacturing facilities. In addition, we have no control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or such foreign regulatory authorities do not approve these facilities for the manufacture of our products or product candidates or if they withdraw any such approval in the future, we may need to find alternative manufacturing facilities, which would significantly impact our ability to market our products or develop, obtain regulatory approval for or market our product candidates, if approved.

Further, as part of their manufacture of our products, product candidates, components and other key materials, our third-party suppliers are expected to comply with and respect the rights of others. From time to time, our third-party suppliers have in the past and may in the future not properly maintain or defend intellectual property rights that they license to us or act in such a way as to invite complaints and litigation that could jeopardize or invalidate our intellectual property or other rights or expose us to potential litigation. If a third-party supplier has failed or fails to maintain or acquire the proper licenses, otherwise infringes the proprietary rights of others or otherwise breaches an agreement with any of their partners in the course of providing services to us, we may have to find alternative third-party suppliers or defend against litigation claims, either of which would significantly impact our ability to develop, obtain or maintain regulatory approval for or commercialize our products and our product candidates, if approved. There are a limited number of third-party suppliers that are compliant with CGMP and/or the QSR, as required by the FDA, the EU, and other regulatory authorities, and that also have the necessary expertise and capacity to manufacture our materials and products. As a result, it may be difficult for us to locate third-party suppliers for our anticipated future needs, and our anticipated growth could strain the ability of our current third-party suppliers to deliver products, raw materials, and components to us. In addition, there is typically a transition period when a new third-party supplier commences work. Legislative proposals are pending that, if enacted, could negatively impact U.S. funding for certain biotechnology providers, including some of our vendors, that have relationships with certain foreign governments or which pose a threat to national security. The potential downstream adverse impacts on entities having only commercial relationships with any impacted biotechnology providers is unknown but may include supply chain disruptions or delays. If we are unable to arrange for third-party suppliers for our materials and products, or to do so on commercially reasonable terms, we may not be able to complete development of or market our products.

The introduction of new CGMP or QSR regulations or product specific requirements by a regulatory body may require that we source alternative materials, modify existing manufacturing processes, or implement design changes to our products that are subject to prior approval by the FDA or other regulatory authorities. We may also be required to reassess a third-party supplier’s compliance with all applicable new regulations and guidelines, which could further impede our ability to manufacture and supply products in a timely manner. As a result, we could incur increased production costs, experience supply interruptions, suffer damage to our reputation and experience an adverse effect on our business and financial results. For example, on January 31, 2024, the FDA issued a final rule which will be effective in 2026 to amend its Quality System Regulation (“QSR”) requirements to align more closely with the international consensus standards for medical devices. Specifically, the FDA amended the requirements primarily by incorporating by reference the 2016 edition of the International Organization of Standardization (“ISO”), ISO 13485 standard. While the ISO 13485 standard and the FDA’s QSR requirements are similar in certain aspects, we are evaluating whether we need to revise our compliance system and processes to be in line with the final rule. In addition, our reliance on third-party suppliers involves a number of additional risks, including, among other things:

\< our suppliers may fail to comply with regulatory requirements or make errors in manufacturing raw materials, components or products that could negatively affect the efficacy or safety of our products or cause delays in shipments of our products;

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| --- | --- |
| \< | we may be subject to price fluctuations due to terms within long-term supply arrangements with suppliers or lack of long-term supply arrangements for key materials and products; |
| \< | given the long lead times to change suppliers, existing suppliers may utilize that as leverage in negotiations with us in a manner that is adverse to our business; |
| \< | our suppliers may lose access to critical services or sustain damage to a facility, including losses due to natural disasters, accidents, terrorism, geo-political events, or epidemics that may result in a sustained interruption in the manufacture and supply of our products; |
| \< | fluctuations in demand for our products or a supplier’s demand from other customers may affect their ability or willingness to deliver materials or products in a timely manner or may lead to long-term capacity constraints at the supplier; |
| \< | we may not be able to find new or alternative sources or reconfigure our products and manufacturing processes in a timely manner if necessary raw materials or components become unavailable; |
| \< | our suppliers may encounter financial or other hardships unrelated to our demand for materials, products and services, which could inhibit their ability to fulfill our orders and meet our requirements; and |
| \< | the possibility of breach or termination of a manufacturing agreement or purchase order by the third party. |

In addition, we could be forced to secure new materials or develop alternative third-party suppliers, which can be difficult given our product complexity, long development lead-times and global regulatory review processes.

