X4 Pharmaceuticals, Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022. X4 is a clinical-stage biopharmaceutical company with no product-sales revenue; its lead candidate, mavorixafor, is being developed for rare immune disorders.
Financial performance and position
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue from product sales | None | None | None | None |
| Research and development expense | $14.1 million | $13.2 million | $42.0 million | $38.5 million |
| Selling, general and administrative expense | $6.0 million | $5.9 million | $20.5 million | $17.6 million |
| Net loss | $21.6 million | $20.2 million | $64.8 million | $58.5 million |
| Net loss attributable to common stockholders | $21.9 million | $20.2 million | $67.3 million | $66.7 million |
| Net loss per share, basic and diluted | $0.26 | $0.76 | $1.32 | $2.71 |
- Operating expenses for the first nine months rose $5.9 million year over year. Higher unallocated R&D costs and SG&A—including compensation, regulatory and IT costs—were partly offset by lower Phase 3 trial start-up costs and a $0.5 million gain on an intellectual-property sale.
- Operating cash use was $58.0 million in the first nine months, versus $51.9 million a year earlier. Investing cash use was $0.1 million; financing provided $56.6 million. Cash, cash equivalents and restricted cash fell $2.0 million to $81.1 million, including $79.9 million of unrestricted cash and cash equivalents.
- At September 30, total assets were $113.4 million, total liabilities $51.6 million, and stockholders’ equity $61.8 million. Debt carrying value was $33.4 million, including $14.6 million classified as current. The Hercules loan’s effective annual interest rate was 12.9%.
- Operating margins are not meaningful for this pre-commercial company; losses are driven principally by research and development spending.
Material changes and financing
- In July, X4 closed a private placement with $55.7 million gross proceeds; together with its March placement, the two offerings generated $60.6 million net financing proceeds during the nine-month period. The July transaction included common shares, pre-funded warrants and five-year warrants.
- Shares outstanding increased from 28.1 million at December 31, 2021 to 68.7 million at September 30, 2022. A substantial additional warrant overhang remained: 78.2 million warrants were outstanding, including 50.9 million July 2022 warrants with a $1.095 exercise price and 13.3 million pre-funded warrants.
- Shareholders approved an increase in authorized common shares from 125 million to 500 million on September 1. This allowed the July warrants to be reclassified from liability to equity; the fair-value remeasurement produced approximately $2.5 million of income. The placement also involved approximately $2.9 million of transaction fees expensed in other expense.
- The current portion of debt increased from $0.8 million at year-end 2021 to $14.6 million at September 30, 2022, largely reflecting upcoming scheduled repayments rather than new borrowing.
Outlook, risks and unusual items
- Management expected Phase 3 WHIM trial results in Q4 2022 and, if results support filing, targeted an NDA submission in early second half of 2023. Positive Phase 1b results were reported for chronic neutropenia and Waldenström’s macroglobulinemia; further chronic-neutropenia data were expected in the first half of 2023, and the Waldenström’s study was expected to conclude in December 2022.
- X4 reprioritized resources toward mavorixafor for WHIM and other chronic neutropenia disorders. Further oncology development, including Waldenström’s, depends on strategic partnerships; the preclinical immunodeficiency program was paused, and X4P-003 development was paused.
- Going concern: Management stated that existing cash was expected to fund operations into Q3 2023, but concluded substantial doubt existed about the company’s ability to continue as a going concern. Under the Hercules agreement, X4 must maintain cash above $30 million; management projected a possible covenant breach in Q2 2023 if specified milestones are not achieved. Hercules could demand repayment of outstanding debt. Additional financing will be needed, with no assurance it will be available on acceptable terms.
- The loan matures in July 2024; principal payments begin February 2023. A milestone tied to Phase 3 WHIM results can reduce the minimum-cash covenant and extend the interest-only period, while further financing and an NDA filing are required for an additional extension.
- Risks include clinical-trial and regulatory uncertainty, potential enrollment or COVID-19-related delays, reliance on single-source mavorixafor manufacturers and CROs, and dependence on additional capital. The filing reported no material legal proceedings. Management said disclosure controls were effective as of September 30, 2022.
- After quarter-end, the compensation committee approved a cash bonus arrangement for employees who remain employed through December 31, 2022; payments were expected in January 2023.
Key facts for investors to verify
- Final Phase 3 WHIM results, their consistency with the filing’s expected timing, and whether the data support an NDA.
- Cash burn and updated runway, the Hercules minimum-cash covenant and milestones, and the timing and terms of additional financing.
- Potential dilution from the expanded share authorization, pre-funded warrants, outstanding warrants and other equity awards.
- Progress, costs and next data milestones for the expanded chronic-neutropenia trial, and whether strategic partnerships enable oncology development.
- Whether single-source manufacturing, clinical-trial execution or COVID-19 disruptions affect supply, enrollment or regulatory timelines.