XLO

Business Context and Reporting Period

Xilio Therapeutics, Inc. (XLO) is a clinical-stage biotechnology company developing masked immuno-oncology therapies. This Form 10-Q covers the quarterly period ended March 31, 2026. The company is classified as an emerging growth company and a smaller reporting company. As of March 31, 2026, the company had 5,782,536 shares of common stock outstanding.

Key Financial Metrics

Debt and Liquidity: The company has no long-term debt. Total liabilities were $90.9 million as of March 31, 2026, primarily consisting of deferred revenue ($48.0 million) and common stock warrant liabilities ($26.3 million). The company reported an accumulated deficit of $428.3 million.

Material Changes vs. Prior Period

• Revenue Growth: Revenue increased by $9.7 million (332%) year-over-year, driven by collaboration and license revenue recognition from agreements with AbbVie and Gilead.
• Expense Increases: R&D expenses rose by $11.6 million, primarily due to increased manufacturing activities for IND-enabling studies (XTX501) and preclinical development. G&A expenses decreased by $1.6 million due to lower professional fees and severance costs.
• Net Loss Improvement: Net loss narrowed by $3.7 million, aided by a $3.3 million gain from the change in fair value of common stock warrant liabilities.
• Capital Raise: In February 2026, the company completed a follow-on offering of prefunded warrants, receiving net proceeds of $37.3 million.
• Stock Split: A 1-for-14 reverse stock split was effected on March 13, 2026. All share data has been retroactively adjusted.

Guidance, Outlook, and Risks

Liquidity Outlook: Management anticipates that existing cash ($150.3 million) plus a $6.0 million development milestone achieved in Q2 2026 under the AbbVie agreement will fund operations into early 2028. This estimate excludes potential proceeds from the exercise of Series C warrants (up to $36.2 million) and other contingent milestone payments.

Key Agreements:

• AbbVie: Collaboration for up to four programs. Eligible for up to $2.1 billion in contingent payments.
• Gilead: License for efarindodekin alfa. Eligible for up to $575 million in contingent payments.

Risks and Contingencies:

• Capital Requirements: The company expects to incur significant losses for the foreseeable future and will require substantial additional capital to complete product development.
• Manufacturing Dependence: Reliance on WuXi Biologics in China for manufacturing exposes the company to geopolitical risks, including the BIOSECURE Act and potential trade restrictions.
• Regulatory Uncertainty: Product candidates are in early clinical or preclinical stages; regulatory approval is uncertain and costly.
• Warrant Liabilities: Significant fair value adjustments to warrant liabilities impact net income but do not affect cash flow.

Investor Verification Checklist

• Cash Runway: Verify the sufficiency of the $150.3 million cash balance against the projected burn rate to confirm the "early 2028" liquidity timeline.
• Warrant Exercise Probability: Assess the likelihood of the $36.2 million potential proceeds from Series C warrant exercises, given the current stock price ($8.41) vs. exercise price ($10.50).
• AbbVie Milestone Timing: Confirm the receipt and accounting treatment of the $6.0 million Q2 2026 milestone payment.
• Manufacturing Risks: Review the specific impact of the BIOSECURE Act and U.S.-China trade tensions on the WuXi Biologics supply chain.
• Revenue Recognition: Scrutinize the deferred revenue balances ($48.0 million) and the assumptions used for recognizing collaboration revenue over time.