If any CMO with whom we contract fails to perform its obligations, we may be forced to enter into an agreement with a different CMO, which we may not be able to do on reasonable terms, if at all. In either scenario, our clinical trials or commercial distribution could be delayed significantly as we establish alternative supply sources. In some cases, the technical skills required to manufacture our products or product candidates may be unique or proprietary to the original CMO and we may have difficulty, or there may be contractual restrictions prohibiting us from, transferring such skills to a back-up or alternate supplier, or we may be unable to transfer such skills at all. In addition, if we are required to change CMOs for any reason, we will be required to verify that the new CMO maintains facilities and procedures that comply with quality standards and with all applicable regulations. We will also need to verify, such as through a manufacturing comparability study, that any new manufacturing process will produce our product according to the specifications previously submitted to or approved by the FDA or another regulatory authority. The delays associated with the verification of a new CMO could negatively affect our ability to develop product candidates or commercialize our products in a timely manner or within budget. Furthermore, a CMO may possess technology related to the manufacture of our product candidate that such CMO owns independently. This would increase our reliance on such CMO or require us to obtain a license from such CMO in order to have another CMO manufacture our products or product candidates which license we may not be able to obtain on favorable terms or at all. In addition, in the case of the CMOs that supply our products or product candidates, changes in manufacturers often involve changes in manufacturing procedures and processes, which could require that we conduct bridging studies between our prior clinical supply used in our clinical trials and that of any new manufacturer. We may be unsuccessful in demonstrating the comparability of clinical supplies which could require the conduct of additional clinical trials. Additionally, under the CARES Act, we must have in place a risk management plan that identifies and evaluates the risks to the supply of approved drugs for certain serious diseases or conditions for each establishment where the drug or API is manufactured. The risk management plan is subject to FDA review during an inspection. If we experience significant shortages in the supply of our marketed products, our results could be materially impacted.

***We are party to a number of material agreements which contain complex commercial terms that could result in litigation or liability that could adversely affect our business, results of operations and financial condition.***

We are currently party to various material agreements, including (i) collaboration and license agreements for the use of certain of our intellectual property by third parties, (ii) supply agreements for the supply of materials and components used in our products and product candidates, (iii) distribution agreements for the commercialization of our existing or future products by third parties, and (iv) transaction agreements. These agreements contain complex commercial terms, including:

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| --- | --- |
| \< | clinical development and commercialization obligations that are based on certain commercial reasonableness performance standards that can often be difficult to enforce if disputes arise as to the adequacy of performance; |
| \< | clinical and commercial manufacturing agreements, some of which are priced on an actual cost basis for products supplied by us to our partners with complicated cost allocation formulas and methodologies; |
| \< | intellectual property ownership allocation between us and our partners for improvements and new inventions developed during the course of the partnership; |
| \< | royalties on sales based on a number of complex variables, including net sales calculations, geography, patent life, generic competitors, and other factors; and |
| \< | indemnity obligations for third-party intellectual property infringement, product liability and certain other claims. |

From time to time, we have had and may in the future have informal dispute resolution discussions with third parties regarding the appropriate interpretation of the complex commercial terms contained in our agreements. One or more of these informal dispute resolution discussions may ultimately result in costly litigation, require us to make payments or incur liabilities, result in the unfavorable interpretation of contract terms and/or result in the inability for us to commercialize one or more of our products or manufacture one or more of our product candidates, which would have a material adverse impact on our business, results of operations or financial condition. In addition, many of the rights we have received related to our products or product candidates were received from parties who in turn received those rights from other parties to which we are not in privity of contract. Our counterparties have in the past and may in the future be subject to disputes that they have breached the terms of the agreements from which our rights are derived but to which we are not a party or act in such a way as to invite complaints and litigation that could jeopardize or invalidate our intellectual property or other rights or expose us to potential litigation. If one of our partners breached an agreement with any of their partners in the course of providing services or rights to us, we may have to defend against litigation claims, which would significantly impact our ability to develop, obtain or maintain regulatory approval for or commercialize our products and our product candidates, if approved.

Filed Nov 8, 2024.
Source: SEC EDGAR, the filing index for accession 0001867096-24-000187. Last ingested by Listed: Nov 6, 2026, 17:33 ET. No prices; not investment advice.