X4 Pharmaceuticals, Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. Financial statements are unaudited. X4 is a clinical-stage biopharmaceutical company developing therapies for rare diseases; it has not generated product-sales revenue.
Financial performance and position
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $3.0 million |
| Research and development expense | $13.2 million | $9.3 million | $25.3 million | $18.3 million |
| General and administrative expense | $5.8 million | $5.3 million | $11.6 million | $10.0 million |
| Net loss | $19.6 million | $15.1 million | $38.3 million | $26.3 million |
| Net loss per share | $0.74 | $0.76 | $1.97 | $1.31 |
| Operating cash used | — | — | $37.6 million | $27.0 million |
At June 30, 2021, cash and cash equivalents were $95.2 million, restricted cash was $1.3 million, and current assets were $101.4 million versus current liabilities of $13.1 million. Long-term debt, including accretion and net of discount, was $33.5 million; the $32.5 million principal bears an effective annual rate of 10.7% and matures July 2024. Total assets were $141.7 million and accumulated deficit was $232.5 million.
Operating cash use increased year over year, while financing provided $54.1 million, primarily from the March private placement. Cash, cash equivalents and restricted cash totaled $96.5 million at period-end, up from $80.7 million at December 31, 2020. No principal payments were due or paid in the first half.
Changes and unusual items
- Six-month R&D expense increased $7.0 million, primarily from higher mavorixafor clinical-trial and manufacturing costs, consulting and professional services, staffing, stock compensation and facilities.
- Six-month G&A expense rose $1.7 million, mainly due to stock compensation, recruiting and facility costs.
- Prior-year six-month revenue included a $3.0 million Abbisko milestone. No license revenue was recorded in the first half of 2021.
- A $8.2 million deemed dividend from the Class B warrant exercise-price reset increased the six-month loss attributable to common stockholders to $46.6 million and contributed to reported loss per share of $1.97. The reset followed the March 2021 equity offering.
- The March private placement generated $55.0 million gross proceeds and $54.0 million net cash proceeds, with issuance costs. The filing reports 24.6 million common shares outstanding at June 30 and 24.9 million as of July 30, 2021.
Outlook, operations and risks
- Liquidity and going concern: Management estimated available cash would fund operating and capital needs into Q4 2022, but stated that substantial doubt exists about the company’s ability to continue as a going concern within one year after issuance of the statements. Under the Hercules loan covenant, a minimum-cash requirement begins April 1, 2022, subject to possible extensions or milestone-based adjustments. Based on projections and without additional funding, management expected a covenant breach in Q2 2022; Hercules could demand repayment of all outstanding debt. The company is seeking additional capital and there is no assurance it can obtain funding on acceptable terms.
- Clinical milestones: For the global Phase 3 4WHIM trial of mavorixafor, 23 patients were enrolled, exceeding the minimum for primary-endpoint analysis. The company expected to complete enrollment in Q3 2021, report top-line data in Q4 2022 and target an FDA NDA filing in Q1 2023. These are expectations, not guarantees.
- Other programs: The SCN Phase 1b trial was difficult to enroll amid the pandemic; initial data from a small number of patients were expected in Q4 2021. The first two cohorts of the Waldenström’s Phase 1b combination trial were fully enrolled; additional data were expected in Q4 2021. The company expected to file an IND for at least one of X4P-002 or X4P-003 in 2022. Further ccRCC development was contingent on a strategic collaboration.
- Collaboration option: On July 20, 2021, after quarter-end, X4 said it would not pursue a co-development arrangement with Abingworth. Abingworth Bioventures 8 could require repurchase, for $2.0 million at the original $8.70-per-share price, of shares it bought in the March placement, by September 2, 2021; the filing said the option had not been exercised as of its discussion.
- COVID-19 and execution risks: The company reported trial-site activation, enrollment, travel and drug-delivery challenges and warned of potential further delays to trials, supply, regulatory interactions and financing. It relied on single third-party manufacturers for mavorixafor API and finished capsules and expected supply into 2022, but that estimate could prove wrong.
- Other risks: X4 expects continuing losses and rising expenses and depends substantially on mavorixafor’s clinical and regulatory success. Regulatory approval, trial outcomes, patient recruitment, manufacturing, intellectual-property rights, commercialization and future financing remain uncertain. No material litigation was reported. Management said disclosure controls were effective as of June 30, 2021.
Investor verification priorities
- Track actual cash burn, financing activity and progress toward the Hercules minimum-cash covenant, including any extension, waiver, milestone or refinancing.
- Confirm whether Abingworth exercised its repurchase option by September 2, 2021 and the resulting cash and share impact.
- Monitor 4WHIM enrollment completion, the Q4 2022 data timeline and the targeted Q1 2023 NDA filing; assess any effects from COVID-19 or trial execution.
- Review subsequent SCN and Waldenström’s trial updates and determine whether preliminary results changed with additional data.
- Assess the dilution and potential share-count impact of equity financing, warrants and outstanding equity awards, as well as the company’s continued lack of product revenue.