X4 Pharmaceuticals, Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. Unaudited results. X4 is a clinical-stage biopharmaceutical company developing treatments for rare diseases; it has not generated product-sales revenue.
Financial results and liquidity
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $3.0 million |
| Research and development expense | $13.2 million | $11.4 million | $38.5 million | $29.6 million |
| General and administrative expense | $5.9 million | $5.6 million | $17.6 million | $15.6 million |
| Net loss | $20.2 million | $17.4 million | $58.5 million | $43.7 million |
| Net loss per share attributable to common stockholders | $(0.76) | $(0.87) | $(2.71) | $(2.18) |
- Cash and cash equivalents: $76.4 million at September 30, 2021, versus $78.7 million at December 31, 2020. Restricted cash was $1.3 million; cash, cash equivalents and restricted cash totaled $77.7 million.
- Cash flow: Operating activities used $51.9 million in the first nine months of 2021, versus $41.3 million a year earlier. Investing activities used $0.6 million. Financing activities provided $49.7 million, principally from the March private placement; $2.0 million was used to repurchase redeemable shares.
- Debt: Hercules loan principal was $32.5 million; reported long-term debt, including accrued end-of-term payments and net of discount, was $33.7 million. The effective annual interest rate was 10.7%. Principal payments were scheduled to begin in February 2023, with maturity in July 2024.
- Balance sheet: Total assets were $120.5 million, total liabilities $51.8 million, and stockholders’ equity $68.7 million. Current assets were $80.7 million and current liabilities $13.2 million.
Material changes and unusual items
- Operating expenses increased year over year: R&D rose $8.9 million for the nine-month period, mainly from mavorixafor trial and manufacturing costs, consulting, and increased staffing and facility expenses. G&A increased $2.0 million, primarily reflecting stock-based compensation, recruiting and facility costs.
- Nine-month 2020 revenue included a $3.0 million Abbisko milestone; no license revenue was recorded in the comparable 2021 period.
- The 2021 nine-month loss attributable to common stockholders included an $8.2 million deemed dividend from the Class B warrant price reset after the March private placement. This increased the attributable loss and loss per share but was not an operating expense.
- In August 2021, X4 repurchased and retired 229,885 shares held by Abingworth for $2.0 million after Abingworth exercised its put option following termination of a contemplated co-development arrangement.
Outlook, risks and contingencies
- Liquidity and going concern: Management expected existing cash to fund operating and capital requirements into Q4 2022, but disclosed substantial doubt about the company’s ability to continue as a going concern for the year following issuance of the statements. The Hercules minimum-cash covenant begins April 1, 2022, subject to extensions or changes upon specified milestones. Based on current projections, X4 expected to breach the covenant in Q2 2022 without additional funding; Hercules could then demand repayment of outstanding debt. X4 is seeking capital through equity, debt, third-party funding, collaborations and other arrangements, with no assurance it will succeed.
- Clinical milestones: X4 completed enrollment of 31 patients in the pivotal Phase 3 4WHIM trial. It expected top-line results in Q4 2022 and targeted an FDA NDA filing in Q1 2023. The SCN/chronic neutropenia Phase 1b trial was amended to enroll up to 25 patients; initial data were expected in Q4 2021. Additional Waldenström’s trial data were also expected in Q4 2021. These are forward-looking expectations, not reported outcomes.
- Trial update: Preliminary Waldenström’s data, based on a June 15, 2021 cutoff, showed an overall response rate of 100% among eight evaluable patients; four had a major response and one a very good partial response. The filing cautions that preliminary data may change as more data are collected and verified.
- Other development: X4 anticipated filing an IND for X4P-002 in the second half of 2022. Further development of mavorixafor for ccRCC was contingent on a potential strategic collaboration.
- Key risks: COVID-19 had caused or risked delays in trial-site activation and enrollment and could disrupt trial execution, supply and access to capital. X4 also highlighted dependence on mavorixafor, rare-disease recruitment and market-size uncertainty, regulatory and clinical-development risk, reliance on single-source mavorixafor manufacturers, and the need for substantial additional funding.
- The company reported no material pending legal proceedings, no off-balance-sheet arrangements, and effective disclosure controls as of September 30, 2021. It had no product sales and expected continued losses.
Important facts for investors to verify
- Whether X4 obtained additional funding or otherwise addressed the projected Q2 2022 Hercules cash-covenant shortfall and going-concern uncertainty.
- Whether the 4WHIM trial results and expected NDA timeline matched management’s stated outlook, including any subsequent regulatory requirements.
- Final, audited Waldenström’s data and the results and timing of the amended neutropenia trial.
- Actual cash burn, financing proceeds, share-count dilution and debt terms in subsequent filings.
- Whether COVID-19, clinical-trial execution, or single-source manufacturing affected development timelines or clinical supply.