X4 Pharmaceuticals, Inc. — FY 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. Filed March 21, 2024. This is an annual report, not a standalone fourth-quarter financial report.
Business context and development
X4 is a clinical-stage biopharmaceutical company focused on rare diseases and immune-system disorders. Its lead candidate, oral once-daily mavorixafor, is being developed for WHIM syndrome and other chronic neutropenic disorders. The company had no product approved for sale and reported no product-sales revenue in 2023.
- The FDA accepted the WHIM syndrome NDA for priority review in October 2023, with a PDUFA target action date of April 30, 2024. The proposed use is for patients aged 12 and older; FDA had not planned an advisory committee meeting as of the filing.
- The pivotal 4WHIM Phase 3 trial (31 participants) met its primary and key secondary endpoints for neutrophil and lymphocyte counts. Reported additional results included an approximately 60% reduction in annualized infection rate versus placebo; mavorixafor was generally well tolerated during the 52-week trial.
- A Phase 2 trial in chronic neutropenia was ongoing, with further data expected in Q2 2024. X4 expected to initiate a global Phase 3 trial in idiopathic or congenital neutropenia in Q2 2024.
Financial performance and liquidity
| Metric | FY 2023 | FY 2022 |
|---|---|---|
| Product-sales revenue | None | None |
| Research and development expense | $72.0 million | $61.1 million |
| Selling, general and administrative expense | $35.5 million | $27.0 million |
| Total operating expenses | $107.5 million | $87.6 million |
| Operating loss | $107.5 million | $87.6 million |
| Net loss | $101.2 million | $93.9 million |
| Net loss per share, basic and diluted | $0.57 | $1.52 |
| Net cash used in operating activities | $96.5 million | $77.1 million |
At December 31, 2023, cash and cash equivalents were $99.2 million and short-term marketable securities were $15.0 million; restricted cash was $1.0 million. Total current assets were $122.1 million and current liabilities were $22.9 million. Long-term debt was $54.6 million net of discount and accretion; total liabilities were $96.2 million. The filing does not present product gross margin because the company had no product-sales revenue.
Other income, net, was $6.4 million in 2023 versus expense of $6.3 million in 2022. This included $7.1 million of noncash income from a decrease in the fair value of warrant liabilities, partly offset by $5.8 million of interest expense. The resulting improvement in other income did not offset higher operating expenses.
Material changes and notable items
- Net loss increased by $7.3 million year over year. R&D expense rose $11.0 million, principally due to a $5.0 million Genzyme milestone following NDA acceptance, higher regulatory and NDA-preparation costs, and increased clinical, manufacturing and regulatory staffing.
- SG&A expense increased $8.5 million, reflecting higher compensation, stock-based compensation and commercial-readiness and market-access costs.
- Operating cash use increased $19.4 million year over year. Investing cash use was $14.9 million, primarily reflecting net purchases of short-term marketable securities. Financing provided $88.5 million, including $60.0 million net proceeds from equity-related issuance and $22.5 million from a Hercules debt tranche.
- Common shares outstanding increased from 121.7 million at year-end 2022 to 167.4 million at year-end 2023. The company also reported 112.7 million outstanding warrants and pre-funded warrants at year-end, creating potential dilution.
- X4 recorded a $5.0 million Genzyme milestone expense and payment in 2023. A further $7.0 million milestone is payable upon FDA approval; additional regulatory and sales milestones and tiered royalties may also apply.
Outlook, risks and contingencies
- Management expected a potential U.S. launch in Q2 2024 if mavorixafor received FDA approval, and anticipated an EU marketing application in Q4 2024 or early 2025. These are plans, not assurances of approval or launch.
- Management said available cash, cash equivalents and short-term securities were expected to fund operations into Q1 2025. However, the company concluded that substantial doubt existed about its ability to continue as a going concern for at least one year after the financial statements were issued, and said it would need additional capital.
- The Hercules facility had $55.0 million principal outstanding at year-end, with interest at the greater of 10.15% or prime plus 3.15%. It requires at least $20.0 million of qualified cash through January 31, 2025. Without additional funding, eligible debt drawdowns, product profits or PRV proceeds, X4 projected it could breach the minimum-cash covenant in Q1 2025; lenders could then demand repayment. Potential additional borrowings are subject to conditions.
- Key risks include dependence on mavorixafor, regulatory and trial outcomes, uncertain patient-population and market estimates, reimbursement and pricing, and reliance on single-source third parties for active ingredient and capsule manufacturing. The filing reports no pending legal proceedings as of December 31, 2023.
- Nasdaq notified X4 in November 2023 that it was below the $1.00 minimum bid-price requirement, with a compliance deadline of May 13, 2024. Failure to regain compliance could lead to delisting.
- PwC issued an unmodified opinion on the financial statements while highlighting substantial doubt about going concern. Management reported effective disclosure controls and internal control over financial reporting; the auditor did not provide an internal-control attestation.
Important facts for investors to verify
- FDA action on the WHIM NDA, the approved label, any approval conditions, and whether a rare pediatric disease Priority Review Voucher is awarded.
- Actual launch timing, patient identification and uptake, payer coverage, pricing, and the commercial supply agreements and readiness of the company’s sole-source manufacturers.
- Updated cash runway, fundraising or licensing plans, future borrowing availability, and compliance with Hercules cash and revenue covenants.
- Phase 2 chronic-neutropenia data and the timing, design and funding of the planned Phase 3 trial.
- Potential dilution from outstanding warrants, pre-funded warrants, equity plans and future financing; also confirm Nasdaq listing compliance.