X4 Pharmaceuticals, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. X4 is a late-stage clinical biopharmaceutical company focused on rare diseases and has not generated revenue from product sales.
Financial performance and position
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue from product sales | None | None |
| Research and development expense | $22.1 million | $14.1 million |
| Selling, general and administrative expense | $7.2 million | $7.7 million |
| Operating loss | $29.3 million | $21.3 million |
| Net loss | $24.0 million | $22.0 million |
| Net loss per share, basic and diluted | $0.16 | $0.72 |
| Net cash used in operating activities | $26.5 million | $20.2 million |
- R&D expense rose $8.0 million, principally due to a $5.0 million accrued Genzyme development milestone and higher costs for the mavorixafor Phase 3 trial. Mavorixafor direct R&D expense was $15.3 million, versus $6.1 million a year earlier.
- Net loss increased by $2.1 million despite $5.4 million of noncash income from a reduction in the fair value of Class C warrants. Higher R&D expense and the absence of the prior-year asset-sale gain also affected the comparison.
- Cash and cash equivalents were $93.4 million at March 31, 2023; cash, cash equivalents and restricted cash totaled $94.4 million. Cash, cash equivalents and restricted cash decreased $28.6 million during the quarter.
- Total assets were $124.4 million and total liabilities were $72.7 million. Debt principal was $32.5 million, with a $32.4 million carrying amount. The company reported $19.5 million of current liabilities and $98.2 million of current assets.
- Gross profit and operating margins are not meaningful to assess because the company has no product sales.
Material changes and business outlook
- In November 2022, X4 reported positive top-line results from its pivotal Phase 3 4WHIM trial of mavorixafor. It was preparing a U.S. NDA for patients aged 12 and older with WHIM syndrome, with submission expected in early the second half of 2023. Additional trial results were expected to be presented in Q2 2023.
- The company was enrolling patients in a Phase 2 mavorixafor trial for certain chronic neutropenic disorders. It expected a clinical update and more clarity on the planned Phase 3 program in Q2 or Q3 2023.
- Management expected operating expenses to continue increasing, particularly as clinical development advances. No formal revenue or earnings guidance was provided.
- Management estimated existing cash would fund operations into Q2 2024, but stated that, without additional funding, the company expected to fall below its Hercules loan minimum-cash covenant in Q1 2024. The covenant generally requires at least $20 million in cash, reducible to $10 million following qualifying FDA approval. A breach could permit the lender to demand repayment of outstanding debt.
Risks, contingencies and unusual items
- The filing states that substantial doubt exists about X4’s ability to continue as a going concern for the year following issuance of the financial statements. Management said additional capital is required, but financing is not assured; failure to obtain it could force program delays, reductions or cessation of operations.
- The Hercules facility carries a variable rate of at least 10.15%; its effective annual interest rate was 13.8% at March 31, 2023. Interest-only payments run through September 2024 under the loan terms described in the financial statements; principal payments are scheduled thereafter, with maturity on April 1, 2026 unless extension conditions are met.
- X4 accrued a $5.0 million Genzyme development milestone in Q1. A further $7.0 million of regulatory milestones was described as reasonably possible within the next 12–18 months, but not yet probable. Genzyme milestone payments can total up to $25.0 million, in addition to potential royalties.
- The company depends heavily on mavorixafor, external clinical and manufacturing providers, and licensed intellectual property. Clinical outcomes, FDA review, patient enrollment, manufacturing and financing are significant uncertainties. X4 also disclosed no material pending legal proceedings.
- Potential dilution is substantial: 87.7 million warrants were outstanding excluding pre-funded warrants at quarter-end. The 2023 weighted-average basic and diluted share count was 146.0 million, while period-end common shares outstanding were 122.2 million; pre-funded warrants are included in the EPS share calculation.
Key facts investors should verify
- Whether the NDA was submitted on the expected timetable, and the FDA’s filing and review decisions.
- Final and complete 4WHIM data, including secondary and exploratory endpoints, and the results and timing of chronic-neutropenia studies.
- Available cash and expected burn versus the Hercules minimum-cash covenant, and the timing, amount and terms of any new financing.
- The status and potential payment timing of the Genzyme milestones, and the fully diluted share count, including warrants and equity awards.