Xilio Therapeutics, Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. Xilio is a clinical-stage biotechnology company developing tumor-activated immunotherapies. It had no product revenue and reported operating losses; its programs remained in early clinical or preclinical development.
Financial position and performance
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development expense | $13.0 million | $10.5 million | $44.2 million | $39.8 million |
| General and administrative expense | $7.2 million | $5.5 million | $21.8 million | $15.7 million |
| Total operating expenses | $20.2 million | $16.0 million | $66.0 million | $55.5 million |
| Net loss | $19.8 million | $16.3 million | $65.8 million | $56.1 million |
| Cash used in operating activities | Not provided for the quarter | $57.5 million | $63.6 million |
- At September 30, 2022, cash and cash equivalents were $139.1 million, down from $198.1 million at December 31, 2021. Restricted cash was $1.6 million. Total assets were $157.4 million; total liabilities were $31.1 million; stockholders’ equity was $126.3 million.
- Operating cash use was lower year over year for the first nine months, despite a larger net loss. Investing cash use was $1.4 million; financing cash use was less than $0.1 million. Cash, cash equivalents and restricted cash decreased by $58.9 million during the period.
- Notes payable were $9.8 million net of discount, representing $10.0 million principal. The loan bears a variable rate (6.5% at September 30), had interest-only payments through December 31, 2022, and matures June 30, 2024. It is secured by substantially all assets except intellectual property. The company reported covenant compliance.
- Gross margin and profitability margins are not meaningful because the company had no product revenue. No income tax provision or benefit was recorded.
Material changes versus comparable periods
- Q3 operating expenses rose $4.2 million and net loss increased $3.5 million year over year. For the first nine months, operating expenses rose $10.5 million and net loss increased $9.7 million.
- Nine-month R&D expense increased by $4.4 million overall. XTX301 spending rose $7.1 million and personnel-related R&D costs rose $4.3 million; these increases were partly offset by lower XTX202 manufacturing and preclinical costs.
- Nine-month G&A expense increased $6.1 million, mainly from higher personnel costs and public-company and facility-related expenses. Equity-based compensation was $6.6 million for the period, versus $2.9 million a year earlier.
- Other income was $0.2 million for the first nine months, compared with other expense of $0.6 million in 2021, mainly reflecting higher interest income on cash balances. The prior-year financing cash inflow included $144.8 million of preferred-stock proceeds; there was no comparable financing inflow in 2022.
Outlook, management commentary and risks
- Management estimated that September 30 cash and cash equivalents would fund operating expenses and capital expenditures into the second quarter of 2024. This estimate depends on assumptions that could prove incorrect; the company expects continuing losses and negative operating cash flow and will need additional capital.
- XTX202: In an ongoing Phase 1 trial for advanced solid tumors, the company anticipated starting monotherapy expansion enrollment in Q4 2022 and a Phase 2 monotherapy trial in the first half of 2023, with preliminary anti-tumor activity and safety data expected in Q3 2023.
- XTX301: The filing reports that the FDA cleared its IND in November 2022, after quarter-end. The company anticipated beginning Phase 1 monotherapy dose-escalation enrollment in Q1 2023 and reporting preliminary safety data in Q4 2023.
- XTX101: The company anticipated completing monotherapy dose-escalation by year-end 2022 and reporting preliminary Phase 1 data in Q2 2023. In November 2022, it said it would seek a strategic collaboration and would not start an anti-PD-1 combination cohort or Phase 2 trial without a partner.
- Also after quarter-end, on November 9, 2022, the company entered an at-the-market sales agreement allowing it, at its discretion, to offer up to $75 million of common stock. Sales could dilute existing shareholders; the company was not obligated to sell shares.
- Key risks include early-stage clinical and preclinical uncertainty, potential safety issues and trial delays, the need for further financing, dependence on third parties, and biologics manufacturing and supply risks. The company disclosed reliance on a single manufacturer for required processes, with significant operations in China. COVID-19, inflation, workforce constraints and market conditions could also affect costs, timelines and access to capital.
- Management concluded disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2022; no material change in internal control over financial reporting was reported.
Most important facts for investors to verify
- Whether actual cash burn and development spending support the stated runway into Q2 2024, and when additional financing may be needed.
- Clinical trial enrollment, safety and efficacy updates for XTX202, XTX301 and XTX101, including whether the stated milestones were met.
- Whether Xilio secures a partner for XTX101 and how that affects its development plans and costs.
- Manufacturing capacity, quality and supply continuity, particularly given reliance on a single manufacturer with China operations.
- Whether the company sells shares under the $75 million ATM facility and the resulting dilution.
- Debt repayment and interest obligations, plus any changes to covenant compliance or the availability of the additional term loan option.