X4 Pharmaceuticals, Inc. — Q3 2020 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2020. X4 is a clinical-stage biopharmaceutical company developing rare-disease therapies. Its lead candidate, mavorixafor, was in a global Phase 3 trial for WHIM syndrome, with additional trials in severe congenital neutropenia (SCN) and Waldenström’s macroglobulinemia. The company had no product sales.
Financial performance
Amounts below are in millions, except per-share data.
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| License revenue | $0 | $0 | $3.0 | $0 |
| Research and development | $11.4 | $8.6 | $29.6 | $23.1 |
| General and administrative | $5.6 | $4.4 | $15.6 | $13.7 |
| Total operating expenses | $17.0 | $17.0 | $45.2 | $40.8 |
| Net loss | $17.4 | $17.7 | $43.7 | $42.0 |
| Net loss per share | $0.87 | $1.22 | $2.18 | $4.31 |
Q3 net loss improved by $0.3 million year over year; nine-month net loss increased by $1.8 million. The $3.0 million of nine-month license revenue was a one-time Abbisko milestone payment, recognized after Abbisko achieved a financing milestone. With no product revenue, operating or gross margins are not meaningful.
Cash, liquidity and debt
- At September 30, cash and cash equivalents were $88.8 million; restricted cash was $1.9 million. Management said available cash was expected to fund forecast operating costs, capital expenditures and debt service for at least 12 months from the financial statements’ issuance date.
- Operating cash use was $41.3 million for the first nine months, versus $38.8 million a year earlier. Cash, cash equivalents and restricted cash declined $37.4 million to $90.7 million.
- Long-term debt had $25.0 million principal outstanding and a $25.5 million carrying value. The Hercules facility bears variable interest, with a minimum rate of 8.75%; its effective annual rate was 10.7% at quarter-end. Principal payments were scheduled to begin in February 2022, with maturity in July 2023.
- Total liabilities were $43.4 million, including $5.4 million of lease liabilities. The debt is secured by substantially all personal property and other assets, subject to stated exclusions, and includes covenants and potential cash-maintenance requirements if borrowings exceed $25 million.
Changes, outlook and notable items
- Year-to-date R&D expense rose $6.5 million, mainly from mavorixafor trial costs, early-stage candidate work, and personnel and stock-based compensation. G&A rose $1.9 million, primarily from staffing and stock-based compensation.
- Management expected WHIM Phase 3 top-line data to be delayed into 2022 because of COVID-19. Initial SCN data were expected in 2021; Waldenström’s trial data were delayed into the first half of 2021 because of site activation and enrollment delays.
- The pandemic disrupted or delayed trial-site activation, enrollment, monitoring and patient access. Management reported adequate global mavorixafor supply through 2020 and well into 2021, while warning that further clinical, supply-chain, regulatory or financing disruption remained possible.
- After quarter-end, FDA granted Fast Track Designation for mavorixafor in adults with WHIM. It already had Breakthrough Therapy and orphan-drug designations; these do not assure approval or faster review.
- The company reported $162,000 of debt-extinguishment loss and a $148,000 tax provision related to foreign withholding on the milestone payment for the nine-month period. The prior-year period included a $4.0 million loss on transfer of nonfinancial assets, which did not recur.
- X4 terminated its Cambridge lease effective September 30, 2020 and established a Boston headquarters lease. A new Vienna laboratory lease was expected to begin in 2021. The company also entered an agreement for up to $50 million of at-the-market equity sales in August; it reported no sales under that agreement through September 30. An October 2020 Aspire Capital agreement provided for potential purchases of up to $50 million of shares over three years, subject to terms and limitations.
- Management expects continuing losses and additional capital needs; future equity financing could dilute shareholders. No material litigation or off-balance-sheet arrangements were reported. Disclosure controls were assessed as effective.
Important facts for investors to verify
- Updated enrollment, trial-site status and timing for the WHIM, SCN and Waldenström’s trials, including the basis for the 2022 and 2021 data expectations.
- Cash burn and runway assumptions, particularly as clinical and administrative costs rise, and whether additional financing will be needed sooner than expected.
- Hercules debt terms, covenant triggers, collateral, interest costs and repayment schedule; confirm whether any additional borrowing or milestones change the cash requirements.
- Actual utilization and potential dilution from the ATM and Aspire Capital equity arrangements, along with the impact of outstanding warrants and equity awards.
- Whether Abbisko achieves further development, regulatory or commercial milestones; future milestone amounts remain contingent and were constrained at September 30.