XLO

Business Context and Reporting Period

Xilio Therapeutics, Inc. (XLO) is a clinical-stage biotechnology company developing tumor-activated immuno-oncology therapies. This Form 10-Q covers the quarterly period ended September 30, 2025. The Company is classified as a non-accelerated filer, a smaller reporting company, and an emerging growth company. As of November 11, 2025, there were 52,500,328 shares of common stock outstanding.

Key Financial Metrics

Liquidity: The Company reported a net cash increase of $48.5 million for the nine months ended September 30, 2025, driven primarily by financing activities. Operating cash flow was negative $3.0 million for the period.

Material Changes vs. Prior Period

• Revenue Surge: Collaboration and license revenue increased significantly to $19.1 million in Q3 2025 from $2.3 million in Q3 2024. This was driven by revenue recognition from a new collaboration with AbbVie and a $7.0 million cumulative catch-up adjustment related to a $17.5 million development milestone achieved with Gilead.
• Warrant Liability Impact: The Company recorded a $15.4 million loss in Q3 2025 due to the change in fair value of common stock warrant liabilities issued in a June 2025 follow-on offering. This non-cash charge significantly impacted the net loss.
• Operating Expenses: Total operating expenses increased by $4.0 million in Q3 2025 compared to the prior year, primarily due to increased Research and Development (R&D) costs ($3.6 million increase) driven by clinical trial activities and personnel costs.
• Balance Sheet: Total assets increased from $71.1 million at year-end 2024 to $133.7 million at September 30, 2025, reflecting higher cash balances and a $17.5 million license agreement receivable from Gilead.

Guidance, Outlook, and Risks

• Going Concern: Management has raised substantial doubt about the Company's ability to continue as a going concern. While current cash and the recently received $17.5 million Gilead milestone are expected to fund operations into the first quarter of 2027, the Company expects to incur significant losses and will require additional capital.
• Capital Requirements: Future funding may be sought through the exercise of Series B and Series C warrants (potential up to $100 million), milestone payments, or additional equity/debt offerings. Failure to secure capital could necessitate cost reduction strategies.
• Nasdaq Compliance: The Company received a deficiency notice regarding minimum bid price and stockholders' equity requirements. It was transferred to the Nasdaq Capital Market in October 2025 and has until March 30, 2026, to regain compliance with the $1.00 minimum bid price requirement.
• Key Risks: Risks include the uncertainty of clinical trial outcomes for product candidates (vilastobart, efarindodekin alfa), reliance on third-party manufacturers (including WuXi Biologics in China), and potential trade restrictions or tariffs affecting operations.

Investor Verification Checklist

• Warrant Exercise Probability: Assess the likelihood of the Series B and Series C warrants being exercised for cash, which is critical for the Company's liquidity runway.
• Clinical Trial Progress: Monitor upcoming data readouts for vilastobart (Phase 2 in MSS mCRC) and efarindodekin alfa (Phase 2 initiation) to validate the revenue recognition assumptions.
• Nasdaq Compliance Status: Verify if the stock price sustains the $1.00 minimum bid price requirement by March 30, 2026, to avoid delisting risks.
• Supply Chain Exposure: Evaluate the impact of U.S.-China trade tensions and potential legislation (e.g., BIOSECURE Act) on the Company's reliance on WuXi Biologics for manufacturing.
• Deferred Revenue Recognition: Review the timeline for recognizing the $69.3 million in deferred revenue from AbbVie and Gilead agreements to understand future revenue visibility.