X4 Pharmaceuticals, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. X4 is a late-stage clinical biopharmaceutical company developing mavorixafor and other candidates for rare diseases. It has not generated revenue from product sales.
Financial performance and position
| Metric | Q2 2022 / June 30, 2022 | Comparable period / prior balance |
|---|---|---|
| Revenue from product sales | None | None |
| Research and development expense | $13.8 million for Q2; $27.9 million for six months | $13.2 million and $25.3 million, respectively |
| Selling, general and administrative expense | $6.7 million for Q2; $14.4 million for six months | $5.8 million and $11.6 million, respectively |
| Net loss | $21.2 million for Q2; $43.2 million for six months | $19.6 million and $38.3 million, respectively |
| Net loss per share | $0.60 for Q2; $1.31 for six months | $0.74 and $1.97, respectively |
| Cash and cash equivalents | $47.4 million | $81.8 million at December 31, 2021 |
| Debt | $33.1 million carrying value; $32.5 million principal | $33.9 million carrying value at December 31, 2021 |
| Operating cash flow | $(38.7) million for six months | $(37.6) million |
Q2 operating expenses rose 8% year over year, while six-month expenses rose 13%. Increased headcount and unallocated R&D costs contributed to the increase; mavorixafor Phase 3 costs were lower than the prior-year period. Q2 net loss widened, although reported loss per share was lower, reflecting a higher weighted-average share count. No product gross margin is applicable.
Liquidity, financing and debt
Cash, cash equivalents and restricted cash totaled $48.7 million at June 30. For the first six months, financing activities provided $4.6 million, compared with $54.1 million in 2021; cash and restricted cash declined by $34.4 million.
The company disclosed substantial doubt about its ability to continue as a going concern within one year after issuance of the financial statements. On July 6, 2022, after quarter-end, it closed a private placement for $55.7 million gross proceeds before expenses. Management said cash on hand plus net proceeds was expected to fund operating and capital needs into Q3 2023. However, under current projections and absent specified milestones, management expected a possible breach of the Hercules minimum-cash covenant in the first half of 2023. A breach could allow Hercules to demand repayment of outstanding debt. The covenant requires cash above $30 million beginning September 1, 2022; achievement of a performance milestone can reduce the threshold to $20 million, and a subsequent NDA filing can extinguish it.
Hercules debt bears a variable rate with an 8.75% floor; the effective annual rate was 10.9% at June 30. Interest-only payments were scheduled through January 2023, followed by principal and interest payments beginning February 2023, with maturity in July 2024. Debt amendments provide for possible extensions of the interest-only period if financing and other milestones are met.
Programs, outlook and risks
The company expected Phase 3 WHIM-syndrome trial results in Q4 2022 and potential NDA submission in early H2 2023, if the results supported filing. It expected results from the chronic-neutropenia and Waldenström’s Phase 1b trials in Q3 2022; it had completed enrollment in the Waldenström’s trial and reported positive results, with the study expected to conclude in December 2022.
In July 2022, X4 announced it would prioritize mavorixafor for chronic neutropenic disorders, including WHIM syndrome; pause its preclinical immunodeficiency program; and advance oncology programs only with strategic partnerships. It also disclosed a workforce reduction of approximately 20%. Management expected SG&A expenses to grow as it built commercial capabilities, while overall spending needs remained dependent on clinical progress, regulatory requirements and financing access.
Key risks include clinical-trial efficacy, safety and enrollment; regulatory approval uncertainty; COVID-19-related disruption; a Russia-based Phase 3 site and the Russia-Ukraine conflict; reliance on single-source manufacturers for mavorixafor API and finished capsules; and the need for additional capital. The company reported no material legal proceedings and stated disclosure controls were effective as of June 30, 2022.
Investor verification points
- Confirm final WHIM Phase 3 results, their implications for an NDA, and whether the anticipated timing changed.
- Verify post-quarter private-placement net proceeds, resulting dilution, and the effect of warrants and pre-funded warrants; the transaction included 37.6 million common shares, 13.3 million pre-funded warrants and 50.9 million warrants.
- Track cash runway against the Hercules minimum-cash covenant, milestone status, and any financing or debt amendments.
- Assess the impact of the July reprioritization and workforce reduction on spending, clinical timelines and partnership prospects.
- Monitor manufacturing supply continuity and trial-site or enrollment disruptions, including those related to COVID-19 and geopolitical events.